When you buy coffee beans that’s labeled genuine what makes you feel certain of its origin? If you meet someone online how do you know who he or she say they are? To be sure, really sure you’d need a system where records can be stored, facts could be verified by anyone and security is guaranteed. That way no one can cheat the system by editing the records because everyone using the system could be watching the system.
Systems like these are on the horizon and the software that powers such systems is called as blockchain. Blockchains store information across network of personal computer systems making them not just decentralized but also distributed. This mean no central company or person owns the system yet everyone can use it and help run it. This is important because it means it is difficult for any one person to take down the network or corrupt it. The people who run the system use their computers to hold bundles of records submitted by others known as blocks in a chronological chain. The blockchain uses a formal math called cryptography to ensure records cannot be counterfeited, changed by anyone else.
You have probably heard blockchain for its first killer app a form of digital cash called “bitcoin” that you can send to anyone even a complete stranger. Bitcoin is different from credit cards, paypal or other forms to send money because there isn’t a bank or other financial institution involved. Instead people from all over the world help move digital money by validating others digital bitcoin transactions with their personal computers earning a small fee in the process. Bitcoin uses the blockchain by tracking the record of ownership over this digital cash. So only one person can be the owner of the cash and it cannot be spent twice, like counterfeit money in the physical world can. But bitcoin is just the beginning for the blockchains. In the future blockchains that manage and verify the online data may enable us to launch companies that are entirely run by algorithms making self-driving cars safer. Help us protect our online identification and even track billions of devices on Internet of Things.
Blockchains can serve as a ledger of existence for billions of devices that can autonomously broadcast transactions between peers for e.g. Toaster can broadcast data to refrigerator, connected light can broadcast data to smart wearables etc. And when we look at the bitcoin payment systems today, we see it mainly as an app, a payment system and nothing much more but in truth this protocol of value exchange has innovative potentials for the Internet of Things. And currently when we look at bitcoin we see that the employee of the bitcoin digital economy are machines who are mining the bitcoin network. However when we describe the Internet of Things we see machines anything from refrigerators, televisions to smartphones and everything in between can potentially from IoT perspective become customers of the bitcoin network and in doing so they would use the bitcoin network to poll an exchange information, verify information between themselves autonomously and act upon that information and this network of machines will essentially act as communication or social network of devices that can automatically act based on information which it hosts in the bitcoin ledger. Thus with the help of blockchain and bitcoin transaction processes the distributed IoT systems can ensured to be safe and secure from malicious transactions. Also it would be decentralize the ownership of the network and reduce value extraction by major dominant players in the IoT domain. Ultimately serving the purpose of liberating the ownership of IoT from dominant players in this field.