Blockchain for IoT applications

1. Blockchain for IoT
Federico Tenga
COO at Chainside
federico@chainside.net
Challenges and opportunities

2. Does it really make sense to mix IoT and
blockchain?

3. Does it really make sense to mix IoT and
blockchain?
Or we are just merging to buzzwords?

4. Blockchain e IoT
• Security of data produced by IoT sensors
• IoT actuators reacting to an event on the blockchain
• Machine-to-machine micro-payments

5. Security of data
produced by IoT sensors

6. IoT data blockchain notarization
Block
n
Block
n+1
Block
n+2
Block
n+3
IoT sensors
Gateway
Calendar server
Blockchain
Temperproof IoT sensors collect data about the
temperature and digitally sign them
Collects data from the sensors and broadcasts
them to the server
The collected data are processed cleaning
statistical anomalies. Metadata are then
extracted and aggregated
The metadata are sent to the blockchain
creating a secure timestamping verifiable by any
third party
BLOCKCHAINHARDWAREIoT

7. Merkle trees
Hash 0.0.0
H(L1)
Hash 0.0.1
H(L2)
Hash 0.1.0
H(L3)
Hash 0.1.1
H(L4)
Hash 1.0.0
H(L5)
Hash 1.0.1
H(L6)
Hash 1.1.0
H(L7)
Hash 1.1.1
H8L8)
Hash 0.0
H(0.0.0+0.0.1)
Hash 0
H(0.0+0.1)
L1 L2 L3 L4 L5 L6 L7 L8
Hash 0.1
H(0.1.0+0.1.1)
Hash 1.0
H(1.0.0+1.0.1)
Hash 1.1
H(1.1.0+1.1.1)
Hash 1
H(1.0+1.1)
Top Hash
H(0+1)

8. Merkle trees
Hash 0.0.0
H(L1)
Hash 0.0.1
H(L2)
Hash 0.1.0
H(L3)
Hash 0.1.1
H(L4)
Hash 1.0.0
H(L5)
Hash 1.0.1
H(L6)
Hash 1.1.0
H(L7)
Hash 1.1.1
H8L8)
Hash 0.0
H(0.0.0+0.0.1)
Hash 0
H(0.0+0.1)
L1 L2 L3 L4 L5 L6 L7 L8
Hash 0.1
H(0.1.0+0.1.1)
Hash 1.0
H(1.0.0+1.0.1)
Hash 1.1
H(1.1.0+1.1.1)
Hash 1
H(1.0+1.1)
Top Hash
H(0+1)

9. Merkle trees
Hash 0.0.0
H(L1)
Hash 0.0.1
H(L2)
Hash 0.1.0
H(L3)
Hash 0.1.1
H(L4)
Hash 1.0.0
H(L5)
Hash 1.0.1
H(L6)
Hash 1.1.0
H(L7)
Hash 1.1.1
H8L8)
Hash 0.0
H(0.0.0+0.0.1)
Hash 0
H(0.0+0.1)
L1 L2 L3 L4 L5 L6 L7 L8
Hash 0.1
H(0.1.0+0.1.1)
Hash 1.0
H(1.0.0+1.0.1)
Hash 1.1
H(1.1.0+1.1.1)
Hash 1
H(1.0+1.1)
Top Hash
H(0+1)

10. Merkle trees
Hash 0.0.0
H(L1)
Hash 0.0.1
H(L2)
Hash 0.1.0
H(L3)
Hash 0.1.1
H(L4)
Hash 1.0.0
H(L5)
Hash 1.0.1
H(L6)
Hash 1.1.0
H(L7)
Hash 1.1.1
H8L8)
Hash 0.0
H(0.0.0+0.0.1)
Hash 0
H(0.0+0.1)
L1 L2 L3 L4 L5 L6 L7 L8
Hash 0.1
H(0.1.0+0.1.1)
Hash 1.0
H(1.0.0+1.0.1)
Hash 1.1
H(1.1.0+1.1.1)
Hash 1
H(1.0+1.1)
Top Hash
H(0+1)

11. Merkle trees
Hash 0.0.0
H(L1)
Hash 0.0.1
H(L2)
Hash 0.1.0
H(L3)
Hash 0.1.1
H(L4)
Hash 1.0.0
H(L5)
Hash 1.0.1
H(L6)
Hash 1.1.0
H(L7)
Hash 1.1.1
H8L8)
Hash 0.0
H(0.0.0+0.0.1)
Hash 0
H(0.0+0.1)
L1 L2 L3 L4 L5 L6 L7 L8
Hash 0.1
H(0.1.0+0.1.1)
Hash 1.0
H(1.0.0+1.0.1)
Hash 1.1
H(1.1.0+1.1.1)
Hash 1
H(1.0+1.1)
Top Hash
H(0+1)

12. Blockchain for IoT
actuators

13. IoT actuator reacting to a blockchain event
Block
n
Block
n+1
Block
n+2
Block
n+3
Block
n+4
Block
n+5
Block
n+6
Block
n+7
Block
n+8
Block
n+9
Block
n+10
Block
n+11
Block
n+12
Block
n+13
Blo
n+

14. Blockchain m2m
micro-payments

15. Problems with blockchain micro-payments
• In a blockchain the whole transaction history has to be share among
all participants, so the usage has to be limited

16. Problems with blockchain micro-payments
• In a blockchain the whole transaction history has to be share among
all participants, so the usage has to be limited
• If the usage is limited to few tx/s, the competition to get a
transaction included in a block increases driving up the transaction
cost

17. Problems with blockchain micro-payments
• In a blockchain the whole transaction history has to be share among
all participants, so the usage has to be limited
• If the usage is limited to few tx/s, the competition to get a
transaction included in a block increases driving up the transaction
cost
• If the transaction cost is high the blockchain is not suitable for micro-
transactions

18. Solution
• Changing the architecture of the base blockchain layer is not a
solution (e.g. exotic altcoins), you still have to deal with the same
trade-offs

19. Solution
• Changing the architecture of the base blockchain layer is not a
solution (e.g. exotic altcoins), you still have to deal with the same
trade-offs
• Building a second transaction layer let you do secure transaction off-
chain using the blockchain only as a settlement layer

20. Off-Chain transactions
block n
Tx 1
From: Alice
To: Bob

21. Off-Chain transactions
block n
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
OFF-CHAIN

22. Off-Chain transactions
block n block n+1
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
OFF-CHAIN

23. Off-Chain transactions
block n block n+1 block n+2
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
Tx 4
From: Dave
To: Ted
OFF-CHAIN

24. Off-Chain transactions
block n block n+1 block n+2
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
Tx (…)
From: (…)
To: (…)
OFF-CHAIN
Tx 4
From: Dave
To: Ted

25. Off-Chain transactions
block n block n+1 block n+2
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
Tx 20
From: Ken
To: Eve
Tx (…)
From: (…)
To: (…)
block n+2
Tx 4
From: Dave
To: Ted
OFF-CHAIN

26. Off-Chain transactions
block n block n+1 block n+2
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
Tx 20
From: Ken
To: Eve
Tx 21
From: Eve
To: Bob
Tx (…)
From: (…)
To: (…)
block n+2
Tx 4
From: Dave
To: Ted
OFF-CHAIN

27. Off-Chain transactions
block n block n+1 block n+2 block n+3
Tx 1
From: Alice
To: Bob
Tx 2
From: Bob
To: Chuck
Tx 3
From: Chuck
To: Dave
Tx 20
From: Ken
To: Eve
Tx 21
From: Eve
To: Bob
Tx 22
From: Bob
To: Ted
Tx (…)
From: (…)
To: (…)
block n+2
Tx 4
From: Dave
To: Ted
OFF-CHAIN

28. Micro payment applications
The energy
provider sends
electricity to the
buyer through the
secure meter
The energy buyer
puts money on a
secure meter
allowing it to
make transactions
The secure meter
measures the energy
transfer, and release
small quantity of
bitcoins every few
seconds
Thanks to the lightning
network and to payment
channels, transactions are
instant, costless and secure

29. Conclusions
• Mixing IoT and blockchain can actually make sense and there are some
scenarios where these two technologies work well together

30. Conclusions
• Mixing IoT and blockchain can actually make sense and there are some
scenarios where these two technologies work well together
• Data notarization from IoT sensor protects from some manipulation
attempts (no all!) and is a very scalable application

31. Conclusions
• Mixing IoT and blockchain can actually make sense and there are some
scenarios where these two technologies work well together
• Data notarization from IoT sensor protects from some manipulation
attempts (no all!) and is a very scalable application
• Using the blockchain is it possible to have true machine-to-machine
payments without the interference of humans

32. Conclusions
• Mixing IoT and blockchain can actually make sense and there are some
scenarios where these two technologies work well together
• Data notarization from IoT sensor protects from some manipulation
attempts (no all!) and is a very scalable application
• Using the blockchain is it possible to have true machine-to-machine
payments without the interference of humans
• You can add complex smart contracts and build all sort of things

33. Federico Tenga
COO at Chainside
federico@chainside.net
www.chainside.net