Blockchain for IoT - a mutually beneficial pairing

Both the Internet of Things (IoT) and blockchain are technologies of huge interest and potential within the utility sector. How can they work together?
Published: Tue 25 Sep 2018

The Internet of Things (IoT) is positioned to revolutionise how many industries, including the energy sector, look at connectivity and technology.

With the capability to take inter-device communications to the next level and enable future capabilities such as automatic demand response and measurement and verification, the IoT for energy is rapidly taking shape.

The IoT will play a key role in enabling new, disruptive and decentralised technologies on the grid both from the utility and consumer side, such as electric vehicles (EVs).

Richard Stamvik, Ecosystem Business Development at communication technology company Multi-Tech sees this connectivity as key, stating in an Engerati interview on communications technologies as key enablers for EVs: "In the new grid, everything needs to be connected, everything needs to communicate.”

However, the current difficulty facing IoT is that security, scalability and standardisation are not integral to the technology, therefore making it a challenging investment. Already, IoT devices have proven to be vulnerable to attack, and as connected devices expand, manual documentation and data management won’t be feasible. This is where blockchain comes in.

Blockchain technology can go beyond cryptocurrency and trading to help IoT technologies with scalability, time stamping, recording, privacy, trust and reliability.

Interconnectivity and data transfer

We asked experts across the field what is coming for IoT and blockchain, including Gerard Bel, Klenergy Co-founder and CEO of Pylon Network.

Bel in a presentation at the inaugural Engerati Meet on Transactive Energy describes the Pylon solution as a “neutral datahub that allows all stakeholders to interconnect without altering the current market infrastructure.”

With an engineering background, Bel sees huge potential for blockchain as a way to share data among different players in the energy market: ”With all of the interconnectivity between players as well as smart devices, the most difficult thing to work out is how to share the data, and who is going to manage it? The European Commission is also focussed on those topics.”

With the European Commission’s focus on private and personal data in and around the GDPR regulation, concerns remain about the security and standardisation of the Internet of Things as a means for data transfer, especially between different stakeholders in the market.

Bel says: “With the IoT and connected smart devices there is the need for a neutral net data hub that can manage and link these permissions and data access across all of these parties in alignment with the European Commission rules.”

In the short term, this is most relevant and applicable for smart meter and consumption data, but can be expanded into further use cases for utilities in the future. Bel says: “Once we start to become more efficient and integrate more smart devices on the IoT such as storage and electric vehicles, the challenge is to understand who will manage and take ownership of the database? This is why blockchain is a great solution.”

He continues: “The big benefit is the new capabilities for data access, for which we can’t even imagine the opportunities right now. Without interconnectivity, utilities will have a huge problem.”

Mutually beneficial IoT and blockchain partnerships

Oriol Pujoldevall, Head of Business Development at the Energy Web Foundation echoes this view. With a background as an energy engineer, he sees the pairing of the technologies as mutually beneficial: “One of the challenges we face is enabling all of these physical devices (PV panels, batteries, etc.) to participate in the decentralised digital infrastructure we propose. They need to be able to communicate among them and with the blockchain”

The Energy Web Foundation has built “a public an open-source blockchain platform specifically designed for the energy sector’s regulatory, operational and market needs.”

He sees IoT as one of the factors that will allow us to disrupt the way energy markets work: “One of the disruptions that IoT brings to the table is the “smartisation” of those physical assets connected to the energy grid. We’ll be able to interconnect these devices in the digital layer by running light clients of the blockchain on them. A light client does not contain all the information nor the global ledger (which reduces greatly the hardware needs) but enables them to write transactions on the chain.”

“Once we master that point we can achieve very interesting configurations, for example, harnessing all that data to increase grid flexibility, that we can collectively use to guarantee a higher penetration of renewables”

This is part of the work Pujoldevall and his colleagues are doing at the Energy Web Foundation: “We are working to define a set of reference implementations to connect physical assets to the blockchain, as part of our mission of accelerating the arrival of commercial applications to market all across the industry.”

To date, more than 80 energy companies have joined the ecosystem of the Energy Web Foundation.

The road ahead for IoT and blockchain

Prasad Kandikonda, Vice President of Software Engineering at Multi-tech Systems also identifies these benefits, however also sees a variety of challenges facing the pairing, outlined in a recent article on IoT, blockchain and security.

For instance, he says, a major blockage will be the general lack of understanding around blockchain, as well as the skepticism around it. This, in part, is due to the suggestions that blockchain and cryptocurrencies are associated with illegal activities, making public perception a significant hurdle.

Furthermore, careful planning and selective partnerships must be made for implementation to be successful. Kandikonda says: “There are many vendors providing Blockchain solutions, but all of them are not interoperable. This creates disparate systems. All parties that are part of this solution need to agree and adhere to a common platform for a successful roll-out.”

Then, he says, there is the challenge of regulatory compliance and legality, which are still currently in flux, as well as questions surrounding accountability and ownership over the technology. Kandikonda comments: “Since blockchain technology eliminates and removes the control for the third-party intermediaries, it will be hard to overcome the vested interest of incumbent agencies.”

Then, there is the overall viability and development of the technology. Kandikonda says: “In some of the public blockchain implementations, the response time for hashing and inserting a block into the chain can take a few seconds to a few minutes, with no guarantee. There are also not many developers and consulting resources that can help easily implement Blockchain solutions.”