Crypto Academy / Season 4 / Week 1 - Homework Post for @yohan2on : Blockchain and the Internet of Things.

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INTRODUCTION
Blockchain is gradually becoming a global asset with its multiple use cases and its ability to incorporated within multiple institutions/fields. This is largely due to its high security, transparency, reliability and freedom from a central authority.

QUESTION 1 - Explain why the future
Internet of Things
depends on Blockchain.

The Internet of things (IoT) is transforming the way enterprises operate through the use of sensors and other edge devices and infrastructure. This presents a major challenge for enterprises, which must protect information at all levels of the IoT ecosystem. With the number of connected devices growing multifold every year, data security has become increasingly complex. Blockchain is helping combat security breaches in an IoT system.

Blockchain is a distributed ledger technology that combines with IoT to make machine-to-machine transactions possible. It uses a set of transactions that are recorded in a database, verified by multiple sources and entered in a common ledger distributed across every node. The combination of IoT and blockchain offers various potential benefits and allows a smart device to function autonomously without the need for a centralized authority. It can also track how devices communicate with each other.

While the decentralized nature of blockchain is an architectural benefit, it can be a potential problem for IoT. IoT platforms rely on client-server or hub-and-spoke architecture, which is a centralized authority. Building an IoT platform that is decentralized in nature will help ensure compatibility with a blockchain network, but it can be a challenge to configure IoT sensors to handle their own compute and data storage, since they rely on central compute and storage resources.

Blockchain has been implemented with IoT across industries, including Banking, Financial Services, Automotive and Agriculture. It has also been used with IoT in smart homes, supply chains, logistics and a new mechanism called smart contracts. Smart contracts apply blockchain to IoT ecosystems to automatically execute a contract once certain conditions are met. This is what allows a smart device to function on its own without the need for a centralized authority.

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This application of blockchain technology allows enterprises to manage data on edge devices in an IoT system, reducing costs associated with IoT device maintenance and data transfer. It reduces the risks of managing data, because there is no centralized data repository and the ledger is not vulnerable to cyberattacks. It eliminates the IoT gateway or any other intermediate device for data exchange and reduces the time required to process the data.

Blockchain imposes high-level security by authenticating and authorizing encrypted device-generated data with the help of decentralized, distributed ledgers. In a distributed ledger, data computation and storage are spread across millions of devices. As a result, the failure of a device, a server or the network will not affect the entire IoT ecosystem, as it might in the traditional model. In many cases, the resiliency of a blockchain network will approach fault-tolerance, where the network can continue operating if nodes are taken offline.

Due to weak access control and client/server architectures, many IoT ecosystems present soft targets for hijackers. Distributed denial of service (DDoS) attacks, which disrupt normal traffic to connected devices by overwhelming the target or surrounding infrastructure with a flood of internet traffic, have become more frequent. The Mirai and Hajime IoT botnets exposed the vulnerability of connected devices to DDoS attacks. IoT devices and networks can be protected from botnet-driven DDoS attacks with the distributed security architecture of a blockchain. In this architecture, every device in a network is independently secured with a blockchain peer-to-peer network.

IoT-blockchain technology is now in its initial stages, and a few major technology companies have begun to seek opportunities in this space. For example, the IBM Blockchain Platform allows enterprises to extend blockchain into cognitive IoT, a set of technologies that combines IoT and cognitive computing.

The adoption of IoT-blockchain technology is not yet widespread due to technical concerns and operational challenges. Scalability and storage are major issues in blockchain systems that maintain a large centralized ledger and storing the ledger on edge nodes is inefficient since smart devices at the edge are not yet capable of storing large volumes of data or handling relatively large amounts of computational power

While blockchain is most famous for its role in facilitating the rise of digital currencies over the past several years, there are also many other non-cryptocurrency uses for this technology. Indeed, some blockchain proponents believe that the technology could far outpace cryptocurrencies themselves in terms of its overall impact, and that the real potential of blockchain is only just now being discovered. As such, it's likely that financial advisors and many others in the investing world will encounter blockchain technology much more in the years to come, whether it is linked with a specific cryptocurrency or if it's being utilized in any number of other applications.

How does IoT work with blockchain?

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IoT enables devices across the Internet to send data to private blockchain networks to create tamper-resistant records of shared transactions. IBM Blockchain enables your business partners to share and access IoT data with you — but without the need for central control and management. Each transaction can be verified to prevent disputes and build trust among all permissioned network members.

Technology, whereby mainly security comes in the picture. In an Internet of Things context where IoT security is already a challenge, it’s clear that security needs to be even more looked at. It is important to note though that blockchain is also seen as a way to secure the Internet of Things and, as mentioned, security overall but that is another discussions with several opinions and aspects to cover.

Operational challenges: the business model and the practical aspects as this requires many agreements and of course many actors too in a broad ecosystem. Just think about that IBM logistics example.

Legal and compliance issues. Bennet among others refers to responsibility issues in case of actions that are taken by devices, based on a rule that is automatically executed by a blockchain-based application, triggered by another blockchain-based application (you see the complexity). And then there is the mentioned example of smart contracts. As you know contracts are far from easy, even outside this IoT and blockchain context.

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Basics of Blockchain

Depending upon the blockchain, parties may be able to view previous ledger entries and record new entries, although most blockchain networks have complex rules for the addition of new groups of records, "blocks," to the chain of previous records. The blocks and the contents within them are protected by powerful cryptography, which insures that previous transactions within the network cannot be either forged or destroyed.