Blockchains haven’t had good press recently. Simple word-association connects ‘the blockchain’ to bitcoin, bitcoin to ransomware, ransomware to crime. So the blockchain is, to the uninformed, obviously a bad thing. On the other hand, technology evangelists around the world are touting the blockchain concept as the greatest invention since sliced bread, their predictions often based on nothing more than hyperbole and hope.
In reality the blockchain concept is neither of these things, of course. It’s just a decentralised method of keeping track of transactions. If the blockchain is bad or good then so is ledger accounting and banking in general since they can be used for crime as well as for legitimate commerce. Blockchain is just a method of storing and verifying transactions independently of a central authority.
There’s no shortage of startups involved in taking the blockchain concept out of bitcoin and applying it elsewhere. Some of these will fail, some might succeed. One that seems more promising than most is Iota, whose basic premise is to apply blockchain transactions to the internet of things. The aim is to allow IoT devices to exchange value between themselves—i.e., to make transactions—without a central authority.
If, as seems likely, almost every device we buy in the near future is to have internet connectivity, there needs to be some way of allowing those devices to transact between themselves. There’s a huge potential value that would otherwise be wasted. Iota uses the examples of a server with spare runtime for rent, or an electric car that needs to purchase a recharge.
Other scenarios might be imagined, such as a local network of solar-panel-equipped houses sharing surplus power between themselves rather than sending it back through the national grid. Or perhaps your apocryphal internet-enabled fridge might negotiate with the neighbours’ wine-chiller for their spare bottle of Chardonnay, now that it’s 1am and all the off-licences have closed. OK, perhaps not that one, but it’s not hard to imagine a vast range of potential transactions on a micro-payment basis.
Firing all these transactions off to a central server for validation and exchange would be expensive in terms of time, bandwidth and processing power. So Iota allows IoT devices to transact with each other directly. The cost to participate in the network is the requirement that each device validates two other transactions first.