By Marc Kavinsky, Editor-in-Chief of IoT Business News.
If the IoT appears to be a child of the internet and sensors, the real value of the technology is likely to emerge from blockchain, especially in the commercial sector. The ability to transact without trust will be a game-changer and likely drive IoT from emerging theoretical reality to practical reality.
To understand the power of blockchain, you need to understand the current system that people use for transactions. At the moment, the world is connected to a third-party network of gatekeepers. If you want to transfer money from one account to another, you have to do it through a bank – an institution you trust to withdraw money from one account and put it in another. If you want to write a contract, you have to delegate its execution to the courts – it doesn’t come automatically.
Think about the impact something like this could have on immigration. A spousal visa application will no longer need to be a written document that must go through courts and government departments. Instead, it could be a smart contract on the blockchain.
We could go on with these points all day, but you see the picture. Making transactions and trusting people is a challenge.
But with blockchain, that could change. You won’t need to use any of these third-party institutions if there is no trust between you and the person you want to deal with. The blockchain will ensure that the contract is fair and just for you.
What does this mean for IoT?
The next question is what does all of this mean for the IoT?
Basically, this means that businesses are going to be able to rely on IoT to transact with other businesses, without first having to build trust or use intermediaries.
It sounds pretty trivial, but it opens up a whole host of opportunities for international businesses. Suppose a shipping company cannot transport the goods of one of its customers.
With blockchain, the customer could simply negotiate a new carrier for shipment through the blockchain using a smart contract. The contract would end once the freight container sensors detect that the shipment has reached its intended destination. The blockchain network would then automatically transfer the client’s funds to the new shipping company, completing the transaction.
Notice how it all happened without the need for prior trust or third parties. No bank or shipping handling organization was involved. Instead, two parties relied on the blockchain system to provide them with the confidence they needed to make things happen.
There are many examples of how this type of transaction could benefit the development of IoT. Companies in the supply chain or industrial networks could use it on an ongoing basis to negotiate prices or delivery times with each other without incurring massive bank charges. They could enter into any type of contract of their choice, without needing the help of lawyers. And maybe that’s what drives technology forward.