Applications of blockchains extend far beyond cryptocurrencies. Electronic sensor networks powered by the Internet of Things (IoT) are an untapped platform for deploying the next generation of blockchain technology, which stands to improve operating efficiency in numerous sectors, including manufacturing supply chains.
The key challenge to adopting blockchain technology on a large scale is adequately quantifying the costs and risks of deployment and ensuring security. Blockchains were first adopted in fintech, where products have short qualification cycles and are not safety critical. IoT networks can help to address these hurdles and extend blockchain technology to other sectors that require higher reliability.
Authenticated Workflow Automation
In a blockchain-powered supply chain, real-time IoT sensors enable authenticated workflow automation through smart contracts — self-executing scripts that can be triggered by blockchain transactions.
Smart contracts allow IoT sensor nodes to bypass the middle man (i.e., a central authentication server). To validate activity on the network, sensor nodes simply need to communicate with their nearest neighbors, which could then quickly authenticate new activities or transactions without connecting to a central server in the cloud or farther away in a private network.
As such, IoT blockchain networks accelerate data exchange in manufacturing supply chains, thus increasing operational efficiency and reducing system vulnerability.
Energy and Security Challenges
The trade-off in operating efficiency versus the cost of energy and network maintenance deserves some attention. While a blockchain IoT network may reduce the number of bottlenecks in a supply chain, the cost of energy for each sensor to continuously validate transactions and update its copy of the distributed blockchain ledger is not a commonly published metric. Frequent blockchain updates also reduce the average sensor lifetime, thus increasing the frequency and cost of part replacement.
The security of IoT blockchain networks is also not well understood.
