Continuing my personal reflections from the recent IoT World Forum, here I look at what I’ve started to understand about Blockchain, and why it matters.
Don Tappscott from the Blockchain Research Institute presented his view of why Blockchain is critical to allowing the IoT to move to the heart of the economy. As someone who has so far struggled to really understand Blockchain and it’s relevance, this was a great presentation. I now understand a little bit more than before – let me share it with you.
In summary, some of the data created by all the billions of IoT devices will either need to transfer value from one party to another, or will potentially transfer value in the future. This data related to value is what gets written to the blockchain, which is the distributed ledger of value.
And this was central to Don’s argument - that we’re moving from the internet of information to the internet of value. The internet of information is characterised by web sites, photos, pdfs, documents, presentations and even voice – things that get copied when they get sent.
By contrast, the internet of value contains things like money, identity, energy, intellectual property, contracts (inc loyalty points, deeds, coupons), art (music, film, visual art), votes, and financial assets (eg bonds, stocks, IOUs, and futures). By their very nature, these things can’t be copied in transmission – they need to actual transfer from the sender(s) to the recipient(s).
In order to track these transactions, we need a distributed ledger that can track everything – one which is completely trusted, and which can’t be changed, hacked, or undermined. This is the blockchain.
Previously, the role of trust sat with the middleman intermediary – for example, a bank that guarantees the five pound note, or the lawyer who witnessed the will being signed. But as numerous public examples have demonstrated, this is open to abuse, delay, and hacking, as well as incurring commission which erodes the value. In the blockchain, this trust is protected not by an expert person, but by cryptology.
A vast network of “miners” encrypt, create and register the new blocks of value – each block of value is attached to the previously existing blockchain, and only makes sense in the context of it’s position within the blockchain. It’s a bit like a new entry in the Encyclopaedia Britannia (remember that???) which gets written letter by letter on every page of the previously existing many volumes, and which only makes sense when you read every page in sequence and in totality.
As a result, any attempt to hack the blockchain would require a hack on every distributed node at the same time and for every block ever created, whilst at the same time, the biggest computer resource ever created is watching specifically to identify and eliminate such hacks. The analogy used was it’s like trying to reassemble a living chicken from a chicken nugget.
In this world, devices are empowered to execute contracts, to barter with other devices, to seek out their own software updates, to find value – all autonomously and all within the trusted boundaries. They can handle micro transactions (eg fractions of a unit or currency), and also handle privacy & identity. Identity remains critical – a device can only accept instructions from it’s valid owner. However, visible identity is not required – you don’t need to know who you are sending a payment too – you just need a secure way of proving that you have sent it and that it has been received (as seen in the Wannacry ransomware incident).
(You can see Don’s presentation, and all the others at http://www.iotwf.com/iotwf2017/keynotes – well worth watching).
In the next instalment, I’ll look at some of the current use cases of blockchain technology, and some of the anticipated directions.