Blockchain technology, which first drew attention as the distributed ledger behind the secure circulation of Bitcoin, is gradually transforming the business paradigm of traditional financial markets built on centralized regulation and high costs. By storing and managing information and value over distributed networks, blockchain can completely redefine the process of trust in digital environments — and is expected to make social and economic activity in the digital world more democratic.
More recently, blockchain has been in the spotlight as a distributed computing technology that delivers data reliability, stability, security, and efficiency — a foundational technology driving the new growth industries of the Fourth Industrial Revolution alongside its other core technologies: artificial intelligence, IoT, and big data.
Perspectives on blockchain differ depending on the purpose of use and the finer technical characteristics, but it is worth noting that the essence of blockchain is not simply a distributed accounting ledger — it is a network-based distributed data structure. Fundamentally, blockchain is a composite concept combining technical elements such as distributed data structures, network connectivity and computing among participants, cryptographic theory and security technology, and consensus mechanisms that make records difficult to falsify or alter.
The concept and scope of blockchain keep evolving with how the technology is viewed and how fast it develops. Moving beyond blockchain as merely the technology behind Bitcoin’s cryptocurrency, the industry has recognized its potential as infrastructure that can settle the authenticity of data without going through centralized certification authorities, and is gradually exploring applications in new industrial domains. In particular, as hardware and network-related IoT technologies advance rapidly, the range of IoT applications is broadening across industries — and with it, the importance of data integrity, system security, and device control in IoT services is rising sharply.
There have already been cases of hacked home appliances — smart TVs, refrigerators — sending malicious phishing and spam emails, and because such smart appliances are often left exposed and unprotected on public networks, they have become prime targets for hackers as vehicles for DDoS attacks. These problems stem from the centralized architecture of IoT systems: attacks on the servers and gateways behind IoT services open the door to data falsification, unauthorized device access, and erroneous device control, and the security threat keeps growing as the IoT era spreads. Last July, global automaker Fiat Chrysler recalled 1.4 million vehicles sold in the United States after two American security researchers publicly demonstrated hacking a car driving on a highway and controlling it remotely from 16 km away.
Many IoT companies that have courted customers with convenience rather than security now judge that if IoT devices unable to overcome their inherent security weaknesses continue to spread, customers will start choosing services for security over convenience. This year, global tech companies including Cisco, Foxconn, Bosch, and Gemalto formed a consortium for IoT blockchain development and, joining hands with blockchain startups such as ConsenSys, BitSE, and Chronicled, are planning to develop blockchain protocols for use in IoT services. In particular, applying blockchain to network security — long singled out as the vulnerability of IoT devices — is expected to let things communicate with one another with far greater security and stability.
Research on IoT services and platforms using blockchain has been active of late; the representative examples are the IOTA Foundation’s ‘Tangle’ and the Linux Foundation’s ‘Hyperledger.’ IOTA, a nonprofit founded in July 2016 for blockchain research, aims to develop a next-generation blockchain to create an IoT ecosystem. Envisioning a blockchain system for trustworthy data exchange among the billions of devices soon to be interconnected, it developed ‘Tangle,’ a new distributed ledger architecture based on a directed acyclic graph, to remedy the inefficiencies of the original Bitcoin blockchain in transaction processing and mobile-device scalability.
Instead of the conventional structure of blocks and chains, each transaction leads to two other transactions, and this in itself constitutes attestation. A single new transaction directly attests two other transactions, and indirectly attests that the details of the Tangle are valid and that the protocol rules are being followed. The IOTA Foundation recently launched a 2 million dollar fund to accelerate the growth of IoT distributed ledger technology derived from blockchain. Named the ‘IOTA Ecosystem Fund,’ the money will be used to expand and refine the IOTA ecosystem through use cases, libraries, tools, hackathons, and more.
‘Hyperledger’ began when a blockchain runtime developed at IBM Research was contributed to the Linux Foundation as open source; today more than 140 companies participate in standardizing a cross-industry distributed ledger. Hyperledger aims to be the standard industrial blockchain platform for corporate payments, goods tracking and management, and more, and many participating companies, IBM included, are building their own blockchain systems on top of it.
In Korea, Daliworks, an IoT cloud specialist, is conducting blockchain research for IoT services. The Smart Fintech Research Center at Sogang University and the Korea Electronics Technology Institute are taking part in the project, which aims to develop blockchain-based technologies for data storage and management and for device identification and management that guarantee data integrity and reliability.
By fusing IoT technology with blockchain-enabled mashups across industries, IoT services with guaranteed trust become possible. Consider, for example, a service in which, after a hospital visit, the refrigerator screen displays the doctor’s list of forbidden foods and foods to eat in moderation, and the patient adjusts their diet accordingly. Countless companies are trying to implement services like this in a P2P fashion, because connecting billions of devices to a centrally managed system is impossible for reasons of cost and stability. Blockchain is exactly where a way can be found to lower the cost of building systems and operating services while raising stability.
Just as IoT is applied across many industries, the range of IoT services where blockchain can be applied is equally broad. Representative scenarios include electric vehicle charging systems and parking payment systems. A typical service would see the charging transaction between a car and the charging system stored automatically on the blockchain, with the car paying the charging system on its own for the amount charged. Just as useful would be a service in which, when a car parks in a space, the parking time is measured automatically by sensors, the parking transaction is recorded on the blockchain, and the car pays the parking system for the time used and drives out. In cold chain management systems — a flagship IoT service — blockchain could likewise be used to secure mutual trust in the temperature conditions throughout transport. Going forward, blockchain’s cryptographic technology is expected to prove valuable in tracking production processes and managing manufacturing through IoT.
The three biggest elements of blockchain use in the IoT era are machine-to-machine payments (M2M Payments), the security of things (Security of Things), and automated process handling (Automated Process). Issues of security, authentication, and safety have generally been resolved by relying on intermediaries, but this centralized arbitration carries side effects in both cost and trust. By distributing trust, blockchain provides a digital platform where direct transactions are possible without intermediaries and where records cannot be arbitrarily manipulated; for enterprises, it removes the need for data synchronization between systems, raising the efficiency of existing system architectures. These effects give blockchain the potential to influence every field of industry in remarkably diverse ways. Above all, in the machine economy of a true IoT era — billions of things interconnected, trading resources and services — blockchain will be a core enabling technology for smart decentralization.
by Technology and Management, August issue, CEO Soonho Lee
