The Economic Value of Fusing 5G and Blockchain

Thanks to Pat Rabbitte, Tyler Durden, Ben Whittle

The confluence of two emerging technologies, BLOCKCHAIN and 5G, will result in profound change, and enormous innovation and economic upside.

Why is 5G a Game Changer?

5G, the next generation cellular network, with deployment through 2020, allows for faster and more secure data transfer. This new connectivity will enable data to move more rapidly, videos to play seamlessly on your devices, and Skype and FaceTime calls to arrive with more clarity and without interruption. As importantly, more people will have access to the broad spectrum of upcoming innovations which blockchain will serve.

To put 5G in perspective, it offers speeds of up to 10 gigabits per second. The average global, nonmobile internet speed today stands at just under 7.2 megabits per second. The effects of 5G on IoT, in particular, will be further augmented by multi-access edge computing, a form of networking where service is disseminated from centralized nodes to peripheral ones, with resulting increase in speeds and reduction in latency.

The 5G Rollout

Network providers have started rolling out 5G within select cities in the U.S. , while global coverage is expected to come online in 2020. Verizon will start delivering its coverage in Chicago and Minneapolis from April 11, with services moving to 30 cities throughout the remainder of 2019. Apple is not expected to bring a device to market until 2020

On the device side, Samsung is releasing its 5G-compatible Galaxy S10 model with devices from other companies, such as Huawei and LG, expected soon. From a modem perspective, Qualcomm is expected to release one that supports both 5G and the existing LTE by end of year.

Waking up the Internet of Things

IoT will rely on Edge Computing and 5G to enable millions of devices to connect with each other. As a frame of reference, Huawei estimates as many as 100 billion IoT connections by 2025.

5G offers high speeds, capacity, low latency and ability to connect with vast numbers of devices. Latency refers to the time between when a signal is sent and received. In blockchain terms, latency is the time between a transaction being broadcast and it being received by nodes. However, for IoT, whether it be applied to smart homes or autonomous vehicles, achieving low latency is critical if devices are going to communicate with each other without experiencing long lag times.

The effects of 5G on IoT and related concepts are going to be further augmented by multi-access edge computing. This is a form of networking whereby service is disseminated from centralized nodes to peripheral ones, resulting in an even greater increase to speeds while also reducing latency.

IoT will rely on this capacity and ability for tremendous numbers of devices to connect with each other. It has been estimated that there could be as many as 100 billion IoT connections by 2025, according to research from Huawei, with growth likely turning exponential after that. 

What Does 5G do for Blockchain?

The new 5G mobile data standard will become the data transmission infrastructure upon which blockchain – as a quasi-protocol – will run. 5G will allow implementations on blockchain to run smoothly and efficiently while remaining in the secure environment it requires. 

The internet of things (IoT) is a point of intersection between 5G and blockchain and several blockchain projects are engaged with supply chain management and the emerging machine to machine (M2M) economy. They include

• IOTA’s distributed ledger, which does not consist of transactions grouped into blocks and stored in sequential chains, but rather as a stream of individual transactions entangled together.
• VeChain, a blockchain-based platform combines physical tracking with blockchain records to keep tabs on real-world products from production to delivery, helping to prevent fraud and increase transparency.
• WaltonChain, a project that combines blockchain technology with Radio-frequency Identification (RFID) technology to improve supply chain management.

These projects are geared towards the collection of data from what will become an inordinate number of sensors along the supply chain used for predictive maintenance and centralized monitoring of manufacturing infrastructure and many other functions. As an indicator of the importance of this function, it should be noted that IOT in Discreet Manufacturing Market is Determined is Anticipated to Reach US$ 76 Billion by 2024. (https://www.marketresearchengine.com/iot-in-discreet-manufacturing)

According to Cisco, 500 billion IoT devices will be connected by 2030. As IoT devices become smaller, less expensive and much more power efficient, both the IoT revolution and its associated blockchain revolution will rapidly develop.

Both technologies have been identified as fundamental infrastructure requirements for ‘smart cities’ which will use technology to make the city work better and more efficiently. Connected and autonomous vehicles, an important smart city data collection point. will require 5G and blockchain technologies along with IoT.

The development of technology in the modern era does not happen in isolation. It involves the combination of multiple technologies such as blockchain and 5G, alongside the IoT. The combination of 5G and blockchain technology has the potential to unleash a surge of economic value as smart cities, driverless vehicles, smart homes and other IoT sensor-driven enhancements access a technology that can handle their needs.

• The power of 5G coverage through its reduced latency, high speeds and capacity allows for IoT devices to become widely used.
• Simultaneously, these devices can leverage the security, decentralization, immutability and consensus arbitration of blockchains as foundational layers.

As foundational layers, blockchains can provide consensus and security while the majority of IoT transactions and contracts occur on second-layer networks, with the opportunity to settle payment channels and transaction disputes on-chain. Second layer networks include the Lightning Network, a payment protocol that works as a second layer on top of a blockchain. Some suggest this is a fix to Bitcoin’s scaling problem.

The Lightning Network opens a payment channel by setting up a multi-signature wallet that holds some amount of cryptocurrency, and then a savings wallet address in the blockchain. Having a payment channel, parties can make an unlimited amount of transactions that are not made public in the blockchain. After all planned transactions are completed, the resulting balance is saved in the blockchain and parties can recover their share of the wallet. Lightning is not as secure as the blockchain itself, but it may be widely adopted for small transactions, and it will reduce the strain on the blockchain, making it more scalable…... per CoinTelegraph

The network capacity of IoT, however, will be enabled by the power of 5G coverage. Furthermore, 5G will directly assist blockchains by increasing node participation and decentralization, as well as allowing for shorter block times, driving forward on-chain scalability — all of which, in turn, further supports the IoT economy.

5G, IoT, Blockchain and Automation

The scope of automation is far broader that robots replacing humans. It includes automation of chores and unpaid mundane tasks and we see glimpses of the possibilities with the advent of smart homes, with domestic appliances communicating with each other and managing inventory. Autonomous vehicles are a more advanced iteration. Traditional industries, such as agriculture, manufacturing and mining will be automated by billions of high speed IoT sensors and devices communicating over 5G.

These applications are dependent on extensive 5G coverage to provide the capacity, speeds, and low latency required for these systems to perform. But there are two other potential roadblocks toward 5G to consider:

1.      Cyberthreats: Malicious devices could cause chaos within networks.

2.      Scale: The potential volumes of transactions and payments enabled by 5G will likely dwarf the current capacity of centralized and decentralized financial infrastructure.

The problem of malicious devices can be addressed by public, decentralized blockchains to ensure immutability, tamper-resistance and establish consensus among distrusting entities. They can serve as a foundational layer for settling disputes between IoT devices that cannot settle transactions.  

Unlike the current client-server model used in IoT, the decentralized blockchain architecture means that identity can be protected and guaranteed. Unlike centralized platforms, decentralized platforms do not require information to pass through a single point. Instead, many points connect (a peer-to-peer network).

So how does this affect IoT. Typically, IoT devices identify themselves via cloud servers, with their identification data held in these databases. The data can be compromised, presenting a major security threat to any application that runs atop such a network. By using a decentralized blockchain, these IoT identities can be protected by asymmetric cryptography and secure hashing algorithms (Devices are registered according to their own corresponding blockchain addresses, guaranteeing their identity).  

The second problem of scale cannot be directly solved by blockchains. Just the anticipated number of IoT devices means that decentralized blockchain architectures cannot handle the throughput.

While this is true on layer one — i.e., blockchains themselves, it is possible to defer most transactions to layer two protocols like the Lighting Network that operate on top of blockchains (discussed previously in this white paper), through the use of payment channels or sidechains. 

However, given that every device will needs its own address and on-chain transactions, on-chain capacity is required that reaches tens of thousands of transactions per second.

Bottom line, scalability must improve significantly on both layers. The good news is that build-out of 5G and layer two blockchain infrastructure is occurring simultaneously and will provide the scalability and coverage required for an IoT-oriented economy.

Conclusion

The value of 5G, IoT and blockchain, should be considered a synergistic rather than individual set of value propositions. This is best summarized by Ben Whittle, author at CoinCentral, who says that to with the right architecture, this technology stack — along with second layer solutions, edge computing, virtual reality, augmented reality and IoS — is set to create an unprecedented amount of value while simultaneously radically altering working conditions, employment and recreation.