State of Blockchain Technology penetration

The technology is still in infancy stage but has seen early adoption in Payments domain, which is expected following the success of Bitcoin. There are other industries as well where it is slowly making its way to production like in Energy and Music. However, it is still early days for blockchain technology yet. Pilots are underway across various industries and we keep hearing new use cases every day. The estimated total investment by banks itself in blockchain technology by 2017 is expected to be more than USD 1 billion and is set to grow exponentially. A major part of the investment is focused on developing capital market solutions and is expected to grow at a CAGR of 52% yoy. We agree that 2016 and 2017 will be the years of exploration, development of POC and experimentation on a small scale and blockchain is expected to become mainstream only by 2018 in a meaningful way.

Blockchain Implications Beyond Financial Services

Though a major part of funding is going into blockchain pilots for banks and FIs’, we see blockchain implications in other fields like:

1. Creating digital assets for copyrighted material like music, art, literature, patents and IP
2. Government considering distributing scholarship grants over block chain
3. Proof of ownership for modules in app development
4. Valuables authenticity and tracking like diamonds
5. Decentralization of storage space using a network of computers
6. Supply chain tracking
7. Energy sharing: solar power generation recorded on blockchain
8. Ride Sharing and Collaborative Transport
9. Decentralized platforms for predictions related to share markets, politics
10. Decentralized patient records management
11. Decentralized IoT
12. Government Records Keeping and proceedings
13. Property registration and notary
14. Decentralized platforms for predictions related to stock markets, politics
15. Digital Identity to protect consumer privacy (Car locks, customer identification, electronic voting)

Blockchain IoT Initiatives on Horizon

IoT can instill intelligence into existing or new infrastructure that can communicate, report and process certain operations by themselves without human intervention. We believe, blockchain will be critical to power this intelligence. As a testimony, recently, blockchain-based microgrid was used to successfully test P2P energy trading in Brooklyn. IoT could have taken it to some extent in terms of real-time responses from the sensors on the grid but with help of blockchain, it was feasible to offer P2P trading of energy on the grid. There are other use cases in Logistics as well where IoT is supported by blockchain to certify the management of container temperature and report the condition of perishable goods in real-time.

At Mphasis, we are developing a solution for automated claims management in the Insurance industry that uses blockchain with IoT devices. The process of fault detection by an IoT device to repairs followed by claims management can all be automated with the help of blockchain technology.

Efficient Business Processes and Systems with Blockchain IoT

There are a lot of benefits that will flow in once connected devices and systems are in place in process efficiency and cost savings. IoT blockchain networks would enable:

1. Real Time Tracking: Blockchain technology can be used in tracking billions of connected devices to record feeds on working condition
2. Immediate Failure Rectification: Regular feeds from devices posted on blockchain can immediately identify failure instances and immediate corrective action can be taken. For instance : temperature fluctuation in a cold fleet carrying food items identified by censors gets posted on fleet provider blockchain and a trigger is sent to driver of the fleet, food supply company and fleet provider company notifying about the temperature fluctuation. The driver can then immediately take action to fix the issue
3. Trend Analysis: A trend study can be carried out on devices for diagnostic study and preventive maintenance.
4. Accelerated Turnaround Times: Real time feeds on blockchain and triggering feeds to relevant nodes automatically can accelerate consequent actions. For instance, whenever an insurance provider issues home insurance policy, Mortgage Company gets a feed that insurance policy has been issued for a particular borrower and can be viewed using passkey on insurer’s blockchain. The mortgage company can then view the policy in real time and immediately disburse loan. The process that would have taken a week’s time is completed in less than a day

The Blockchain IoT Framework

An IoT enabled blockchain is where an overlay of services is designed in a particular kind of framework that will enable free communication between devices in a network. Each device generates its unique public key to send and receive information with other device and any participating device can seamlessly retrieve information associated with a given key. For instance : Multiple Industrial IoT blockchain initiatives are being undertaken to automate irrigation by controlling water supply based on feeds from another blockchain that keeps track of crop condition.

In the solution that we developed internally, IoT blockchain keeps track of working condition of all the home devices using censor technology and triggers feeds to relevant stakeholders like a homeowner, service center, mortgage provider (if the property is taken on loan), the insurer in the event of device breakdown. These stakeholders, in turn, take relevant action and update relevant parties. For example, the borrower will follow up with servicer for repairs, repair center will send its executive to fix the issue and then update its own blockchain with feed like device fixed, bill amount etc. Insurer will verify the bill amount and automatically reimburse the homeowner and update on its blockchain. Finally, the mortgage provider will revise device valuation based on the feeds from other stakeholders and update on its blockchain.

Skepticism due to Security Implications

Though blockchain technology has gained traction due to its highly secured encryption capabilities, there are several security concerns when implemented to IoT use cases:

1. Unknown/Untrusted parties: Blockchain IoT would largely be dominated by P2P network of communicating devices that function independently without dependence on a centralized trust center and where the parties are unknown/untrusted and may sometimes be of malicious nature.
2. Complex Security Mechanism: Multiple security layers to be developed for multiple devices that need to be integrated into a blockchain-based IoT network. A single loophole can compromise the security of the whole network
3. Little Knowledge on Threats: Since the technology is new and under pilot, malware/loopholes are still to be detected. The immunity can be made stronger only when any technology goes live on a broader scale.

Risks and Challenges restraining adoption and implementation of blockchain IoT

Some challenges while employing IoT blockchain

• Scalability: According to an estimate, 50 billion devices are yet to come online. Scaling up networks to support billions of devices and keep network up and running as data keeps multiplying every day, is a challenge
• Processing power : since all the connected devices have different computational capabilities and are not capable of running the same algorithm in the required manner, encryption of all objects in a blockchain based environment becomes a challenge
• Storage: The shared ledger technology aims at storing information across all nodes rather than on a central server. The information generated across nodes will increase each day, which is currently not supported by most smart devices like sensors which have very low storage capacity.
• Adoption: Present day systems are all centralized however blockchain is a complete 360-degree shift to decentralized systems and placing everything on a permissioned public network. The whole ecosystem may take considerable time to understand the technology and place trust in it

We believe that the need to understand the Infrastructure besides the blockchain technology will be critical. The challenges highlighted above needs to be addressed innovatively in the given network.