Can blockchain technology be used as the foundation for Industrial IoT? This was the question tackled by nChain’s Chief Scientist Dr Craig S. Wright at the recent Internet of Things and Intelligence System (IoTAIS) event in Bali.
Wright discussed industrial IoT running over BSV blockchain as a transaction ledger and addressed the issue of cost in Bitcoin. Dr Wright explained that the cost is not an issue in Bitcoin, as it is designed to be a micropayment system that can scale to billions of transactions per second.
He added that the concern about cost factors is due to a misunderstanding of what is meant by Bitcoin or BSV blockchain. Wright highlights that some cryptocurrencies passed off as Bitcoin, like BTC, are not actual representations of Bitcoin. He further discusses the methodology of extending Bitcoin to handle large volumes of transactions, which involves incorporating data storage, processing, and inclusivity into blocks.
He argues that with larger block sizes and millions or billions of transactions per second, the overall cost of transactions will be distributed, resulting in very low communication and electricity costs per transaction. The goal of IoT is to have a low-cost system that enables many exchanges to be recorded at a minimal cost.
One blockchain – one standardised system
Another requirement for IoT to work effectively is standardisation. Dr Wright discusses in this context that having multiple blockchains, similar to having numerous Internets, can create problems in terms of standardisation and interoperability.
As an example, he cites a scenario in which many different Internet protocols would still be in use today, such as DECnet, IBM’s protocol, CompuServe, AOL’s proprietary version of the Internet, and IPX from NetWare. An Internet built on that many different protocols would require protocol gateways between everything.
Dr Wright further explains that consultants in the past often took advantage of this complexity and promoted the use of multiple networks to make money. Similarly, the blockchain industry today promotes its blockchains even though they do not scale. One solution to still make money from these non-scalable blockchains are so-called blockchain bridges to other blockchains, second-layer solutions or so-called private blockchains.
Thus Wright advocates for a single standardised system relying on the infrastructure that scales unbounded – BSV blockchain. This would prevent unnecessary complexity and costs associated with multiple blockchains.
Showcasing the utility of a scalable blockchain in supply chain management
Dr Wright emphasises the need for recording every move and transaction of goods and services to track their source to destination, prevent fraud, and ensure accountability. He uses the example of the transfer of high-value tuna fish to highlight the significance of accurate and automated record-keeping. The use of blockchain technology allows for traceability and the simple correction of errors.
The concept of layered networks with peer-to-peer communication is explained, with the need for end-to-end source validation. Wright argues that automation does not eliminate the role of humans, but rather increases productivity and efficiency in overseeing and validating data. Statistical sampling is suggested as a means to validate information when data from IoT machines match up and is consistent.
This part of the keynote address is the longest one for further details regarding the audit process, the importance of human oversight and how such a system improves the current standard, we recommend you watch the presentation in full length:
Internet and Bitcoin – built for secure and robust communication, validation and auditing
Dr Wright then delves into a fundamental aspect of Bitcoin that is commonly misunderstood. He mentions that Bitcoin was not designed for decentralised communication and censorship resistance – a view that Cypherpunks commonly purport. In their view, Bitcoin is aligned with a legacy of the Internet that is built around anarchist principles.
Dr Wright counters that the Internet was formed for robustness and security, particularly for military purposes such as communication during a nuclear war. The inventor of Bitcoin also emphasises that the blockchain, including Bitcoin, is not a distribution network, but rather a communication network that is distributed to the edges.
Thus, the main focus is on end-to-end communication, where Bob and Alice (who can also machine) can securely transfer data without the need for intermediaries. Dr Wright argues that the true purpose of the Internet and Bitcoin is to enable communication, validation, and auditing across different paths while being secure and robust.
Scaling to a billion transactions per second
BSV blockchain is the most scalable blockchain solution and To be useful as a ledger in IoT, BSV blockchain needs to handle millions and in the future billions of transactions per second. Dr Wright addresses the future scalability goals to close his keynote address. He mentions that his goal is to achieve over a million transactions per second on Bitcoin next year, and eventually billions of transactions per second by the end of the decade, with a long-term aim of 10 billion transactions per second.
What follows is a detailed discussion of Alice and Bob and payment channels for the specific use case of IoT. Wright discusses how every ‘transaction could be put into a Merklised structure’, where ‘only the hash route is saved on chain’, as not all data needs to be saved on-chain. If further data and changes need to be recorded, these could be stored e.g. in cloud storage.
This approach enables scalability for the expected increase in transactions due to the growth of the Internet of Things, where billions of machines will need to communicate and update information. The transparency and auditability of blockchain technology can help ensure accountability and productivity in various processes, including auditing and verification of data.
Study and share Dr Wright’s presentation on blockchain Technology as a foundation for Industrial IoT
Dr Wright’s presentation slides are available here: