Data Transfer via Blockchain

Data is digital gold. It has long been no secret that Google earns millions from user data. In two weeks, Zuckerbegr has collected approximately 1,200 pages of PDF files on the Austrian lawyer and privacy activist Max Schrems, and diligently earns money on them, as well as on every other user.

Amazon has long known the preferences of its users and offers “suitable” products. Meanwhile, Amazon, Apple and Google are also sitting in a digitized “house” with the help of Alexa, Siri and Google AI, and thus receives an infinite amount of data. These digital traces stored in so-called “databases” are basically “only” metadata, but from them it is possible to draw conclusions about the user’s private data (working hours, consumer behavior, place of residence, even sexual preferences, etc.). But what does all this have to do with IoT?

In our previous article, we told you about the advantages of blockchain in the context of IoT services, and now let’s talk about Internet of Things devices.

And so, the amount of data available to companies grows exponentially with each IoT device. Each of these devices undoubtedly helps us in everyday life, but also transfers data between devices. It is this data that is of great value to companies. Creating your own infrastructure for data is very difficult, expensive, and you will quickly reach the limits of processing speed. Therefore, you again resort to the help of the central system of manufacturers.

But systems like Alexa are dependent: if the Amazon server fails, nothing will work. And if Amazon no longer wants to use this business model, Alexa will stop working at all, because no server will be able to manage data. These people only talk about a centralized solution.

But in fact, there is no reason at all for IoT devices to work with the server as an interface. Most of the information can be exchanged directly.

This is exactly where blockchain technologies offer an interesting alternative. Some developers, including European ones, have already realized this and are developing various technologies to make data interception more difficult and make communication between devices safe and fast.

As always, each technology has its advantages and disadvantages. Another advantage of blockchain as a means of communication between devices is the ability to quickly, securely and automatically process payment transactions.

Blockchain is the foundation

To really understand the concept behind these technologies, you first need to understand how the blockchain works. Therefore, here is a brief description:

1. According to Coinmarketrate.com , The blockchain consists of many blocks of data connected together:

• Each data block receives an individual hash according to the SHA256 algorithm, which cannot be calculated in the opposite direction.
• The hash of the previous block is in the data set of the current block.
• Since the hash is currently impossible to forge, the chain will be considered invalid and will break up as soon as the block data is attempted to be changed.

2. The blockchain is stored on a lot of computers (so-called nodes) around the world, and there is a consensus, the majority decides what is right:

• If a node wants to enter falsified data, all other nodes notice that this data is incorrect and exclude it from the network until the data becomes correct again.
• You can enter data to the blockchain using a private key (identity verification).
• The private key is not visible in the blockchain, but the address of the so-called public key is visible.
• A private key can generate multiple public keys, which leads to anonymity.
• A small fee (hereinafter referred to as Tx) is charged for each data transfer.

However, the traditional blockchain is quickly limited in data throughput. Bitcoin manages to process only about 13 transactions/s, which is ridiculously small considering the expected number of IoT devices. This is where alternative technologies come to the rescue.

Tangle IOTA

Tangle is a German invention and is being developed by the Berlin-based IOTA Foundation. Currently, IOTA is the largest IoT blockchain project. IOTA is a so-called cryptocurrency, traded in millions as a unit.

The essence of this technology is that the data transfer rate increases the more data is transmitted. This is due to entanglement. If in the classic blockchain all nodes of the network confirm transactions in each block, then in the IOTA network the transactions themselves do it.

This also makes them free. Each new transaction confirms two old, unconfirmed transactions. There are no more blocks in this network, since consensus is created automatically by a ball. After the specified time intervals, the resulting transaction tree is saved and a new Genesis transaction is created, on the basis of which a new Tangle is created.

Currently, this technology is still in beta testing and has many disadvantages. However, major Dax companies such as Bosch and VW have already confirmed that they are exploring this technology.

The idea behind IOTA is that each device now has its own IOTA private key, and devices can send individual IOTA commands to each other. IOTA is so cheap that the costs are negligible, and since the transaction is free, you don’t “lose” any money. A new address can be used for each transaction, so it is also impossible to store the metadata of individual devices.

In fact, VW has very high hopes for this technology in connection with automated driving, etc. That is why Volkswagen has also appointed CDO Johann Jungwirth as a new member of the Supervisory board and advisor to the IOTA Foundation.

Nano, formerly RailBlocks

Compared to IOTA, this technology is still very young and relies on the classic blockchain. However, each private key gets its own blockchain. This creates a grid structure of blocks. The transaction consists of two blocks. One block on the sender’s chain, and one on the recipient’s chain. This means that the network itself must process the minimum amount of data.

Transactions using this technology are also free. In order to prevent spam of the network by transactions, the developers have built in a proof-of-work (PoW) algorithm, as in Bitcoin. To receive a transaction, the recipient and sender must provide proof of work.

However, this can also become a serious problem in the IoT sector, since many IoT devices do not have sufficient computing power for cost reasons, and this is quite justified. Since the technology is still very young, it does not yet have any use cases or companies that have officially announced its support. Currently, it is possible to conduct about 7,000 transactions/s, which is about 1000 times more than in classical blockchains.

Hdac (Hyundai Digital Asset Currency)

This is a technology developed and provided by Hyundai. Hdac wants to become a serious competitor to IOTA and specializes in SmartHomes and SmartCars.

The Hdac chain wants to make it possible to create its own coin using a smart contract (similar to Ethereum). The biggest advantage of Hdac over IOTA or other solutions is that they allow you to create a private blockchain. Thus, SmartHome devices should be able to communicate only in their own blockchain. This ensures high data security.

However, Hdac is one of the youngest technologies among IoT technologies, and it has yet to assert itself in the fight against IOTA and others in order to take its place in the market. At the moment, the blockchain has been tested: about 150 transactions/sec – on a public blockchain, and 500 transactions/sec – on a private blockchain. The goal of about 1000 transactions/s has not yet been reached.

First of all, the volume of transmitted data is important for the technology. Presumably, 1000 transactions/s claimed by Hdac, as well as 7000 transactions/s of Naon will not be enough if the IoT market develops as expected.

Summing up

In general, however, it is obvious that none of the technologies has matured yet. Nevertheless, everyone has the potential, but no real application has yet been created for any of these technologies. Since the Internet of Things is also in its infancy, it is hoped that these technologies will develop in parallel and offer increasingly mature solutions. Due to its “infinite” scalability, IOTA, in particular, is very promising as a basis for transferring data and money between devices.

The EU can also catch up with the technological turn it has overslept, and take a strong position in the IoT sector due to IOTA. Unfortunately, the EU government has not yet made any statements about possible and necessary regulations for the “new territory” of blockchain, so it remains interesting to see how this technology will be integrated into everyday business and private life.