Understanding Blockchain and the Proliferation of IoT - Part 1: Blockchain and IoT Adoption

Updated: Sep 22, 2021

Both blockchain and the Internet of Things (IoT) are frequently discussed as essential digital transformation technologies. But what about their combination? Blockchain technology and the adoption of the IoT have the potential to revolutionize supply chains, payments, and revenue streams. Here is what business leaders need to know.

What Is Blockchain?

Blockchain is a form of data and digital money transfer and a form of triple-entry bookkeeping that is almost impossible to hack. Blockchain promises to remove the security concerns around the digital transfer of sensitive information or money. The Economist describes blockchain as “an apparently mundane process that has the potential to transform how people and businesses co-operate.”

How Blockchain Works: Distributed Checks and Balances

“Blockchain is a database and a network,” says Obreahny O’Brien, who leads the business solution development for blockchain in Ernst & Young Strategic Insights and FinTech Strategy practice. “It allows both data and value to be transferred via a distributed system that runs, records and compares multiple copies of secure, encrypted transactions in near real-time on multiple computers.”

Hacking into one computer to get at your data is an easy job for an attacker but hacking into millions is almost impossible. No single machine contains all the information from a transaction, and the only way to persuade the system that a false transfer occurred is to gain control of more than half of the network's devices. This means that the greater the number of devices running blockchain software, the more secure it becomes.

Blockchain Is Encouraging the Adoption of IoT

IoT will usher in a new era of devices and networks that integrate the physical and digital worlds. The near-real-time capture, transmission, and analysis of data is at the core of this new change. The emergence of blockchain and the Internet of Things (IoT) presents a significant opportunity to revolutionize supply chains, payments, and revenue streams.

“Blockchain enables you to take the generated data and transmit it securely and in real-time, in a way that was previously very expensive,” says O’Brien. Its security and cost-effectiveness now mean “you can sell micro bits of data and receive micro payments in exchange — all in near real-time.”

From large organizations to individuals, anyone can become a data provider and receive payment in exchange, which should encourage the adoption of more IoT devices, as smart devices no longer become simply expensive new gadgets, but potential ways to earn money.