blockchain and iot how does it work

The business world has been experiencing rapid advancement in digital transformation, which has profoundly impacted management, security, innovation, and business operations by bringing new technological solutions for developing solutions to business problems.

In addition to providing ever-increasing business intelligence, this transformation aims to increase operational efficiency and improve end users’ product and service experiences.

Many of these cutting-edge technologies are even more effective when used in tandem, as is the case with Blockchain and Internet of Things technologies, which can significantly boost business performance.

The Blockchain represents a paradigm shift because it is a distributed network in which users (referred to as “nodes” in the network) are in charge of validating and registering transactions.

In other words, it is not a proprietary system owned by company A or company B. It is a joint effort of all the businesses involved in an ecosystem.

The business thrived in a centralized setting where one entity had more control over its business partners. This model is broken by the Blockchain, significantly reducing the power imbalance.

However, how can one ensure that a specific piece of data or transaction recorded in the Blockchain is actually “true”? Verification cost refers to this lack of definition. And it is at that precise moment when IoT solutions improve the use of Blockchain-based ones.

IoT sensors can prove that an event occurred, ensuring the accuracy of every transaction recorded in the Blockchain.

With the implementation of projects that use this technology to monitor devices in the field, the Internet of Things (IoT) has grown exponentially. The IoT is now at the forefront of digital business transformation thanks to its endless application possibilities.

But what exactly does IoT mean in Blockchain, and how does it work? Read on to find out.

What is IoT in Blockchain

The Internet of Things (IoT) can simply be defined as sharing data among various objects, such as consumer goods, industrial machines, and vehicles, to carry out specific tasks.

Sensors and data networks, which enable communication between “things,” form the backbone of the Internet of Things. A computer system is required to manage the actions of each object connected to that network and analyze the data received.

As a result, the haphazard growth of the IoT poses several difficulties, including managing, identifying, and connecting such a large number of devices. Supporting massive IoT ecosystems in the future will be very difficult for the current architectures and infrastructure.

This issue can be resolved by using Blockchain, which allows for distributed inventory and automated audits.

IoT ecosystems will be able to depart from the conventional paradigm of centralized, socket-based networks, where devices depend on a central cloud server for device identification and authentication.

Furthermore, many industrial sectors, including large farms, where IoT nodes are dispersed over large areas with few connectivity networks, make it challenging to establish centralized networks.

Blockchain will make it possible to build more secure networks of networks where IoT devices are trustworthily interconnected, eliminating risks like device fraud and impersonation.

Blockchain and IoT: big city with skyscrapers. Dashed lines start from some buildings with clouds at the end (representing the cloud) WiFi.
Credits: Rawpixel by Freepik

How Does IoT in Blockchain Work

IoT makes it possible for Internet-connected devices to transmit data to private Blockchain networks in order to produce tamper-proof records of shared transactions.

Your business partners can share and access IoT data with you using Blockchain but without the need for centralized management or control. Each transaction can be independently verified to prevent disputes and foster trust among all members of a permissioned network.

Benefits and challenges of Blockchain in IoT

The Blockchain is already being used by some solutions to manage IoT networks. This kind of association does present some difficulties, though, which necessitate special attention if it is to run smoothly. They are challenges to overcome, like:

  • Latest Technology

Blockchain will only be widely used if problems with transaction speed, verification, and data caps are resolved.

  • Low Compliance

It is challenging for business ecosystems to adopt them because of the lack of standardization and regulatory ambiguity.

  • Occupational culture

Blockchain is a paradigm shift for a decentralized network that depends on the participation of its users and operators, which lessens the power asymmetry between the strongest links in the stream.

  • Power, safety, and privacy

For the general public to fully trust a Blockchain solution with their personal data, cybersecurity concerns still need to be resolved, regardless of whether public or private Blockchains are being used for data encryption.

  • Assurance in implementing new standards

Similar to the Internet of Things (IoT) that uses Tangle technology, which, despite not being a Blockchain in the traditional sense (what we refer to as Digital Ledger Technology), appears to be a promising technology based on its architecture more focused on the volume of transactions that IoT will generate

The number of benefits, on the other hand, will be notable and highly pertinent for businesses once the difficulties presented have been overcome:

  • Lack of Trust and The Elimination or Reduction of Intermediaries

Without the oversight or mediation of a third party, two parties can make a change, greatly reducing or even eliminating counterparty risk.

  • High-Quality Data

Due to participant validation, Blockchain data is exhaustive, consistent, accurate, and widely accessible.

  • User Empowerment

All information and transactions will be under the supervision of the people.

  • Longevity, Dependability, and Durability

The Blockchain is more resistant to malicious attacks due to decentralized networks’ lack of a single point of failure.

  • Process Reliability

Users no longer need a third party because they can trust that their transactions will be carried out exactly as the protocol dictates.

  • Transparency And Permanence

Public Blockchain updates are transparently visible everywhere, which increases process transparency. Additionally, each transaction is immutable, meaning that no network participant can change or remove it.

  • Simplification of the ecosystem

This lessens the chaos and complications brought on by multiple ledgers by consolidating all transactions into a single public reason ledger. You only possess “one” truth.

  • Lower Transaction Costs

Blockchain has the potential to greatly lower transaction costs by getting rid of the middleman and overhead involved in exchanging goods.

  • Digital

Virtually any document can be expressed in code form and encapsulated, or it can be referred to by a reason-book entry, demonstrating the broad range of uses for Blockchain technology that go far beyond financial transactions but are still largely unexplored.

  • Increased Security and Ease of Monitoring and Data Transactions

Generating more intelligence and control for CIOs and other departments.

Examples of IoT Blockchain Systems

  1. Helium
    Helium is located in San Francisco, California. It is a decentralized machine network. The business uses Blockchain to link low-power IoT devices (like routers and microchips) to the internet. Radio technology is used in Helium’s Blockchain-based wireless internet infrastructure to improve internet connectivity and significantly reduces the amount of power required to run “smart” machines.’
  2. Ubirch
    The Ubirch company is located in Cologne, Germany. In order to establish what the company refers to as a “chain of trust” the UBIRCH Trust Platform can be combined with the Internet of Things platforms. This ensures that as IoT data is collected, Blockchain and cryptography technologies are used to guarantee that it cannot be changed. Medical devices, supply chain transparency, smart cities, and document certification can all benefit from UBIRCH’s solutions
  3. Rizon
    Rzon is located in Zug, Switzerland. The Tendermint engine and Cosmos Inter-Blockchain Communication Protocol are both used by the digital asset and currency hub known as the RIZON Blockchain. Support for the Internet of Things businesses is one of the services provided by Rizon, which also provides features like horizontal scalability and instant asset exchange. According to the company’s 2022 overview, its Blockchain aims to “enable interoperability between sovereign Blockchain networks and allow for an environment that allows for these networks to utilize a vast pool of liquidity.”
  4. Atonomi
    Located in Seattle, Washington. Blockchain technology is used by Atonomi, which describes itself as “a universal trust environment,” to enhance security for IoT-connected devices. The company’s solution enables transactions between validated devices regardless of their manufacturer, reputation tracking to identify device anomalies and device identity validation on an immutable ledger. It can be applied to autonomous vehicles, smart homes, smart cities, and industrial applications.
  5. Grid
    Hardware for cryptocurrencies and digital assets is a specialty of Grid+. The company markets its GridPlus, Lattice1 and SafeCard hardware wallets as being the safest and most convenient way for people to use cryptocurrencies. A Zigbee antenna enables Lattice1 to connect to other IoT and smart devices, and users have access to human-readable signing for smart contracts.
  6. IOTA
    Located in Berlin, Germany. With distributed ledger technology for “tamper-proof data, feeless microtransactions, and low resource requirements,” IOTA views its Tangle network as the “backbone of IoT.” IOTA’s Industry Marketplace provides automated trading of data, goods, and services to support industrial IoT. Global trade and supply chains, customs and border management, and other industries are among those for which the company’s distributed ledger can offer solutions.
Port customs with cargo ship containing containers
Credits tawatchai07 by Freepik

Use Cases of Blockchain and IoT

The following are some use cases of Blockchain and IoT when applied in different industries.

  • Supply Chain/Smart Contracts
    Blockchain and IoT can be combined for supply chain quality assurance. Perishable goods, like wine or rare foods, are frequently subjected to temperature and light exposure fluctuations as they travel through transportation and warehousing networks. The journey of perishable goods from manufacturer to retailer can be captured by combining IoT and Blockchain. An expert explains that “At the case or pallet level, temperature and location data can be collected and incorporated into the Blockchain, allowing the ability to validate the history of the product as it go through the supply chain and deny accepting the product and moving it forward if the terms of the handling contract are violated.”
  • Field service and oil operations
    According to a report, IoT sensors on oil and water wells can aid oil companies manage the performance of hauling corporations that pick up and deliver oil and water from wells and transport it to various destinations, including environmental waste dumping grounds.
  • Truck Leasing
    Integrating Blockchain With IoT Strengthens Trust in Multiparty Processes; IoT sensors installed in leased trucks can record key events on a Blockchain to help manage fleet whereabouts and returns and support more meaningful billing practices.

The Usefulness of the Blockchain and IoT Combination.

The combination of these two technologies can bring many benefits in factories, warehouses, the logistics chain, agriculture and even smart cities.

Among these benefits are; a cryptographic layer that allows information to be recorded in a decentralized manner, the ability to use the Blockchain to achieve greater transparency in management and the difficulty of unilaterally modifying registry data.

Another advantage is the process of automation. There is a high volume of information in many IoT scenarios, and it is convenient to have automatic mechanisms that can respond to events registered by IoT sensors without human intervention.

With these technologies, information transactions can be launched, and many interconnected devices can be coordinated. The decentralization of the technology can eliminate costs in managing the IoT network.

Why Blockchain is the Future of IoT

The future of IoT depends on Blockchain because it can keep a record of each transaction mode on IoT. It can also make transactions secure in such a way that data cannot be altered.

Through a cloud-based ecosystem, the Internet of Things (IoT) has the capability to connect every device. It might support the infrastructure of smart cities in the future, making communications much more streamlined and effective than they are right now.


The Blockchain still has the potential to become a true source of monetary value and online trading. This can hugely impact the financial services industry and its current protocols. 

And it will be extremely useful in new uses alongside other technologies such as Analytics and Machine Learning.

Blockchain and IoT can be an excellent combination, but they are not evolving at the same pace. For example, Blockchain has constraints such as regulatory and privacy issues, which are requirements for enterprise adoption and scalability constraints to handle large amounts of data.

IoT, on the other hand, needs to show that the system is efficient, resilient and secure in order for it to become a staple in enterprise technology.In addition, every leader needs to have an authentic understanding of these technologies to make the right decision and avoid ‘a hammer looking at a nail scenario’.  

See you soon,

Scaling Parrots

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