The Internet of Things and Blockchain

May 26, 2020

8 min read

The Internet of Things and Blockchain

Hi Readers👩‍💻,

Today we’d like to take you through the effects that blockchain has on the Internet of Things (IoT). Recently, trend research for the Global IoT and blockchain market valued it at 37.4 million USD in 2018. Additionally, the report reflects that in 2027 the market is expected to be worth around 9 billion USD, expanding at a Compound Annual Growth Rate (CAGR) of 60.6% from 2019 till 2027. Leading tech players are investing in the space, including IBM, with already 1,000+ employees and $200m invested in blockchain-powered IoT. Therefore, we figured it was time to dive into this subject and see what we could learn.

So, let’s look at what the Internet of Things is and how it works before we get started. If you’re familiar with this concept and are looking for Use Cases or the effect of blockchain on IoT, scroll to the second part of this article.

🤓 Part 1 — What is The Internet of Things and How Does it Work?

IBM describes the Internet of Things (IoT) as:

“The concept of connecting any device — so long as you can turn it off and on — to the internet and other devices.”

That said, IoT is an extensive network of connected objects and people who all share data about what they use and how they use it, as well as the environment they use it in. The devices aren’t limited to your phone or car. For example, they include ordinary appliances such as microwaves, your thermostat at home, smartwatches with heart rate monitors, and extraordinary things such as self-driving cars. IoT can even connect to the street light, highways, and train routes.

Often, people are unaware that this data is being collected, which leads to scandals such as the Facebook incidents and ‘systemic’ privacy flaws found in popular IoT devices like iHome in 2019. These factors are driving the development of the blockchain IoT market. Rising adoption of IoT connected devices has alerted the broader public to the growing security concerns, which causes enterprises to shift their focus towards operational efficiency and private security for users.

How does IoT work? In essence, devices have built-in sensors and chips that are connected to an IoT platform. This platform integrates the collected data from the devices and applies analytics to share it with applications and organizations built to address specific users’ needs. These IoT platforms are so advanced that they know what information is useful and what isn’t. The platform can also detect patterns, make recommendations, and detect problems before they occur. The insights that these platforms provide due to advanced analytics creates the possibility to make processes more efficient. See the video below for an example of how IoT works.

The advanced systems and analytics of IoT make smart cities an exciting possibility. What’s interesting is that according to market research, smart cities are also the most lucrative end-user segment in the global blockchain IoT market. That is because of the significant adoption of blockchain solutions for enhancing security in these smart city projects, solves a lot of concerns for both users and governments.

💻 Part 2 — Blockchain and IoT

According to Mckinsey, in 2023, over 43 billion devices worldwide will be connected to the IoT. And while this brings many positive and great things, it also comes with concerns such as security concerns, reliability, and validity of transactions.

Blockchain technology has already caused a significant impact on IoT. At its core, Blockchain is a cryptographically, secure distributed ledger that allows you to transfer data between parties securely. Traditional IoT devices are entirely dependent on their centralized architecture. That means that information needs to be sent from and to devices through the cloud, where the data is processed and then sent back. With the billions of devices that are expected to be connected in the next couple of years, this system will have very limited scalability. It will, therefore, expose billions of weak points in its security. But not just that, the use of third parties that check the data will also be very costly and slow.

Data on the blockchain cannot be altered, but it can be traced and verified from any connected device. With this, connected appliances will be able to network and conduct commerce through microtransactions using digital assets as the ICON Network, and the Seoul Municipal Government are already illustrating with some of their DApps.

But that is not the only way blockchain networks improve IoT. Smart contracts will make it possible for devices to function securely and autonomously through the creation of agreements that are only executed when specific requirements are completed. Think about tasks like automatic inventory ordering, tracking, and management between suppliers, for example. Smart contracts allow greater automation and better scalability; they are cheaper than third parties and can prevent overriding by individuals or enterprises that want to use personal data for their benefit.

Lastly, centralized networks have the risk of a single point of failure that disables the entire network. These single points of failure are a significant concern with IoT that has, on many occasions, hindered its large-scale development. IoT devices are vulnerable to Distributed Denial of Service (DDoS) attacks. During these attacks, multiple compromised computer systems attack the central server with a vast volume of simultaneous data requests, which causes a denial of service for any users of the targeted system. Blockchains’ decentralized network lowers the risks due to millions of individuals nodes transferring data peer-to-peer (2p2), which will keep the rest of the IoT Network running smoothly in case of failures.

A DDoS Attack Illustrated, as first published by Selectel.

With all this kept in mind, we can see that significant growth of blockchain IoT in the Asia-Pacific region is attributed to the increasing penetration of blockchain IoT solutions in various markets along with a favorable economic situation for the adoption of new solutions. In the last few years, North America has held a significant share of the global market, which is due to the global IoT leaders’ presence and the initial adoption of blockchain solutions in this region. By expectations, these areas will lead the way to full blockchain IoT adoption.

⚙️ Challenges in Blockchain IoT

While significant developments have been made in the blockchain IoT area, it is far from perfect, and multiple challenges still need to be overcome.

The first focus point is legislation, compliance, and regulation. The regulation of the Smart contract actions off-chain needs to be closely examined. Think about medical IoT devices, for example, who is responsible for the activities that need to be taken with this device if a smart contract rules but ends up causing the patient harm? Will the responsibility lie with the manufacturer, the hospital, maybe even the patient? Decentralization makes it very hard to pinpoint a responsible party, which might be a problem in everyday life.

Another aspect that causes challenges is scalability. Over the next ten years, the amount of data produced by IoT devices will be huge. That leads to the question: will Blockchain networks be able to deal with this kind of data volume? Also, the amount of electricity needed to process all the data in blockchains and the power required for all the IoT devices is another serious concern. Solutions for the energy-use of blockchain networks and their ability to process these crazy amounts of data will need to be created.

And then there is interoperability, which we have written about before. While many blockchain networks and its enthusiasts are working hard to make interoperability possible, it is still not there on the level that we would need for global adoption. Cross-chain interoperability will have to be improved if we want to make sure we can leverage the benefits of smart devices with blockchain. If this isn’t possible, we could end up in a situation where we’re all connected to multiple isolated decentralized networks that work great for their purpose but aren’t able to communicate with other devices.

📖 Blockchain and IoT Use Cases

In its essence, the blockchain decentralized ledger technology isn’t hard to grasp for the mainstream audience. In one of their articles, Business Insider once referred to it as: “a strongly encrypted and verified shared Google Document, in which each entry in the sheet depends on the logical relationship to all preceding entries, and is agreed upon by everybody working on the sheet.”

It is interesting to see that large investments in blockchain are being made. According to CB Insights, venture-capital funding for blockchain startups is continuously growing and was up to $1 billion in 2017. But not just that, leading technology companies such as IBM have made significant investments, $200 million, into the blockchain-powered Internet of Things.

And as we move into the adoption age of blockchain technology, more and more use cases arise. According to the Boston Consulting Group, the different use cases of companies using blockchain and IoT can be split into five categories. Operations tracking and visibility (such as supply chain management), provenance and authentication, autonomous machine-to-machine interactions, service-based businesses (smart locks, deliveries, smart vehicles, etc.), and data monetization (health care, environmental conditions, etc.). Below, we have illustrated some examples of use cases.


Supply chain management is one of the areas most often used to illustrate the possibilities of IoT and Blockchain. The technology is excellently equipped to track real-time goods as they move and change hands (or machines) through the supply chain. Tracking, ordering, delivering, pre-ordering for significant events that are coming up, etc. it can all be automated and secured with blockchain. And the SmartLog project, which ran from 2016 to 2019, has done just that. Below, you can see an illustration of how blockchain improves the supply chain of SmartLog.


Another Blockchain IoT implementation has been made by the Australian telecom company Telstra. They have used blockchain paired with IoT to create a smart home system that is safer and doesn’t just rely on mobile apps for control. Instead, by uploading biometrics, like a face or fingerprint recognition into a blockchain, Telstra’s system is more challenging to infiltrate by malware and safer and more secure in use.


Healthcare is another industry in which IoT and Blockchain stand to make giant leaps of improvement. The healthcare company Clinitraq has created a dosimeter that utilizes the NetObjex IoT-Blockchain Platform. A Dosimeter is a badge that measures radiation levels for its wearer. “Normal” dosimeters can take around 60 days to give any results; however, with blockchain, it is possible to provide data in real-time. While this might sound like a far from our bed show for you and me, it is beneficial to people who work in health or science to eliminate risks during experimentation. The data of the dosimeter can be tracked, and firmware can be administered through the cloud.

Hyundai Digital Asset Company

The Hyundai Digital Asset Company (Hdac) applies blockchain technology to fastly and effectively communicate, handle identity verification, authentication, and data store between IoT devices. Their organization uses a double-chain system, that is public and private, to increase the transaction volume and rate. Their technology can be applied to anything from smart homes to factories to machine-to-machine transactions and operation.


Streamr, the open-source blockchain infrastructure that will power the world’s data economy and aims to give people back control of their information, has a partnership with Nokia and OSIsoft. They have created technology that can be inserted into everyday objects, such as your car, that will record data such as traffic, local fuel prices, etc. Users can choose to sell the data to fellow car users or highway agencies and buy information from others that will help them make real-time decisions in a smart city, somewhat like a super-smart TomTom, that works peer-based. Information travels through the decentralized peer-to-peer network to get posted on the network nodes and is powered by the network’s native digital asset.

🧐 Conclusion

Of course, the above named are just a few of the hundreds of IoT and blockchain use cases currently in the works. Blockchain and the Internet of Things are both very recent, proliferating developments in their adoption and possibilities. Looking back at the beginning of the article, we asked what Blockchain’s significance is to the Internet of Things. We can now say, Blockchain technology will be the stepping stone to a safer, more private, scalable, and ecological implementation of the Internet of Things in our homes, cities, and the world.

DISCLAIMER: This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.

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