Crypto 2.0 Musings - Internet of Things

What happens when you cross Internet of Things and Blockchains together? No, this is not a start of a bad joke, rather potentially the beginning of something very transformative. For those of you who do not know much about Internet of Things, Wikipedia has a nice definition: 

'The Internet of Things (IoT) is the network of physical objects or "things" embedded with electronics,  software, sensors, and network connectivity, which enables these objects to collect and exchange data. The Internet of Things allows objects to be sensed and controlled remotely across existing network infrastructure, creating opportunities for more direct integration between the physical world and computer-based systems, and resulting in improved efficiency, accuracy and economic benefit. '

A good example of an IoT device is an internet connected smart lock, which allows you to open your door with just your smart phone. You can even grant temporary access to visitors. If you couple it with Nest Protect CO + smoke alarm, excessive CO levels could trigger automatic door unlock to allow people to escape and at the same time switch off your boiler by sending a kill signal to the Nest thermostat, which in its own right allows you to set temperature remotely via the internet to make your house nice and cosy ahead of your arrival. In fact the possibilites are endless, just see LittleBits.

Having these capabilities is great, but personally I worry about security. I want to make sure that only I can lock and unlock my door, and only I can set my home temperature. On first glance, this is trivial - just make sure that the devices are password protected.

But hang on, to allow automated workflow e.g. unlock door if CO alarm is raised,  we need to execute somewhere the enabling code. That code would then need to be authorised to control devices on your behalf. You may change your mind in the future about what code is allowed to do, so you need to have a capability to de-authorise access to your devices.

A number of workflow automation systems exist today that allow you to detect an event raised by one device and cause an action on another device e.g. IFTTT and Apple's HomeKit to name a few. Most of the solutions are cloud based, so in effect you trust them to execute your instructions faithfully and therefore you grant them authority to control your devices. Even if you run such a service on your own computer, it has to be connected to the internet to allow remote control, and hence susceptible to hackers, just like the cloud service.

However, what happens if those cloud services are hacked and someone is able to unlock your door for malicious purposes? You have to put a lot of trust in the cloud service i.e. it acts as a trust intermediately - you trust it to be available all the time, be secure, store and execute your code faithfully etc.

Back to blockchains, what is it that makes them interesting? Well, they do a pretty good job in dis-intermediating trust away from centralised utilities. That's why companies like IBM and Samsung are experimenting with blockchain technologies to provide a decentralised backbone for IoT. 

Much of what is required for IoT is already solved by blockchain technologies. Smart Contracts (code) and Distributed Ledgers (storage), coupled with cryptography and crowd voting guarantee that only you or the code you authorise on your behalf can control your devices because no single central service needs to be trusted to get it all right.

Home automation is just the beginning, if we can provide a secure and trusted backbone for IoT. How about disrupting the way we make on-line purchases. Today we pay for goods upfront and hope they arrive. If they don't, you may have chargeback recourse if you paid with something like VISA.

And yet, another way is possible - your payment on blockchain can be made to an escrow account managed by a smart contract. Once the delivery company arrives at your doorstep, you digitally sign your attestation that delivery has been received by using your private key on your smartphone, which prompts the release of money held in escrow to the merchant. Non-delivery within a specified period will auto-trigger release of money back to the purchaser. 

Same principle can be extended to many other use cases e.g. imagine shipping containers with IoT locks that only unlock if money from importer is in escrow, but once there, an unlock triggers release of funds to the exporter, thus automating today's trade finance flows. Add to the container a temperature sensor, and you can automate insurance claims for goods that require to be transported at certain temperature ranges.

The future is here, we just need the imagination and will to recognise it!