IoT and Blockchain

Aspire Thought Leadership! Ever wondered about IoT and Blockchain?. Find out more on what has changed with IoT and Blockchain in the current age. Come

Internet Of Things (IoT) is about enabling everyday objects to connect, share data about that object, or the environment around it, and realize new insights, business innovations and enhancements to society. IoT devices differ from primitive sensors to sophisticated ‘things’. For example, it could be a tiny, primitive sensor on floodplain monitoring river conditions and water levels which only produces kilobytes of data every day. Another extreme point of view for an IoT ‘thing’ is an airplane engine, which could generate terabytes of data in only a few hours of flight time. IoT and blockchain solutions can represent these things or anything in between, a Car, Fridges, Freezers, Kettles, or buildings.

Consider IoT as digitalization of the physical world. IoT allows representation of the real world, its interactions, and behaviors in a digital format. With this digitalization, the potential benefits for business and society are immense. IoT with Blockchain can enrich those business networks who are enjoying Blockchain with a digital representation of the physical world. Gartner has predicted that by 2020 there will be over 8 billion connected IoT devices (excluding mobile devices such as Smart Phones and Tablets).

IoT and Blockchain

How does IoT work?

IoT is centered on events. Because of the vast number of things IoT represents, it makes more sense to consider events rather than requests. If we are talking about a smart kettle and we want to know when it has boiled, and there is a whole number of factors that may influence the time to boil the kettle including, time of day, the owner, the temperature in the building and so on. While they could make many assumptions on the observations and try to consider these factors, an alternative approach is to wait for an event to occur such as ‘the kettle has boiled’. The IoT device can then send events, and it notifies any interested parties (other IoT devices, applications or systems) that subscribe when the events occur. A lightweight messaging protocol such MQTT is used for communication between IoT devices.

Why is IoT taking storm now?

Since the invention of MQTT, several applications and industry solutions for IoT have emerged. There is now a perfect storm of technologies and advancements that are allowing IoT to take hold.

• Availability of cloud computing : Cloud computing is cost-effective, scalable and elastic allowing companies to innovate and incubate ideas and grow them into enterprise solutions
• Pervasive connectivity : Connectivity in public buildings, offices, homes, towns, cities and even planes is commonplace and affordable. It has opened remote, disperse, and hostile environments to communication via innovations in low-power wide-area networks and mesh networks.
• Analytics : Accessibility to analytics tools is more available both regarding ease of use and affordability, helping to use all the IoT data to gain insights into innovation.

Why use IoT with Blockchain: What is the point?

Blockchain and IoT are both disruptive and emerging technologies. The combination of these two elements have a tremendous potential to change the prevalent modes of business and challenge the prejudges of society.

1. Blockchain brings trust to a business network, by sharing visibility, verification through consensus and a record for all of the time through immutability. For Blockchain to be of value to a business network, it still requires data inputs pertinent to the state change of the asset(s) transacted on the network. Business networks can receive data from existing systems or digitalized processes which they can share through Blockchain fabric. However, having accurate, reliable and secure representations of the physical world can be best achieved through the combination of IoT and blockchain.
2. Leveraging Blockchain for IoT data opens new ways of automating business processes among business partners without setting up a complicated and expensive centralized IT infrastructure. The data protection provided by Blockchain ensures faster resolution of breached contracts, stronger working relationships, and higher efficiency as partners learn they can rely on the information provided.
3. Reduce costs by removing overhead associated with middlemen and intermediaries. Leveraging blockchain for IoT data offers new ways to automate business processes in a business network without setting up an expensive centralized IT infrastructure. The mechanism of relying on intermediaries – lawyers, auditors, intermediaries – all have costs associated with them, they all contribute to additional layers of complexity. By embedding some of these capabilities digitally into smart contracts in blockchain, some of these costs disappear from the system.

IoT and Blockchain Example use cases

Use case 1: Improving workflow and real-time visibility on the status of shipments .

Ninety percent of goods in global trade is carried by the ocean shipping industry each year. However, the complexity and sheer volume of the point to point communication across a loosely coupled web of land transportation, freight forwarders, customs brokers, governments, ports and ocean carriers, slows down the supply chain.

International trading parties require both improved workflow and better visibility. They estimate the costs associated with trade documentation processing and administration to be up to one-fifth the actual physical transportation costs. A single vessel can carry thousands of shipments, and on top of the costs to move the goods, the documentation to support it can be delayed, lost or misplaced, leading to further complications.

IBM and Maersk are addressing these problems using blockchain to exchange event data and handle document workflows. For example, in 2014, Maersk found that just a single shipment of refrigerated goods from East Africa to Europe can go through 30 people and organizations, including over 200 different interactions and communications among them.

Using blockchain technology to establish transparency among parties reduces fraud and errors, reduces the time products spend in the transit and shipping process, improves inventory management and reduce waste and cost.

Use case 2: Asset life-cycles and history .

Every industry has an asset with a long life-cycle associated with complex business processes–mining equipment, tractors, and telecoms equipment–are types of critical assets which have long lifetimes – anywhere from 10 to 30 years. In most cases, the asset ownership changes over its lifetime. For example, an aircraft might have three or four owners. An aircraft has different parts replaced over its lifetime. Are the parts on an aircraft – over the full course of its life – with multiple owners genuine, in good working order, original and not counterfeit?

Using IoT, instrumentation and device authentication – right down to the part number – every part used in the airplane can have an indisputable provenance and history in an unalterable record on the blockchain. For the buyer, and the passenger of the aircraft, the safety, and reliability of that aircraft is traceable – and trustworthy.

Damage events are something an organization wants to know about. For aircraft, they track the number of hard landings as a vital indicator of the wear and tear on the aircraft. What if we could track and record the number of hard landings on a blockchain. We would have a higher trust in that aircraft’s history.

The automotive industry is another area where blockchain can make a difference regarding parts and provenance – reducing the potential for counterfeit parts. Blockchain could have an enormous impact in any part-intensive industry – where the supply chain is vital to a manufacturing organization. Although a manufacturer might maintain a secure connection with its direct suppliers, the surrounding processes – for example, components delivered from site to site, may not be as airtight. It assumes trust along the supply chain unless there are signs of physical tampering, theft, or unexplained delays.

Determining provenance all along the way can help reduce counterfeit parts within the supply chain. The automotive industry buys thousands of parts (including sensors used in modern cars for proximity detection, lane deviation, and blind spot detection) from dozens of vendors. It’s crucial to ensure these parts are genuine – with autonomous cars.

Blockchain minimizes reliance on blind trust while enabling real-time visibility into supply and demand – across the entire ecosystem. Using blockchain and IoT ensures each part receives its own unique identity as part of the supply chain.

Use case 3: Infrastructure management .

Infrastructure management is an exciting area because it’s tough to enforce a service level agreement (SLA) on telecommunications partner. It’s difficult because there is a tremendous amount of hand-offs between systems, involving a massive amount of data. In the telecommunications industry, FCAPS has become a proven approach to network management that works well in a centralized, single-provider environment.

The opportunity is that blockchain technology can also facilitate distributing FCAPS (fault, configuration, accounting, performance, security) capabilities across multiple administrative domains. By instrumenting and tracking each of these FCAPS on the blockchain – to track records across a distributed network where multiple suppliers and vendors take part in the business network – such as the telecommunications industry, it’s possible to create and enforce service level agreements.

Infrastructure management with blockchain also applies to transportation infrastructure, and energy, or water networks – any business network where we depend on processes that span a broad ecosystem of partners and suppliers. Knowing the condition or key performance indicators of any infrastructure we work with is a compelling use case to explore because it guarantees we have transparency in the operation of the network using blockchain.

Use case 4: Guaranteeing the safety and reliability of the food supply chain .

There’s much complexity in the food supply chain – involving many interim processing steps. For instance, a farmer’s produce might first enter a food processing facility, then move on to a distribution center. Each point in the chain has a one-step view up or back; there’s no full view.

The process uses different methods, pretty much on paper – which means it’s not fast and it is error-prone, and there’s no visibility along the whole chain. There have been some obvious examples in the last few years ranging from spinach to peanuts. The time it takes for organizations like Walmart to react to something like an E.Coli outbreak is critically important. Sometimes it can take weeks to figure out the source of a problem – the food’s origin, where along the way it became contaminated.

Using IoT sensors and blockchain, retail giant Walmart is hoping to address these issues – improving the speed, traceability, and trackability, using a trusted network along the blockchain.

Social Good and Humanitarian causes

The distributed and secure ledger enabled by blockchain is the perfect platform to short-circuit large organizations and harness it for providing relief in disaster-hit areas. They could apply the technology to disaster help, for instance, in settings where there’s an urgent need to track services. Given the common problem of aid leakage — loss of the vast amount of subsidies along distribution — an agency could use a blockchain to record the distributed items and recipients. Blockchains could also provide proof of provenance for material goods — a ledger, for instance, of the travels of diamonds from the mining site to the point of sale. In another case, blockchains could record vaccine delivery in areas where health records are scarce.

Blockchain can also allow a person to create and control her identifying traces. This infrastructure, if done right, could act as a new source of authority for authenticating a person’s existence, with implications ranging from education records to voting. Blockchains could create another form of acceptable ID, offering an alternative to state-issued social security numbers that required for many financial and record-related transactions.

Blockchain is promising for financial inclusion. The blockchain ledger can give someone long-term access to a record of established creditworthiness. For a person who lives in a place with poor access to banks, a blockchain could document her informal bartering transactions or micropayments. The technology would then establish alternative accreditation in parts of the world that don’t have access to formal financial institutions.

The World Food Program (WFP) of United Nations experimented with blockchain in Azraq refugee camp in Jordan. Using biometric information including iris scans, they created a digital identity for the refugees stored on a private blockchain. The refugees received cryptocurrency vouchers and stored in their digital blockchain accounts for use at the supermarket within the camp equipped with an iris scanner. WFP tested the pilot for 10,000 refugees and used an Ethereum based private blockchain developed by Parity Technologies and Irisguard.

BanQu is a startup that uses blockchain to create a digital identity for poor communities to allow individuals to take part in the modern financial system. Using blockchain, BanQu aims to remove barriers to entering the global economy, which can reduce poverty among developing nations. Besides providing an identity for the banking process and state they can link systems, land and health as part of a more significant economic identity. So far, BanQu has created IDs for several hundred impoverished refugees in Kenya and is piloting a land mapping system with small farmers in Latin America.

Bankymoon is a South African startup that has launched a crowdfunding project to help African schools, powered by blockchain called Usizo. Bankymoon has installed smart utility meters in poor African schools to provide electricity and clean water. Using Bitcoin, a donor from anywhere in the world can donate to the utility meter linked to the individual school. By using blockchain, Bankymoon removed all middlemen reducing the overhead to fractions of a penny.

Limitations and Challenges

There are adoption barriers due to lack of knowledge and fear of new technology such as blockchain. For example, the WFP has decided not to go through with their original plan to expand the pilot to 100,000 by August. One of the main concerns among refugees was data privacy since they did not trust the blockchain system with their sensitive biometric information because they did not understand this new technology.

Cryptocurrencies provide a fast, transparent way to send money internationally with low fees, but criminals have also used them as a convenient way to transfer funds semi-anonymously. Many governments are skeptical of this technology because of the lack of regulation, and potential money laundering opportunities. With a few countries such as Bangladesh banning Bitcoin, government regulation on cryptocurrencies limits the usefulness of the technology for all.

Another major limitation is privacy. However, most privacy concerns come with implementing blockchain systems rather than the underlying technology its self. Public blockchains store all transactions online for the public to see. As a workaround, cryptocurrencies create a series of letters and numbers (known as a hash) that represent a user’s account identity. So instead of the public being able to see every individual’s transaction history, the public can only see the hashes sending money to other hashes. With private blockchains, the data access can be permission-based such that only individuals related to a transaction have access to that data, protecting their data from the public. Because most applications of blockchain deal with personal information, private blockchain solutions are more acceptable as implementations in real-world use cases. Regardless of these measures, some people do not trust this new technology with private data such as their identity or health records. For blockchain to become widespread, people need to either trust or understand it.

Future of IoT and Blockchain for Humanitarian Causes

The first step to making use of blockchain is beginning a dialogue. Understanding what blockchain is, its usage, and its limitations are critical to starting a conversation about its potential. If an organization sees an aspect that could benefit from blockchain, it is essential to investigate and learn from similar use cases. What has been done in the field, what type of blockchain would be most beneficial, and what were the limitations are all questions one should ask when considering the use of blockchain. There are many large corporations, including IBM and Microsoft, offering private blockchain platforms and tailored solutions for organizations and charities who have identified uses within their industry. Unless a solution requires large amounts of hardware, setting up a private blockchain is not expensive; most of the cost is on a monthly basis because many companies offer blockchain as a service. A public blockchain is less expensive to maintain because it cuts out the middleman but has privacy and scalability limitations.

One potential use of blockchain is developing a charity platform similar to the Bitgive use case. A blockchain is a powerful tool for donations because of three reasons: transparency, cost, and speed. Cases of fraudulent and inefficient charities have lowered the public’s trust in non-profits. For example, in 2010 the Red Cross raised half a billion dollars to help Haiti rebuild after a devastating earthquake, but in reality, little money went to help Haitians, and they only built six houses. Charities wasted as much as 40% of the funds were on overhead charges according to an analysis by ProPublica.

By sending the money to the beneficiary, a blockchain charity platform could revolutionize the industry by increasing transparency and lowering overheads by eliminating middlemen. A blockchain system could send donations (using cryptocurrencies) in a matter of seconds, which is vital in emergencies. Such a system would work by transferring donated money to a cryptocurrency, sending the cryptocurrency to a beneficiaries digital account, who could convert it back to a fiat (government regulated) currency or needed goods. This system would need a point of sale at the end of the process, where the charity could perform the last step of transferring the donated cryptocurrency to fiat currency or practical goods. Because they store the whole process on the blockchain, patrons could track when and where their donations have gone, creating complete transparency.

The primary role of charities would be at the point of sale, providing a simple method for the beneficiaries to receive fiat currency or aid, which they can use. In controlled environments, such as a refugee camp, this is not a significant issue however it is more difficult in unconstrained environments, such as natural disaster relief. One solution is for charities to team up with local store chains like 7/11 to handle the point of sale, as blockchain remittance companies have done. Also, seeing the money reach the beneficiary through blockchain could increase the gratification associated with charity, increasing donations. It is important to note that such a blockchain system would focus on monetary donations because transferring money on a blockchain is more efficient than transferring other goods. By developing a donations platform, a wide variety of non-profits could make use without the need to alter the platform for each company. If a sizeable philanthropic organization could develop a platform, it would increase the public’s trust in charity, increasing the donor base resulting in a revolutionary impact on global humanitarian aid.

The EU General Data Protection Regulation (GDPR)

GDPR, which took effect May 25, 2018, is arguably the most important change in data privacy regulation in 20 years. This regulation applies to all organizations established in the European Union (EU) that process personal information in that establishment and all organizations outside of the EU that process personal information on EU citizens when offering them goods and services or monitoring their behavior.

GDPR protects personal information and give citizens greater control over the information. GDPR applies to organizations operating within the EU, and also applies to organizations outside the EU who offer goods/services to EU individuals. If an organization infringes GDPR, they shall fine it according to the gravest infringement, and the fines can be 20 million Euros, or 4% of the worldwide annual revenue.

Under GDPR guidelines, individuals or employees are classified as Data Subjects, while organizations could either be Data Controllers, or Data Processors, or both. Data Subjects are all individuals about whom information is collected. Data Controller is the natural or legal person, public authority, or other body that determines the purpose and means of processing the personal information. Data Processor is the natural or legal person, public authority, or other body that processes personal information on behalf of the Data Controller. Data Processors do not determine the purpose or means of processing personal information. They must only process personal information in the way determined by the Data Controller.

GDPR defines special categories for the collected information about Data Subjects and any processing performed on it. Personal Data is any information relating to an identified or identifiable natural person that can be used to directly or indirectly identify an individual. “Special Category of Data” or SCD, is personal information that reveals a person’s racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, health, sex life, or sexual orientation. It also includes genetic data or biometric data. It requires a higher level of protection.

Data Processors must provide sufficient guarantees they will implement measures to meet GDPR.

Data Subject’s rights

The GDPR provides seven rights for Data Subjects. Data Controllers must comply with Data Subject’s requests without undue delay and within one month of the receipt of the request.

1. Under the GDPR, Data Subjects may get confirmation whether a Data Controller is or is not processing their personal information, and to get the information without undue delay and within one month of receipt of the request.
2. Data Subjects have the right to correct inaccurate ** personal information**.
3. Data Subjects have the right to request the deletion or removal of their personal information where there is no compelling reason for its continued processing . This right implies the secure deletion of personal information in a way they cannot restore it.
4. Data Subjects have the right to object to the processing based on legitimate interest or performing a task in the public interest or in the exercise of official authority, including profiling.
5. Data Subjects have the right to block or suppress processing of their personal information in certain circumstances.
6. Data Subjects have the right to receive a copy of their personal information in a machine-readable format , and to transfer their personal information from one Data Controller to another in a safe and secure way without hindrance to usability.
7. Data Subjects have the right not to be subject to a decision based on automated processing, including profiling, which produces a negative legal effect concerning or affecting them.

GDPR applied to Blockchain

GDPR assumes that Data Processor and Data Controllers would be easy to identify entities such as Google, Facebook, Amazon, and Apple, that control how citizens search, shop, and connect. The inherent assumption is that centralized entities have centralized data stores they could examine for the data they collect, and identify all sub-processors attached to it.

Blockchain and GDPR started with very different goals—creating a network without a central authority or trusted store, versus introducing data privacy laws. In most blockchain projects, eventually the need arises to share information with participants and at certain times (for example, during a transaction). Every organization that takes part in a business network becomes a Data Processor and has to be comply with GDPR. Every node that takes part in a blockchain network may be both a Data Processor and Data Controller, depending upon the transactions they perform. The decentralization made available by blockchain promises data sovereignty and control over their personal data to individuals (or participants in a network).

Personal data stored on blockchain

Depending on the use case, data stored on blockchain may be data related to an identified or identifiable natural person such as data related to individual behaviour. The data stored on the blockchain could be stored either in plain text, encrypted, or hashed.

1. Personal data stored in plain text on the blockchain falls under the purview of GDPR and must be addressed like plain text personal data stored in any other data store.
2. Encrypted data that someone can access with the correct keys is not irreversibly anonymized and may not qualify as adequate security measures ‘baked in’.
3. GDPR may consider personal data that has been subject to a one-way hash as pseudo-anonymous, even though the one-way hash protects against reverse engineering of the data. This is because it may still be possible to link the hashed data with the Data Subject by examining other transaction properties.

From above, the conclusion is that the transactional data stored on the blockchain will be subject to GDPR regardless of how it is stored.

The Solution

One solution is to store all Personal Data off the chain, in an off-chain, mutable data storage. It stores only the proof of Personal Data on the blockchain with salted hashes linking the entry in blockchain to the Personal Data. In this approach, the Blockchain Operators can delete Personal Data without impacting network operation. A downside of this approach is that it defeats the fundamental tenets that blockchain provides – those of decentralization and security through resiliency. One can think the off-chain data store as an Oracle that all network peers call via an API.

The advantages of this approach are it helps meet many of the rights of Data Subjects.

1. Data Minimization: Blockchain is an immutable data which is append-only so it will only ever grow in any deployment. Every node stores copies of the data which conflicts with the GDPR mandate that states that personal data be ‘collected for specified, explicit and legitimate purposes and not further processed in a manner incompatible with those purposes’. The above solution does not store personal data on the blockchain but in an off-chain data store minimizing its distribution. For example, it will store personal data in nodes where the organizations require it, minimizing its processing.
2. Right to amendment: GDPR states that personal data should be accurate and up to date. In the recommended solution, it stores personal data in off-chain data store which ensures there is only one copy of the data. It is not clear whether the typical blockchain applications and use cases approach of appending a new block to update the information in a previous block may not be acceptable.
3. Right to Access: Organizations can implement a simple API or a read-only node in the network which can provide citizens with adequate controls (such as private keys) to access their data.
4. Right to be Forgotten: Perhaps the most well-known right mandated by GDPR is the right to erasure. The traditional blockchain approach would be to append another record which invalidates information stored in a previous block, but it is not clear at the time of writing whether this would be acceptable. There are other legal issues around this (for example, right to be forgotten is not an absolute right, and that it requires the Data Controller takes into account available technology and the cost of implementation). Storage of personal data in an off-chain store is the only way of fulfilling this right.

Blockchain and AI

Artificial Intelligence involves a machine that can perform tasks that have characteristics of human intelligence. The coming together of blockchain and AI is on the cutting edge of innovation and sometimes touted as the holy grail to prevent deliberate tampering with labelled data used by AI systems.

Big data transformed AI because it gave AI the ability to gather and learn on mountains of data, which brought down the error rate in acceptable limits. Blockchain technology could transform AI too, in its own particular ways. Some applications of blockchains to AI are mundane, like audit trails on AI models. But most real-world AI works on large volumes of data, such as training on large datasets or high-throughput stream processing.

The benefits of blockchain and AI are:

1. The decentralized nature of blockchain may mean more participants, and more data, which may mean better models. data is often siloed, in this new world where data can be a moat. But blockchains encourage data sharing among traditional silos, if there is enough up-front benefit. The decentralized nature of blockchains encourages data sharing: it’s less friction to share if no single entity controls the infrastructure where the data is being stored.
2. Decentralized and distributed blockchain network may provide more qualitative new data, and therefore models. Merging data from silos doesn’t provide just a better dataset, it also provides a new qualitative dataset.
3. Shared control of AI training data & learning models. One risk in developing models with a disperse team is the lack of trust on the contributor, training data, data labels, and learning models. A distributed network on the blockchain that crowd sources the wisdom of AI scientists from around the world yet provides granular control and audit trail reinforces trust in the generated models.
4. Immutability of the audit trail means the model’s outputs and the data they have trained the models upon can be trusted. Microsoft had to shut down its twitter bot after twitter users taught it racism.
5. AI with blockchains unlock the possibility for AI DAOs. This is uncharted territory, but one can surmise an era which deep learning models could power a specialized DAO and automate tasks done by organizations with human supplied governance. For example, an AI DAO which owns the cars could operate the self-driving cars, or perhaps the cars own themselves, in a future where humans may rent services from such AI DAOs.
6. Enable AI marketplaces. AI requires building on previous efforts and algorithms, rather than each organization creating their models from scratch. Information sharing, and composition of higher value models based on prior work is crucial to advancement of AI. Most of the sharing is asymmetric and ensuring lawfulness of data and models is impossible. However, with blockchain one could create provenance trees that provide full audit trail of the models, training data sets, and model output. The producers of the models could monetize them, and consumers will build new models using existing ones.

The most famous example of blockchain and AI coming together is SingularityNET, which claims to be the world’s first decentralized AI network. SingularityNET uses AGI tokens to pay for AI related services and hopes to develop advanced general AI they can apply to any task.

Other examples of blockchain and AI implementations are platforms such as Namahe which aims to boost the efficiency of supply chain by integrating AI into supply chain processes. Numerai hedge fund uses its platform to crowd source market predictions based on machine learning and steer the hedge fund’s direction.

IBM introduced a crypto anchor in 2018 which provide tamper-proof digital fingerprints, and can be embedded into products, or parts of products, and linked to the blockchain. These fingerprints can take many forms such as tiny computers or optical codes, but when they are tied to a blockchain, they represent a powerful means of proving a product’s authenticity. For example, crypto-anchors can be embedded into an edible shade of magnetic ink, which can dye a malaria pill. The code could become active and visible from a drop of water letting a consumer know it is authentic and safe to consume.

This combination of AI and blockchain is in its infancy but holds tremendous promise.