Anna Solana, science and technology contributor to IoT Solutions World Congress 2019 in Barcelona, explores the role to be played by distributed ledger technology like the Tangle as the internet of things becomes increasingly ubiquitous.

It’s not just a buzzword anymore.

It’s been said that blockchain is “the new internet”, “the internet of value”, and a game-changer that has the potential to revolutionise pretty much everything it touches.

Critics, however, argue that the word has been so stretched and diluted that the whole concept is just becoming more and more confusing.

Different types of blockchain

There is no longer just one blockchain. Instead there are many blockchains all around us.

Public blockchains, like Bitcoin or Ethereum; private blockchains and consortium blockchains, each one with its own individual set of specifications.

At its core, blockchain is what’s known as a distributed ledger technology (DLT).

This means that they work like a shared database, which is not stored in a single place but across different computers around the world.

Each piece of this database (call it block) is encrypted and has an ID (hash), which is linked to the previous one and the following piece of the chain.

At the end of the process, the chain is unaltered and provides immutable truth.

That’s the beauty of it. It also makes the technology secure and a valuable tool to authenticate not only transactions but any transfer of data between parties through the net.

The concept might not be ready for the prime-time, but it’s getting closer to its breakout moment as the year progresses.

Companies are starting to see value in blockchain’s potential to reinvent processes and there are already some interesting examples of its use in the real world.

Not only in areas related to its cryptocurrency roots, like payments or digital identification, but also in supply chains, healthcare, real estate, music, energy, fishing and even the protection of endangered species, to cite just a few.

Distributed ledger technology and the IoT: A perfect match?

Those same fields are also integrating more and more connected devices.

Blockchain technology can be used in tracking them, and processing the transactions and co-ordination between those devices.

It appears to be the silver bullet needed by the IoT industry to address long-standing challenges of scalability, privacy and reliability.

But is it? Are blockchain and the IoT really a perfect match?

“It does make sense to consider that IoT uses blockchain”, says Marc Rocas, president of Blockchain Catalunya, a Spanish non-profit organisation created to assess the potential for blockchain adoption.

“First of all, considering the volumes of devices that are expected to be connected in the coming years, a centralised or cloud architecture doesn’t add up.

“Distributed architectures are needed because they add redundancy, and therefore security, meaning they build better resistance to attacks.

“Additionally, devices are expected to be ‘autonomous’ to negotiate connectivity and optimum routes, and this also implies a certain range of transactions, which can be implemented with smart contracts.”

Why IOTA’s Tangle could be the best distributed ledger for IoT

Yet, Rocas – one of Europe’s leading commentators on blockchain adoption – also makes it clear that it’s still far too early to determine what the dominant solution or standard will be.

Currently, IOTA, a distributed ledger which uses a tangle (like a web) instead of blocks, is leading the way as it seems to be specially built to power the internet of things.

The reason is there are no individual miners, say accountants who keep the record of your transactions.

The entire community verifies them, removing the need for fees and, theoretically, reducing energy consumption.

Volkswagen, together with @iotatoken will show at #cebit18 a proof of concept how the trusted transfer of software over-the-air to vehicles can be securely documented using the #tangle. Great example how distributed ledger technology can be used in the future pic.twitter.com/4wuc7pdKfv — Johann Jungwirth (@JohannJungwirth) June 9, 2018

These factors are essential when considering that the IoT network will process billions of microtransactions between devices on a daily basis in the coming years.

Let’s remember that an estimated 26 billion connected things will be in use in 2020, according to Gartner.

Companies like Bosch, Fujitsu, Den Norske Bank and Volkswagen have already announced projects involving the IOTA protocol.

There are many other examples of IOTA open source technology being integrated across a variety of IoT sectors including mobility, energy, industrial IoT or public regulatory affairs.

Challenges of distributed ledger technologies like Tangle

However, using DLTs poses some challenges.

Critics say that despite the theoretical scalability of IOTA’s Tangle, the actual protocol has relatively high energy consumption.

Moreover, the whole process is computationally complex relative to the limited capabilities of many IoT devices and may be unfeasible in certain cases.

Montse Guardia, general manager at Alastria Blockchain Ecosystem, considers that IOTA is a great bet that still needs time to mature and also time to learn and adjust along the way while it’s been developed.

“It’s not a marketing stunt but there is still a long way in its development to leverage its potential”, she says.

Every new technology needs time to be further consolidated.

Blockchains are not a panacea. In fact, they are now getting hacked.

Bitcoin has been forked multiple times. Ethereum, too. The application of Europe’s GDPR is also posing a great challenge to blockchains.

Will they ever be perfect? No. But that’s just the point, right? And it’s called disruption.

The Internet of Things Solutions World Congress (IoTSWC) claims to be the largest international event specialising in the industrial application of the IoT. Organised by Fira de Barcelona in partnership with the Industrial Internet Consortium (IIC), it takes place in Barcelona from 29 to 31 October 2019