7 Things You Need to Know About Blockchains and the Internet of Things

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July 06, 2017


The July Blog Series | 6 Degrees of Connectivity

Issue 1: 7 Things to Know about Blockchain and IoT


With the rise of botnet and ransomware attacks, people are becoming increasingly concerned with their cybersecurity. It seems that it is becoming harder and harder to ensure the security of your devices, including your smartphone, laptop, tablet, desktop and any other smart device you may have. In addition to those devices, other not-so-obvious items are becoming what's known as the Internet of Things (IoT for short). More and more, everyday objects and appliances such as cars, refrigerators and solar panels are all becoming connected to the IoT in some form or another. However, there are a number of concerns, first and foremost being people's digital security and privacy. Thankfully, there is a solution that is proving to be a better way to keep your information safe: blockchain technology. At this point, few people know or understand what blockchains are, so let's go over some of the specifics of this emerging technology.


1. Blockchain Technology's Mysterious Origin

The origin of blockchain technology is somewhat mysterious, as it was created by either a single person or a group of people operating under the pseudonym Satoshi Nakamoto. The reason for blockchain's creation was the digital currency Bitcoin, an encrypted cryptocurrency that is virtually untraceable. Bitcoin serves as a good example of how blockchain technology is utilized.


2. How Bitcoin Works

The first step of using blockchain technology is that a transaction needs to be requested. From there, the request is sent to a network of peer-to-peer (P2P) computers. This network, also known as a network of nodes, then validates the transaction as well as the status of the user. This process is done using algorithms. Once everything is validated, the transaction is added to the blockchain. The important thing to understand is that Bitcoin only exists within the blockchain network, as it has no physical counterpart and is untraceable. Another way of understanding blockchains is to look at the idea of a distributed database.


3. Understanding a Distributed Database

A distributed database is one that is shared across thousands of computers, and these computers all make up the network that updates the spreadsheet. A blockchain works very similarly. It also doesn't have any centralized location, meaning it's safe from hackers. In addition, the information is accessible to the public and easier to verify. It's the simultaneous access to the information for the entire network that differentiates blockchains from traditional database technology. Traditionally, databases only allow access for a single user at a time.


4. Blockchain Technology Is Like the Internet

Another easy way to understand blockchain technology is the internet itself. The internet has no centralized location or point of failure, and it's the same with a blockchain. Much like how websites refresh themselves, blockchains constantly check all transactions that occurred during 10-minute intervals. That's where the "block" part of the name blockchain comes from: Every one of these intervals is considered its own block. The result is a transparent system in which data is spread throughout the entire network, making it a de facto public system. It is also incorruptible, as the entire network would have to be overpowered in order to alter a single piece of data.


5. What Blockchains Mean for Your Digital Privacy and Security

Let's begin with a look at the tangible benefits to your digital security as a result of blockchain technology. First and foremost, blockchains do away with the need for a username and password-based system of digital security and identity verification. Instead, blockchains use encryption technology that relies on private and public keys. Your "public key" is a string of numbers generated at random. Then specific transactions that take place, whether a Bitcoin transfer or something else, are assigned as belonging to that "key," or address. What you get are incorruptible public transactions, although -- perhaps ironically -- you will need to print out your private "key," keeping it safe in the physical world.


6. Blockchains and the Internet of Things

Now that we know a little more about how blockchains operate and keep our digital lives safe, let's look more in depth at the connection between blockchains and the IoT. Programs like IBM's Watson IoT blockchain allows a variety of devices to participate in transactions, allowing those concerned to check the publicly available transaction list to ensure they are dealing with a reputable party. That's where the public aspect of blockchains becomes so handy: It creates a decentralized network that has a higher degree of accountability due to its transparency.


7. Other Blockchain Applications

Blockchains are already being used in a wide range of applications across a variety of fields. One of these applications is the open-source blockchain program Ethereum, which can provide digital automation with the use of smart contracts. A real-world example of this specific blockchain being used along with smart contract automation was when a Tesla, a smart car that is part of the IoT, was programmed to pay a toll by using the Ethereum blockchain. This means tolls can be paid automatically without the need for a centralized server. Another example of a smart contract is to automate a derivative payout when a financial benchmark is met.

Blockchains are increasingly emerging as a way to execute transactions that are both more secure and transparent than the current centralized systems that dictate so much of our lives. Banks, tolls and our digital log-in information are all systems in which security is the highest priority, so it makes sense to use technology that lives up to that standard. In this way, blockchain technology has the ability to provide us all with a safer world.


Sources

Blockchain & IoT Info -- https://blockgeeks.com/5-incredible-blockchain-iot-applications/ & https://blockgeeks.com/guides/what-is-blockchain-technology/
IBM Watson Blockchain Info -- https://www.ibm.com/blogs/internet-of-things/watson-iot-blockchain/
Tesla Info & Link -- https://www.ethnews.com/project-oaken-puts-a-tesla-on-the-blockchain


About the MRC Blog

The MRC Blog publishes four monthly articles focusing on a particular theme each month relating to fraud, payments, risk, cybersecurity, data, technology and other emerging eCommerce trends. Open to members and non-members alike, this forum is intended to educate, inform and provoke new ideas surrounding the most relevant issues in eCommerce. Interested in learning more about the MRC or MRC membership? Contact us!