The Network Effect at Blockchain 360: IoT Security Summit 2016

By Steve Bell

Blockchain 360 — the opening day of the IoT Security Summit 2016 in Boston — was a well-attended event with a broad cross section of participants. Numerous companies in the space gave presentations explaining how Blockchain addresses the problem of trust in a decentralized situation by using ledgers containing immutable statements that are verified by multiple nodes, so that there's no reliance on a centralized body for confirmation.

So far, the primary initial use case for blockchain is for alternative currencies and simple, speedy financial settlements. Initially wary of the technology, banks and financial institutions are now embracing the opportunity to reduce the settlement time of financial and stock securities from three days to potentially minutes.

A theme that emerged was the power of the network effect in the blockchain world. The value of Bitcoin, as with any currency, is its acceptability — how many places you can use it and with how many people. Consequently, the more people that embrace blockchain, the greater its value. This is similar to Metcalfe's law in the communications space, first used to describe the utility of fax machines to people and businesses. The first fax machine had no value because it couldn't communicate with anything, and the same with the first mobile phone, but directly you have multiple possible connections with value that increases at an exponential rate.

This workshop exposed the huge potential opportunity of what lies beyond financial applications. Anytime a machine interacts with a third-party, you could use blockchain as the verification process of the device as a trusted party, as well as the validity of the data it’s sharing.

Thomas France, co-founder of Ledger, a French-American startup, spoke about how they are creating hardware oracles that attest the physical device state to the digital world, primarily used for hardware Bitcoin wallets. An oracle is a trusted entity that sends confirmation to the blockchain. A hardware oracle is the combination of a physical sensor that analyzes the data and software that transmits the digital state information to the blockchain, either for validation or as validation. Ledger has created an operating system that has a very small footprint — between 4kb and 120kb with exposed APIs. The company plans to license the technology to OEMs and chip vendors.

Use cases are smart grid utility companies that need to attest to certifiable energy production, and issue tokens on the blockchain that prove that production. This can also be used to ensure that electricity was consumed. Ledger is primarily based in France where a number of the smart meter and SIM/security companies operate. They anticipate that the proof of concepts will be rolled out over the next 18 months, with production occurring in 2018.

Another aspect of blockchain is the concept of smart contracts which are neither smart nor contracts. It is validated program logic that runs on the distributed ledger, with procedures attached that are triggered when an authentication is received. This allows for a value chain process to be built across industries that don’t trust one another at the ecosystem level. In its simplest form, it means that when goods are shipped and received, payment can be released, and this avoids redundancy and reconciliation of databases across multinational supply chains.

For IoT, a practical use of these techniques is for devices to measure events, and send data to the blockchain that would trigger smart contracts. For instance, an IoT thermostat can test temperature, and attest to the validity of the reading and post proof on the blockchain for the life of the asset. An example of this application is when a container with wine, traveling from one country to another, can be validated to have not exceeded temperature limits for the entire journey.

This is similar to a project that Kouvola is working on, using Blockchain and IBM's Watson IoT platform to monitor and track containers. Every signal sent from a tracking sensor on the container is stored on the blockchain using Hyperledger, so that you can provide irrefutable evidence of the state of the contents, its location and variations throughout its journey, from point A to point B.

The clear message I walked away with was that the growth of Blockchain and IoT will be intertwined, and combinatorial in terms of the network impact they have. This is particularly true for the telecom industry and the markets it serves.

A quote that was shared at the workshop was something that infrastructure theorist Vinay Gupta said when talking about Ethereum, the next-generation Blockchain platform: “Data is the network and the network is the data.” With all these connected validated devices networking and creating value, this should be manna to mobile operators' ears!