Blockchain for Security Challenges in Business & IoT


There is a groundswell of interest these days in adopting blockchain, the technology that can radically improve the security and efficiency of banking, supply chain and other transaction networks and create new opportunities for innovation in new market segments.

Ever since the invention of the relational database, almost every application used on the internet depends on a computer database. Companies trust their third-party cloud-based service providers to store and secure their information and the information of their customers. And collectively, they spend billions of dollars to protect their data from malicious attack. Yet, data leaks and breaches occur regularly raising questions about whether that trust is misplaced.

Unlike traditional cloud-based services that rely on centralized servers, all transactions made using the blockchain network are encrypted and intelligently distributed across computers of the participants. If someone forges or changes data, there are many others that still have the exact same copy of blockchain to protect the authenticity of the information stored in it. It is impossible for anyone to add, update or delete information in the blockchain without permanently recording it across all other participants’ machine.

The Three Dimensions of DevOps
Centralized vs Decentralized Systems (Source)

What’s the difference between blockchain and Bitcoin?

In 2008, Satoshi Nakamoto published a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System that uses blockchain for transactions. Bitcoin is an unregulated digital currency or cryptocurrency. The paper outlined a payment system that bypasses regulatory controls and simplifies online transactions by getting rid the cost of third-party intermediaries managing and authenticating transactions. The paper does not use the word blockchain, but blockchain is used in the open-source code of bitcoin. Due to the anonymous nature of bitcoin transactions, it’s been used for illegal transactions like money laundering and to avoid paying tax. Since Bitcoin was the first application of blockchain, people often use Bitcoin and blockchain interchangeably.

It took a number of years for legitimate businesses to realize that blockchain technology could be adapted for use in other applications, both public and private. All blockchains are decentralized peer-peer networks with append-only ledgers. They are immutable, and replication occurs only through consensus. However, there are important differences between public and private blockchains regarding who is allowed to participate in the network, execute the consensus protocol and maintain the shared ledger.

Public blockchain networks are completely open; anyone can join and participate. They require a massive amount of power to resolve proof of work for each transaction and raise privacy problems with transactions.

Private blockchain networks are permissioned. Participation requires an invitation to join a private blockchain network. A specific set of teams or otherwise called as peers is designated to endorse the transactions as per the endorsement policies defined by a business network. For eg., atleast 5 out of 7 endorsing peers have to approve the transaction in order to consider the transaction as valid and to add it to the blockchain.

Blockchain for Business

There are three characteristics that distinguish the Bitcoin blockchain from a blockchain designed for business.

Assets versus cryptocurrency – Business blockchains deal with tangible assets such as cars, real estate and food, as well as intangible assets such as bonds, private equity and securities.

Identity versus anonymity - Businesses have KYC (know your customer) and AML (anti-money laundering) compliance requirements that require them to know who exactly they are dealing with.

Selective endorsement versus proof of work - Businesses have designated teams (identified by the business network) to endorse participants and approve transactions while Bitcoin blockchains rely on mining.

Many enterprises and financial services are investing in blockchain technologies for their businesses. The core benefits of a blockchain-powered business network include:

Shared ledger – Record of all transactions in the business network that are shared among Each participant has their own copy through replication.

Smart contract – Business rules implied by the contract are embedded in the blockchain. The rules are executed along with the transactions.

Privacy – The ledger is shared, but it is made permissive, so participants see only appropriate transactions as defined in the access control list. All transactions need to be authenticated, and the transactions are encrypted with public key cryptography.

Trust – The ledger is a trusted source of information. A specific team within the business network is authorized to endorse and validate transactions. Authorized transactions are added to the ledger with the appropriate level of confidentiality.

Trade financing takes advantage of blockchain features (Source)

Industries where blockchain technology will play a major role include:

Finance – Trade finance, cross-currency payments, mortgages

Public sector – Asset registration, citizen identity, medical records, medical supply chain

Retail – Supply chain, loyalty programs, information sharing

Insurance – Claims processing, risk provenance, asset usage history, claims files

Manufacturing – Supply chain (tracking product parts), maintenance tracking

Blockchain for IoT

Applications of the Internet of Things (IoT) are growing fast, almost every device in the home, factories and agriculture sector is expected to be enabled with internet connectivity in the coming years. IoT requires a huge investment in infrastructure to manage the identity, security and availability of the devices to ensure the system runs smoothly.

All the characteristics of a permissioned private blockchain network are well suited for the IoT ecosystem: it’s decentralized, security is assured, devices are identified and the record of transactions is immutability. IoT nodes directly communicate and verify the validity of transactions without requiring a centralized authority. The resolution time to validate a transaction is faster with a private blockchain as the user base is smaller compared to a public Bitcoin blockchain network, which typically requires about 10 minutes to mine and resolve a transaction.

Structure of the IoT blockchain network (Source)

There is a lot of development work being done for applying blockchain to IoT networks, specifically to address security issues.

■ IBM has integrated the Watson IoT Platform with Blockchain to help companies create use cases using blockchain and IoT.

Chain of Things (CoT) is developing Maru, an integrated blockchain and IoT hardware solution to solve issues with identity, security and interoperability of IoT networks.

■ Telstra has successfully verified real-time tamper detection testing with blockchain. As a result, the company has enabled blockchain with biometric security for its secure smart home offerings.

Of course, there remain challenges to the adoption of blockchain in business. Concerns include the high computationally expensive, high bandwidth requirements for processing a transaction, and the huge storage requirements needed to maintain the ledger of IoT nodes. These are issues that may slow the pace of blockchain adoption in the IoT space. As IoT opportunities grow, device and chip manufacturers are likely to develop innovative ways to address these and other challenges. As they do, blockchain will revolutionize the IoT space.


About the Author


Manikandan J
Principal Systems Engineer

Over 13+ years of experience in the field of Wireless/Mobile Communications, Embedded Systems and specialized in Middleware & System Design for M2M/IoT, Smart Home & Automotive, Connectivity & Security, Web Services and Multimedia Solutions.


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