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on juli 10, 2018 transformation iot blog internet of things

“What’s missing from IoT” [Part 3]

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In the first and second posts in the series “What’s missing from IoT”, I explored the direction where developers and architects could take the future development of IoT. I made the case for the 'Collaboration of Things'.

To enable the Collaboration of Things, additional ingredients must be added to the existing digital nervous system. In today's post I will explore the ingredient of transparency in more detail.




Part 3. Transparency

Contracts, transactions, and the records and archives of them, are among the pivotal structures in our political, legal, and economic systems. They protect valuable assets and set organizational boundaries. They establish and verify identities and arrange interactions among nations, organizations, communities, and individuals.

And yet, these critical tools haven’t kept up with digital transformation. They’re like the morning rush-hour gridlock trapping a 300 MPH super-car. In the digital world, the way we maintain governance and control has to change dramatically.

Blockchain promised to solve this problem by recording the transactions between parties efficiently in a permanent and independently verifiable way. It could provide a means of algorithmic consensus — the confidence that interoperating Things on the internet could register, access systems, tap into data resources, and anchor information assets onto the blockchain. That way, it could serve as a trusted data exchange (cryptocurrency being just one form of data), that would enable a whole new set of data-based business processes, including data ownership, transfer, broadcast, lineage, etc.

In addition, distributed ledgers could enable virtual agents embedded in smart contracts to enforce legal, political and economic terms. Together, these capabilities act as a virtual third party, that scales and extends the reach of business processes, removing the need for humans in the middle. Distributed ledgers and zero knowledge proof (ZKP) enabled Smart Contracts marry immutable identity, authentication, authorization and access control to business processes in smart contract form, while providing absolute privacy for its human and/or machine users. In that sense, they would close the trust gap that would otherwise exist in the Internet of Everything, and would provide for the more rigid structure of a governed, transactional internet where machines abide by rules, and cryptography provides independent validation.

While open and transparent, serious performance and scaling problems limit the widespread adoption of current distributed ledger technology. All blockchain consensus protocols (e.g. Bitcoin, Ethereum, and Ripple) share the same characteristic: every fully participating node in the network maintains a copy of the entire state and must participate in the processing of every transaction. While a decentralized consensus mechanism offers many benefits, such as authenticity, fault tolerance, resiliency to cyberattacks, neutrality, and thus making it challenging for participants to collude with one another in order to profit at the expense of others, this comes at the cost of scalability, as hundreds of thousands of nodes would have to be hacked to gain control of the network. It slows transaction processing to an average of around 3 to 5 transactions per second. Current blockchain protocols actually get slower, as more nodes are added to its network, since the total network latency logarithmically increases with every additional node.

This expensive and slow process is absolutely justifiable for a global network with relatively limited numbers of high-value transactions, and where all participants are potentially malicious. Examples that spring to mind are clearing and settlement networks, as well as real-estate and mortgage transactions. It is unusable however, as the backbone for a global micro-payment system, let alone as the backbone for the Internet of Everything, where hundreds of billions of devices each perform multiple transactions per second and check each other randomly.


 A new distributed ledger technology that solves the scaling shortcomings of blockchain consensus protocols, is the IOTA tangle protocol. It does so, while maintaining most of the benefits of decentralized consensus mechanisms. IOTA achieves three simultaneous goals, that have never before been accomplished in the cryptocurrency space: zero-cost transactions, offline transactions, and infinite scalability. IOTA is a ledger technology with excellent scaling properties. As the network becomes more used, it becomes faster and more reliable. The technology makes it possible to perform an infinite number of transactions per second. It’s offline transaction capabilities, allow tiny battery-operated sensors to stay offline for prolonged periods of time. These features make IOTA ideally suited for the Internet of Everything. It may be too soon to declare the IOTA tangle protocol as the clear winner in the 'distributed ledger for IoT' space, but it's certainly worth it to keep your eyes wide open.

In the fourth post in the series, I will explore the final topic of structure.

Eric Mulder

Experienced Business Consultant @Nalta