IBM Sees Bitcoin and Blockchain Technology in Internet of Things
IBM, one of the leaders in the upcoming ‘Internet of Things’ era where most devices of everyday use would be connected to a cloud, and be able to communicate with one another, sees the future of this communication in blockchain technology, first used in Bitcoin. IBM has invested significant resources into the internet of things paradigm, and sees the blockchain technology solving some core issues, helping the ideas go more mainstream. According to IBM,
The Internet of Things represents an evolution in which objects are capable of interacting with other objects. Hospitals can monitor and regulate pacemakers long distance, factories can automatically address production line issues and hotels can adjust temperature and lighting according to a guest’s preferences, to name just a few examples.
The traditional model of internet of things involves a centralized data center that gathers all the information collected through the various connected devices. However, this has a serious drawback in terms of lifecycle costs and revenue. The company that makes a smart LED needs to consider the costs of managing the data collected from this device for an average of over 20 years, whereas the revenue is usually a one-time event when the consumer buys the light bulb. This makes the internet of things limited in scope only to devices that can be sold a high premium or that aren’t used often.
To solve this problem, IBM sees a future where each device is self-sufficient in managing itself, thus managing costs and resources on its own without involving recurring expenditures for maintenance. This uses edge-based cloud computing in a distributed environment, which means the devices on the edge of the network are connected together to form their own distributed cloud. This is sustainable as long as the devices are present, and the lifetime of this cloud becomes the lifetime of the devices that form the cloud in the first place. The network is therefore self-contained in a way, lasting for as long as the devices can last and at a fractional cost to the manufacturer.
An important aspect of this distributed cloud is the lack of trust in individual nodes. With a centralized system, trust is easier, since a central agency manages all the devices and their identities and potentially weeds out the bad nodes. However, with potentially billions of devices coming online, this is a next to impossible task. Instead, IBM sees the future to be a distributed model that doesn’t require trusting every node in the network – a problem that had already been solved by Satoshi Nakamoto in designing Bitcoin.
According to Paul Brody, the vice president for IBM Global Business Services,
The core of this new approach is built upon the Block Chain, a model of distributed computing leveraging the architecture of BitCoin (without the financial component). Using the Block Chain we can implement the typical transaction processing work done by centralized data centers without any of the cost associated with those systems by using compute power generated by individual devices that would, in most cases, go to waste. These distributed, Block Chain-based services will run on new transport protocols as well.
The blockchain technology, which is widely known to have solved the old Byzantine General’s Problem, provides a way to create a network consensus without having to trust individual nodes. Bitcoin uses the proof of work algorithm to secure its network, but several other mechanisms have since been developed to accomplish the same goal.
Today, using Bitcoin, it is the first time that devices can act in the financial markets completely independent of any human interference. An algorithm can generate its own Bitcoin wallet that enables it to trade with other algorithms. When these sit on top of things, it means everyday household items can in fact participate in financial dealings with one another and to the outside world (for instance, devices connected to the grid could negotiate a price for reduced electricity usage during peak hours). IBM is already exploring these possibilities with Bitcoin.
Photo Credit: “Internet of Things” by Wilgengebroed on Flickr
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