Blockchain Meets the Internet of Things: When Two Oceans Collide…


What happens when two oceans collide together? Now, I don’t profess to be a meteorologist, but generally speaking highly disruptive, changeable weather patterns seem to occur. That said, this does depend on the geographic region in which they occur. If you go to the Gulf Of Alaska, for example, where the Bering Sea and the North Pacific Ocean meet – not much happens. The oceans do not actually mix, with them usually separated by a clearly, identifiable, slightly foamy line.

Image : Wikipedia

If, however, we go to the Bay of Good Hope, at the tip of Southern Africa, where the Atlantic and Indian Oceans meet, there is volatility, uncertainty, very rough waters and severe danger. Indeed, it was originally labelled as the Cape of Storms by Portuguese explorer Bartholemew Dias in 1448. It is also the haunted location of the ghostly ship, the Flying Ducthman, which is said to be so cursed it can never reach land and was said to be the inspiration of the Disney film the Pirates of the Caribbean. This all makes for very troubled waters in the region.

But enough of maritime folklore, how would two significant technologies react when they converge together? Will it be the calm of the Gulf of Alaska or the Furied, Cursed Cape Of Good Hope? The two technologies I want to consider are Blockchain and the Internet of Things.

For those that might be new to the Internet if Things (IOT for short), the Wikipedia definition summarises the technology very succinctly as being:

 “the network of physical objects, devices, vehicles, buildings and other items which are embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data.”

Although we may not actually label it as such; we all use an IOT device – the smartphone in our pockets.

Smartphones are so much more than just a phone. They are computers, with its power coming from its connectivity to the internet and the range of applications that have been, and continue to be developed. This is just the beginning of the IOT wave with so many companies, ranging from car companies through to fridge manufacturers through to furniture and lamppost manufacturers all exploring a deep IOT strategy. So much so, that Cisco estimate there will be 50bn connected devices by the year 2020.

Image via Cisco

So where is the power of IOT?

In their introductory document “Introduction to IOT”, Lopez research highlight the 3 C’s for the benefits of IOT :

Communication – IOT communicates information and data automatically to both people and systems, previously having to be managed manually. For example, sensors are already being installed in many trucks that can automatically pick up data relating to brake lining and air filters and arrange to book the truck automatically into the nearest repair station with inventory to hand.

Control and Automation – we as consumers can control an external piece of equipment via our smartphone. Instead of waiting until we get home on a balmy summer’s night to turn on the air conditioning, with the stains of perspiration seeping through every pore , we can turn it on remotely via our phone – even automatically when we are two kilometres from home. This control idea has even been extended to livestock – where a Dutch startup has installed sensors in the ears of cows, proactively diagnosing their health. (The human applications of this alone could be incredible).

Cost Savings – sensors can measure driving behaviour and adjust driving patterns automatically. Sensors can equally proactively stop equipment from failing – a significant cost to any business – by means of proactively pre-programming maintenance regimes.

The possibilities are almost endless, with this not lost on the Venture Capital Industry.

Almost $2bn has been invested in the IOT space already, double the investment made into Blockchain technology to date. Those that are aware of Blockchain (if you are relatively new to Blockchain – check out one of my other articles If you think the Blockchain is just about disrupting the finance sector you’d better read this….) are already aware of the phenomenal, raw potential of Blockchain and, as these two technologies converge and seamlessly blend together, the VC investment in both sectors is likely to rise exponentially, as the two technologies begin to generate synergistic results. This blending will happen because of two key features – the machine to machine communication of IOT, and the smart contracts capability of Blockchain.

Machine to machine communication is a de facto standard of IOT. Data and information is communicated and transferred automatically, without the need for any human intervention. By looking at the business models around this transference of data there, one beautiful feature of Blockchain that will help monetise that data automatically – smart contracts.

Data can be measured and targeted – and that is its power. So by instigating triggers we can programme events to happen. As we saw in my article last week (Smart Contracts (1) – Where The BlockChain Truly Comes To Life…), smart contracts enable monetary based contracts to be executed automatically – just like a vending machine. So, if we monitor the data exchange and establish a programmatic baseline with an “If….Then” statement, we can programme the data to generate monetary value. Let’s see a practical example of this.

There is a new startup company in Germany,, that is addressing the problem of all of us having appliances, cars or other assets only being used for a very limited time – with them oftentimes just stuffed in a garage doing nothing. They have developed a smart lock system that requires no trusted parties to be involved by creating a lock that only operates when the lock itself is actually paid. At first glance this might appear to be a little surreal. The diagram from the website perhaps help give us some clarity:

Here’s how it works:

1) The owner of the item being rented – whether this is a car or a bicycle through to an Airbnb flat, initially sets a deposit, a price for rental and a time period for the rental.

2) The owner pays a deposit directly to the lock (usually via a smartphone)

3) Smart contracts (on to Ethereum platform) are built into the lock itself, which upon receipt of the necessary deposit and identity opens itself automatically.

4) Once the rental has finished, the deposit is returned less the costs incurred.

In this model, no human intervention required, no handling of cash is required and no trusted third parties; it’s just the lock itself leveraging IOT and smart contracts on the blockchain. Check out their website for a deeper video on how this works. These locks are set for official distribution in 2017, although they may be available later this year, according to their website.

By extending this analysis further we can also consider larger transactions – say with international trade. Let’s say you are a trader buying product in from China and you are shipping product to your domestic country. With the internet of things, the containers on the sea can have location sensors linked to GPS. As your container enters US waters, for example, a trigger can be made to automatically release funds directly to your Chinese supplier without any need for a third party intermediary or bank remiting funds are terms of a letter of credit have been agreed..

The flexibility and power of the combination IOT and Blockchain is only just beginning to be explored but once they come together in clear use cases like Slock above, the combination of the two has the potential to as seamless as the Alaskan Gulf but with the disruptive power of the Cape of Good Hope. Who knows where these technologies will finish up – but I, for one, am so pleased to be right in the middle of it – the opportunities are pervasive and immense.


If you are interested in understanding more about the Blockchain, its power and its challenges, why not check out my new book Down The Rabbit Hole, a book for business & non-technical people, like you, to truly understand the Blockchain & to capitalize on its power. Its available on :

Amazon – Blockchain: Down The Rabbit Hole: (Discover The Power Of The Bockchain) eBook: Tim Lea: Kindle Store

Down The Rabbit Hole

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