IoT IN BLOCKCHAIN — A NEW SHIFT IN THE WEB3 SPACE?

The use of Internet of Things (IoT) devices is increasing at an alarming rate in businesses and daily life. Despite supply chain problems and chip shortages, global IoT connections are expected to grow to 27 billion by 2025. Today’s IoT companies are built on centralized infrastructure, which is fully managed by organizations where data lock-ins and user security are the main issues. Organizations have extensively used the data collected from IoT devices to maximize their business impact and create value.

Web3, the third iteration on the internet, is a paradigm shift that could fundamentally transform the way IoT businesses operate. A typical web-based app makes two major promises of IoT in web3: ownership and decentralization. To explain more, web3 in IoT is a network that runs an application on decentralized, community-powered networks and aims to give back ownership to its users. This paradigm shift opens up new opportunities for web2-based IoT companies to redefine their value propositions, customer engagement strategies, and other business models.

As web3 is becoming more mainstream, it has attracted much attention from IoT industry professionals. However, IoT business leaders must develop a web3 digital transformation plan that works with current IoT system architectures and business models.

How blockchain infuses decentralization and security into IoT devices?

The fundamental layer of web3 is blockchain which is well-known for its solutions in financial fields. However, blocks can contain more information than the exchange of tokens and coins. Any data can be recorded immutably and distributed. Then why not use blockchain to communicate between IoT devices? This would resolve some of the most pressing issues of the Internet of Things.

IoT-recorded information by sensors is only helpful if it is true. Therefore, the current IoT infrastructure relies on intermediaries and centralized entities to validate the data. In web3 IoT, blockchain would transform the IoT’s structure from Client/Server to peer-to-peer. Consensus mechanisms (as with cryptocurrencies) can be used to verify transformation to address trustworthiness at the beginning. This would make IoT a trustless system that allows direct communication between devices without intermediation.

The majority of IoT units are already in public key infrastructure. If encrypted messages were stored on a blockchain using a cryptographic identity, it would create a ‘reputation.’ The blocks would not only tell you if a device has a reliable history, but they also record what it sent and to whom transparently. They are always accessible in an everlasting timeline. Each entity still retains its privacy despite the traceability of communications, and an alphanumeric string represents this. If encryption is extended to all networks, it could prevent DDoS attacks. This dual-key architecture would stop hacking attempts.

The IoT would also be able to use smart contracts technology, which is supported by many other blockchains. The IoT structure could eliminate actuators and replace them with blockchain-decentralized software.

How to adapt web3 in the IoT model?

Many web2-based IoT companies attract customers by creating smart devices and services with salient features and functions. They also conduct extensive marketing campaigns. The web3 technologies; DeFi, non-fungible tokens, and DAOs provide powerful resources to help develop new IoT business models. These technologies can also increase customer engagement and drive social impact.?

Organizations looking to adapt to web3 in the IoT market might issue NFTs. These NFTs will allow them to represent their IoT products on blockchain and allow NFT holders specific rights (e.g., access to future products). Customers might be encouraged to share IoT data with organizations and make passive income through DeFi platforms. Customers could also be allowed to create a DAO with their customers to share ownership of a machine and make decisions about how it should be used through a consensus-based governance process. Organisations should also be able to choose from various web3 technologies and combinations that align with their business goals.

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