While the IoT seems like it is a child of the internet and sensors, the real value of the technology is likely to emerge from blockchain, especially in the commercial sector. The ability to carry out transactions without trust will be a game-changer, and will probably drive the IoT from emergent theoretical to practical reality.
To understand the power of the blockchain, you need to understand the current system people use for transactions. At the moment, the world is hooked up to a third-party network of gatekeepers. If you want to transfer money from one account to another, you have to do it via a bank – an institution you trust to take money out of one account and put it into another. If you want to write a contract, you have to delegate the enforcement of it to the courts – it doesn’t come automatically.
Think about the impact that something like this might have when it comes to immigration. A spouse visa application will no longer need to be a written document that has to go via the courts and government departments. Instead, it could be a smart contract on the blockchain.
We could continue with these points all day, but you get the picture. Transacting and trusting people is a challenge.
But with blockchain, that could change. You won’t actually need to use one of these third-party institutions if there isn’t any trust between you and the person you want to transact with. The blockchain will make sure that the contract is fair and just for you.
What Does This Mean For The IoT?
The next question is what all this means for the IoT?
Fundamentally, it means that companies are going to be able to rely on the IoT to transact with other firms, without first having to build trust or use intermediaries first.
This sounds quite trivial, but it opens up a host of opportunities for international firms. Let’s say a shipping company isn’t able to transport the goods of one of its clients.
With the blockchain, the client could simply negotiate a new carrier for the shipment via the blockchain using a smart contract. The contract would complete once sensors on the cargo container detect that the shipment has reached its intended destination. The blockchain network would then automatically transfer funds from the client to the new shipping company, completing the transaction.
Notice how all this happened without the need for prior trust or third parties. There were no banks or shipping handling organizations involved. Two parties, instead, relied on the blockchain system to provide them with the trust that they needed to make things happen.
There are many examples of how this kind of transaction could benefit the development of the IoT. Businesses in the supply chain or industrial networks could continually use it to negotiate with each other on price or delivery times without incurring massive banking fees. They could construct whatever type of contracts they liked, without requiring the help of lawyers. And that could be what drives the technology forward.
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