The authors provide a non-technical overview of the benefits of blockchain, Artificial Intelligence (AI), and the Internet of Things (IoT), and discuss their complementary properties and interactions.
They present the role of these technologies using a layered framework: IoT is used for data generation, the blockchain provides an infrastructural backbone via immutable smart contracts, and AI can be used to optimize rules and processes.
The authors argue that as these systems intersect, the use of blockchains may prove beneficial. Smart contracts can provide an instrumental mechanism for IoT devices to interact with one another predictably.
Sandner P, Gross J and Richter R (2020) Convergence of Blockchain, IoT, and AI. Front. Blockchain 3:522600. doi: 10.3389/fbloc.2020.522600
How can the convergence of blockchain and AI make up for the drawbacks of traditional IoT?
AI, IoT, and blockchain are innovations with massive implications for business and industry.
- Blockchains: increase trust, security, and transparency.
- IoT: increases automation and user-friendliness of industries.
- AI: improves processes through pattern detection and outcome optimization
The interconnection between these fields has been neglected as a field of study.
- In the future, they will converge.
Connection: IoT provides data, blockchains provide infrastructure and rules of engagement, while AI optimizes and processes rules.
Convergence may allow for optimized data management and business process automation.
- There are two general storage options for blockchain-based data: on-chain storage and off-chain storage. On-chain data can be restored from full nodes at any time, but storage requirements are significant, which can lead to “blockchain bloating” (i.e. large quantities of on-chain-stored data that hinder throughput and scalability). Off-chain storage stores data off-chain and only keeps aggregated metadata on-chain; it is considerably more scalable than on-chain solutions but decreases data transparency.
- Blockchain may improve the infrastructure of IoT devices via smart contracts, especially when it comes to data immutability.
- The true potential of AI, IoT, and blockchain may only be accessed if and when combined.
- As these technologies intersect, when it comes to data management, the design goal is to improve standardization, enable privacy, and increase the security and scalability of systems where this technology is relevant.
A considerable challenge for traditional IoT is the massive amount of data it collects.
This data is traditionally stored on centralized servers, which face a lack of standardization, privacy, security, or scalability. Cross-platform data is hard to access and difficult to explain.
Blockchain offers access for multiple parties and stores data in one format, increasing interoperability.
Another challenge is that data submitted to the cloud is not encrypted and therefore does not ensure privacy.
Privacy technologies being pursued in the context of blockchains may lead to better privacy if implemented correctly. If implemented properly in a combined system, this may increase the privacy assurances of IoT devices.
Security: Cryptography and Consensus mechanism
- Trade-off: privacy vs. control of illicit activities.
- Security may be improved by AI performing data analysis (IoT is a source of big data).
AI benefits from big data produced by IoT devices; the larger the quantity of data, the better the AI performance.
IoT can’t store big data effectively, but blockchain combined with AI can.
- Certain blockchains lack scalability but may be increased with different consensus algorithms and with AI.
- Data Management: Authentication via a Blockchain-Based Identity
- Blockchains can manage IoT device identity and authenticate IoT participants on the network.
- Identity: individuals, companies, devices, or machines
- Transactions between two entities may be processed efficiently (high speed, low cost).
- 2025 estimate: more than 20 billion IoT devices will be connected to the internet.
- Identity management will play an extremely important role.
- Blockchain allows protection of data, organization of ownership, and monetization of data
- Identities are secure as blockchain data is extremely difficult to forge
- Automatization via Smart Contracts
- The convergence of blockchain, AI, and IoT is promising for automation.
- Smart contracts are the main connection between these three innovations.
- The main limitation of smart contracts is their crypto prerequisite that companies are often unwilling to leverage.
- Typical crypto value too volatile
- Stablecoins: unregulated
- IT and accounting systems are typically based in fiat
- Solution for smart contracts: fiat-denominated cryptocurrencies that flow through the smart contract, e.g. DLT-based digital Euro
- IoT devices could make micropayments
- Enterprise Resource Planning (ERP) systems could record every blockchain transaction
- Cheap or no cost of currency conversion
- Compliant with regulatory requirements
- Issued by banks, e-money institutes, unregulated institutions, or central banks
- The distinction between central-bank-issued Euro and e-money-provider-issued Euro is important in times of crisis, hence why an official digital currency may be needed.
The authors argue that convergence of IoT, AI, and Blockchain can and will happen. When it comes, it will begin a new age of digitization. Most critiques of blockchain’s limitations from ten years ago have already been remedied. Scalability limitations may be addressed with newer architectures. There are still challenges that have yet to be overcome.
- General Data Protection Regulation’s (GDPR) enumerated right for data to be forgotten
- Integration with legacy systems
The authors argue that these issues will sooner or later be overcome.
The authors provide a case study with a network of IoT lamps. Each lamp has a blockchain-based identity. It operates using a digital Euro. Micropayments made to the lamp allow for it to turn on. AI may leverage the data about the lamps’ usage and automatically perform needed maintenance based on blockchain-provided metrics. It may also optimize downtime by optimizing the maintenance process. Lamps may be tokenized and availed to investors, allowing for building and autonomous maintenance for a network of lamps
Tokenization may be performed for all IoT devices (e.g. sensors, cars, or cameras) that are connected to the Internet and a blockchain network.
Thanks to @Cindy for helping to create this summary.