Thing 1 and Thing 2 … BILLION: Blockchain’s Convergence With the Internet of Things

BILLION

By Lance Koonce

In prior posts, we’ve identified six basic ways in which blockchain technology will innovate (or disrupt, take your pick) the content industries. Just to recap, those areas are:

• Proof of Creation, Ownership and First Use (IP Registries)
• Transfers of Digital Works
• Rights Management
• Smart Contracts
• Micropayments
• Creative Collaboration

I gave a talk this week on the blockchain as it relates to the Internet of Things (“IoT”). The term IoT refers to our increasingly interconnected world of physical objects — that is, the network(s) of “things” embedded with technology that allow those objects to collect information and exchange it with other devices and systems.

Experts estimate that within four years the IoT will encompass over 20 billion interconnected objects

For those not very familiar with the IoT yet, here’s an example of what a robust IoT world might look like, in your own backyard.

Imagine that you own a garden sprinkler system. But in the near future, each sprinkler head in your system is able to sense dry soil in its particular area, check the local forecast, assess water system usage data, and look at your personal gardening schedule, all in order to find the optimum time of day to turn itself on and off (in conjunction with the other sprinkler heads); and it might also be able to report to you when a component is faulty or even order itself a new part directly from a supply company.

Anyway, during my preparation for my talk, something became clear to me, if it wasn’t already. While on the surface these are quite different topics — one relates to real-world, physical objects, and one to creations of the human mind such as music, film and art — at their heart, there are significant similarities between the IoT and content distribution, at least when it comes to how they might be innovated by the blockchain.

First, when we talk about “content” on this blog, we actually mean two things. On the one hand, we mean the copyright interest we deem to be created when someone first reduces their thoughts into something tangible. But when talking about content distribution we really mean copies of a work, whether the copy is physical or digital.

By contrast, when we talk about physical objects in the IoT, we are generally only talking about physical copies of devices (although in many cases there actually is an analog to the copyright interest, in the form of an underlying patent). So once we get beyond the registration of the underlying copyright interest, and subsequent assignments and transfers of that underlying interest, and start talking about distribution of copies, there is real overlap. (Technically speaking, all of these copies also arguably are enabled by a transfer or license of a sliver of the original owner’s copyright interest, but that’s a discussion for another day.)

So, one of the conclusions I’ve reached is that most of the categories above, with some tweaks, apply to the IoT as well. Bear with me on this.

Let’s go back to the IoT. For it to function well, on the massive scale anticipated, we will need networks to manage all of these objects securely and in real-time.

The sheer number of devices may overwhelm traditional systems, and security is notoriously difficult to manage at large scales. Also, while the continual connectivity of devices is paramount, the cost of providing that ongoing connectivity and monitoring using centralized networks can be very high.

Enter the blockchain. (You knew I was going to say that, right?) In a white paper entitled Device Democracy and another called Empowering the Edge that are required reading on this topic, IBM argues that blockchains are a key solution for networks in which growing computing power exists at the “edge” — in sensors, appliances, and other distributed devices.

Blockchains, with their peer-to-peer structure and redundancy in authorization and verification methods, offer important advantages for the IoT. We can break those advantages down in the following ways which mirror the categories I set out previously for content:

• Registry of Creation and Ownership
• Device Management and Tracking
• Data Transfer Tracking
• Smart Devices
• Payments

Devices can be registered to a blockchain-based registry as soon as they are manufactured, and linked with their original manufacturer. They can then be automatically registered to the blockchain by retailers and users as the devices pass through supply chain. Similarly, product information, warranties, software updates, and much more can be recorded, tracked, and immutably linked to the device. Crucially, the decentralized and permanent nature of this life-of-product information allows for management of end-of-life status for devices, something that currently many companies have difficulty tracking.

The blockchain can be used to record and track transaction history of individual devices, logging data transfers between devices and user, other connected devices, and online services and apps.

Most intriguingly, blockchain technology, along with peer-to-peer messaging, should facilitate devices acting as independent agents, performing a range of autonomous functions. These could include checking their own warranties when a component fails, ordering replacement parts and scheduling maintenance; “bidding” against other devices for priority when using resources such as home electricity, to maximize efficiency; and working in sync with other devices, for instance during an emergency (imagine emergency lighting in your home directing you to an exit when the smoke detector sounds an alarm, and an automatic lock unlocking the door).

Blockchain technology also can create more efficient transaction systems for these IoT networks, helping to lower transaction costs and possibly facilitating true micropayment systems, which in turn will allows individual devices to collect revenue and store that revenue in the device’s own account, which could then be used to pay for maintenance, etc., even bidding for the cheapest services using their accounts. Parameters or tolerances for these interactions would be set in advance by the device owners.

Some observers believe that these capabilities eventually will allow devices in the IoT to become autonomous actors in a global data marketplace, each interacting with their limited slice of the world.

There are already some ambitious projects underway along these lines, including the following:

• IBM ADEPT: IBM has partnered with Samsung for a proof-of-concept system of managing IoT devices using blockchain technology and peer-to-peer messaging
• FILAMENT: Startup that develops ad-hoc mesh networks of smart sensors for industrial applications, operating on the blockchain.
• ETHEREUM: Develops blockchains with robust software solutions; recently hosted hackathon to build IoT/blockchain solutions, including:
• SOLETHER: Project to build an autonomous entity that will give people electrical energy in exchange for cryptocurrency coins; energy will be provided by smart devices powered by solar panels
• SLOCKIT: A decentralized autonomous network of smart locks