Can IoT Powered By Blockchain Improve Peer-to-Peer Trading?
Lisa Wang
Lisa is an Analyst at Hygge Energy. She is currently a student at Harvard University in Environmental Science and Engineering with a joint concentration in Environmental Science and Public Policy. She is extremely passionate about clean energy and sustainability, in addition to energy access and equity. She is excited about the potential of decentralized and distributed energy resources and believes Hygge Energy is making strides toward building clean energy communities.
What is IoT?
The Internet of Things (IoT) is the internetworking of physical devices which are embedded with electronics, sensors, software, actuators, and network connectivity. The IoT transforms objects into smart and connected devices by enabling them to collect and exchange data, communicating and interpreting information from their surroundings in real time. The devices connect to the network through the Internet, each with a unique IP address, in order to enable remote monitoring and control using cloud-based control systems. The information, gathered from the environment through sensors, can allow other devices and systems to act on the world through actuators. The IoT connects devices with the goal to increase the efficiency of processes and automate aspects of our lives and systems.
“The IoT connects devices with the goal to increase the efficiency of processes and automate aspects of our lives and systems.”
The IoT offers great opportunities and potential value through connecting people, places, and products. The analytics capabilities of IoT utilize data transmitted to the IoT network to convert insights into action. Current scenarios can be improved upon and new processes can be enabled through the sophisticated chips, sensors, and actuators embedded into physical items, transmitting data to the IoT network. The analytics capabilities of the IoT use this data to convert insights into action. The valuable information from the real world is converted into digital data to provide increased visibility into how users interact with services, products, or applications.
Challenges of IoT:
IoT networks currently face two major issues: security and scalability.
Security issues of IoT devices and networks make them vulnerable to disruptions and data breaches by external parties. Distributed Denial of Service (DDoS) attacks have affected unsecured IoT devices, in which multiple compromised computer systems bombard a target such as a central server with a huge volume of simultaneous data requests, thereby causing a denial of service for users of the targeted system. Weak security protection of IoT networks may make them vulnerable to cyber attacks and hacks, including launching into DDoS attacks. Each device that is connected to the IoT raises privacy and security concerns, as hackers may steal data and even control devices remotely, be they vehicles or home appliances. Beyond hackers, corporations may have access to more information than the private data previously shared through one channel. Threats also include device spoofing and impersonation.
“Weak security protection of IoT networks may make them vulnerable to cyber attacks and hacks, including launching into DDoS attacks.”
The issue of scalability arises when an IoT network grows in the number of devices it connects; the current centralized systems which authenticate, authorize and connect different nodes in a network can turn into a bottleneck. Thus, servers must be prepared to handle the great amounts of information exchange in the network. Otherwise, if the server becomes unavailable then the entire network can go down.
“… the current centralized systems which authenticate, authorize and connect different nodes in a network can turn into a bottleneck.”
What is blockchain?
Blockchain technology at its core comprises a distributed digital ledger shared between participants in the system, which enables data exchange without the need for intermediaries. The network participants interact directly and with encrypted identities. Each transaction or event is validated in the ledger collectively through a consensus process, and then added to an immutable transaction chain distributed across network nodes. Information recorded and shared to the community of users through this method is highly secure.
“… enables data exchange without the need for intermediaries… Information recorded and shared to the community of users through this method is highly secure.”
Blockchain solutions:
Blockchain addresses a fundamental problem of current IoT systems: security. IoT security architecture under a centralized client-server model managed by a central authority is susceptible to a single point of failure. With blockchain, decision-making is decentralized to a consensus-based network of devices.
Blockchain technology can dramatically improve the security of information in IoT networks. IoT data may be managed without the costly and complex centralized IT infrastructure and cloud server which identifies and authenticates individual devices. Devices would be able to easily identify and authenticate each other as legitimate nodes would be individually registered on the blockchain, thereby eliminating the need for central brokers. Scalability would be improved as the network could support billions of devices without additional server capacities.
“IoT data may be managed without the costly and complex centralized IT infrastructure and cloud server which identifies and authenticates individual devices.”
Blockchain’s tamper-proof distributed ledger removes the need for trust among involved parties, and grants no single organization with control over the vast amount of data generated by IoT devices. Storing IoT data with blockchain adds an additional layer of security, protecting against bypassers gaining access to the network in addition to robust encryption preventing false overwriting of existing data records.
Transparency provided by blockchain allows authorized parties accessing the network to identify specific sources of data leakages and track past transactions.
Fast processing of transactions and coordination among vast networks of interconnected devices is another strong advantage of blockchain’s distributed ledger technology, providing a solution for scalability.
“Blockchain’s tamper-proof distributed ledger removes the need for trust among involved parties, and grants no single organization with control over the vast amount of data generated by IoT devices.”
Potential for Peer-to-Peer Trading:
IoT powered by blockchain technology can significantly improve peer-to-peer (P2P) trading by optimizing communication between participants, increasing transparency, and removing the need for intermediaries. P2P describes the mechanism by which a decentralized platform allows two or more network participants to interact directly. With IoT and blockchain, the information provided is through direct transmission of data such as production, consumption and storage availability information directly from the device/blockchain to the intended party, thereby eliminating human error and inefficiencies.
Momentum is building towards a decentralized, distributed and transactive electric grid. With an ever-expanding network of assets on the energy grid, including intermittent renewable energy sources, greater interventions and balancing actions must be incorporated. Supply and demand of energy must be matched on a second by second basis, and thus grid management capabilities must accelerate alongside technological growth. Enabling technologies such as batteries and IoT/blockchain provide flexibility, visibility, and control over the consumption of energy.
At Hygge Energy, we are building infrastructure to accelerate the distributed clean energy transition. Hygge Energy’s platform utilizes blockchain and IoT to increase connectivity, while ensuring security, robustness, and scalability.
Lisa Wang
Lisa is an Analyst at Hygge Energy. She is currently a student at Harvard University in Environmental Science and Engineering with a joint concentration in Environmental Science and Public Policy. She is extremely passionate about clean energy and sustainability, in addition to energy access and equity. She is excited about the potential of decentralized and distributed energy resources and believes Hygge Energy is making strides toward building clean energy communities.
