The hype surrounding blockchain, the latest technology promising to upend the business world, seems matched only by the attention paid to another hot topic: the Internet of Things (IoT). Amid the noise, business leaders need to determine if experimentation that combines these two early-stage technologies can yield a sustainable competitive advantage.

Read more about the promise and impact of blockchain and the Internet of Things Pairing Blockchain with IoT to Cut Supply Chain Costs

Stamping Out Counterfeit Goods with Blockchain and IoT

In this joint study by The Boston Consulting Group and Cisco Systems, our aim was to better understand how blockchain is being used by businesses building a distributed IoT network. Our research shows that only a small subset of companies have started down this path, and most of those experimenting with blockchain and IoT are still in the proof-of-concept phase. Still, already it’s clear that these nascent technologies, if paired together, can disrupt a variety of business sectors.

IoT: From Hype to Reality

As invariably happens with new technologies, hype helped define the early days of IoT. Investments in IoT have skyrocketed over the past two to three years but lag original estimates. According to a February 2018 IDC study, projected spending on IoT is expected to hit $1 trillion in 2020, which represents a robust, four-year compound annual growth rate (CAGR) of roughly 15%. It falls short of a December 2016 IDC projection, however, that forecast a market size of $1.29 trillion.

This shortfall reflects a healthy recognition of reality. Several factors have inhibited IoT’s growth, including a lack of technical standards, antiquated business and market structures, cultural issues, technological complexity, and security and privacy concerns. To address some of these issues, companies are turning to blockchain.

The Case for Blockchain with IoT

Our findings show that there’s a select subset of IoT-related applications for which blockchain is a perfect match. Generally, these blockchain-with-IoT use cases can create incremental value if they exhibit one or more of the following characteristics:

The need for high trust and transparency across devices managed by multiple parties that don’t typically trust one another

across devices managed by multiple parties that don’t typically trust one another Reliance on a single version of truth by multiple stakeholders when individual records are error prone and the cost of lost or compromised data is very high

of truth by multiple stakeholders when individual records are error prone and the cost of lost or compromised data is very high Device authenticity ; this is critical because the impact of rogue, tampered devices would be substantial

; this is critical because the impact of rogue, tampered devices would be substantial Reliance on autonomous decision making and decentralized transactions

We identified more than 35 use cases of companies using blockchain with IoT and organized them into five categories: operations tracking and visibility, provenance and authentication, autonomous machine-to-machine interactions, service-based businesses (such as smart locks, smart vehicles, delivery, car leasing), and data monetization (consumer goods usage data, health data, and environmental conditions, including weather and pollution). (See Exhibit 1.)