While blockchain and the Internet of Things (IoT) are each powerful by themselves, the combination of these technologies can be leveraged by enterprises in an incredible way. This is sometimes referred to as BIoT or Blockchain of Things.
A 2018 study by Aftrex Market Research found that the combined blockchain and IoT market is estimated to reach $254.31 billion by 2026. Numerous industries would benefit from blockchain and IoT technology, including retail, automotive, telecommunications, manufacturing, healthcare, and oil & gas. These findings suggest that the combination of blockchain and IoT is revolutionary, and that enterprises are jumping on the bandwagon.
“While I think blockchain or distributed ledger technology can benefit from IoT architectures, I’m definitely not as bullish as others on the subject,” said Michael Leone, a senior analyst with Enterprise Strategy Group (ESG). “If I had to put a year on it, I would say by 2020 a small percentage of organizations may have a system reliably implemented, but with minimal features and functionality. By 2022, I expect a more robust feature set, common reference architectures, and enough case studies available that give organizations the confidence to do it themselves.”
Here are 5 specific benefits of blockchain and IoT that will propel the market growth in years to come.
1. Accelerated Data Change
One of the leading benefits cited by Aftrex Market Research is accelerated data change. Leone believes that the current implementation of blockchain has its limitations with this facet because it caps the number of transactions per second.
“A more enterprise-grade approach, like a permission-based blockchain, is required to handle the amount of data, the number of devices of IoT, and the speed at which two parties transact,” Leone said. “A blockchain that can minimize the time to validate transactions by leveraging trusted nodes is essential to handle the performance requirements of IoT, and it is one that can handle the speed of IoT data exchange.”
2. Lower Costs
One of the most touted benefits for enterprises is the ability to reduce operational costs. The technology allows for data to be transmitted on a peer-to-peer basis without centralizing control, thus lowering business expenses.
“It really boils up to scale,” Leone said. “Simply put, scaling a highly-reliable centralized infrastructure will be expensive. Decentralization enables a more cost-effective way to address the scale of IoT — never mind eliminating single points of failure.”
3. Improved Security
Due to its ability to legitimize data and ensure that it comes from a trusted source, security is one of the innate attributes of blockchain. This benefit is especially helpful because of the high number of devices within IoT. The combination of the technologies could enhance secure communications and strengthen privacy agreements.
“It’s important to note that it’s not just the devices either — it’s human to human, human to device, and device to device,” Leone said. “Having a trusted ledger that transparently shows who has access, who is transacting, and a record of all of those interactions is a win.”
Enterprises that are currently implementing a combination of blockchain and IoT often rely on security measures, such as device authentication. This just the tip of the iceberg when it comes to the security aspects of blockchain and IoT.
“There needs to be various security layers implemented to prevent unauthorized access or cut off access if a bad actor is detected,” Leone said.
4. Streamlines Accounting
Within an enterprise, accounting would be one of the first departments that could immediately benefit from the added transparency provided by blockchain and IoT.
“Simply knowing what entities are sharing/sending money/data across a linear, time-stamped chain is a win,” Leone said. “Obviously if you’re audited, a translation layer is required, but the fact that it’s a hardened and reliable chain of transactions that can’t be changed is a win for accounting purposes.”
5. A More Efficient Supply Chain
For many enterprises, making supply chains more efficient is considered to be a major priority. However, numerous economic and global challenges are making this process more difficult. Blockchain and IoT can improve supply chain efficiency by eliminating the middle man, increasing the speed of transactions, and lowering costs.
“If a traditional supply chain transaction takes four or five hops to be validated, you’re paying fees with each hop,” Leone said. “With the blockchain serving as a validator to a degree, untrusted parties can exchange data directly with one another, eliminating the fees associated with every hop.”
What Does This All Mean For Enterprises?
In an August 2018 Twitter poll conducted by Enterprise Mobility Exchange, 57% of respondents said that they will never utilize blockchain. Meanwhile, only 12% of respondents in the poll have taken advantage of distributed ledger technology.
Based on the analysis from Leone, blockchain and IoT can be an incredible combination. However, we still have a few more years before this new business solution becomes a staple in enterprise technology. It would be wise to start planning for it now.