"Who are all these people interested in this?"
The question, asked by Shilpi Kumar, head of product commercialization at Filament, summed up the reaction to a Trusted IoT Alliance event sponsored by Cisco in San Jose last week. As the event showcased, the intersection of the Internet of Things (IoT) and blockchain is becoming more congested, with commercial products now live, instead of merely proofs-of concept.
According to Kumar, only a year ago Filament, which sells IoT hardware connected to the blockchain, was often receiving confused, if not skeptical, looks when the company mentioned it was developing blockchain for IoT applications. And now, she said, looking out over a room of about 100 attendees, "there's all these people sitting with us at that intersection."
Not only are more entrepreneurs interested in the space, but, in the past three months, calls from corporate clients asking how the blockchain plays a role in Filament's business model have increased as well, she said.
This increased interest could be, in part, the work that Bosch, Cisco and the other members of a previously unnamed group have done to create awareness of the many use cases for blockchain in the IoT industry.
But, according to Anoop Nannra, the senior leader and head of distributed ledger technology and blockchain incubation at Cisco's Strategic Innovation Group, both IoT and blockchain are nascent industries where much collaboration must be done to ensure the industry succeeds.
"A number of blockchain IoT startups in this space came together and recognized common challenges ... that there's a missing identity later in IoT and maybe blockchain could potentially solve that," said Ryan Orr, CEO of Chronicled, a blockchain startup that's also a part of the alliance.
"But if we all took a different approach with smart contracts, we'd end up with [a bunch] of different startups and processes that would create confusion and not any one would take hold of the market."
The alliance was set up late last year to develop common protocol 'primitives' to merge blockchain and IoT through smart contracts using ethereum, the Linux Foundation's Hyperledger and JP Morgan Chase's Quorum. And, although Orr believes there will be hundreds of IoT blockchains, the alliance's hope is that it can create interoperability between those.
About half of the room consisted of blockchain aficionados, and half were individuals and companies representing the IoT space. According to Joe Pindar, CTO and director of product strategy at Gemalto, this diversity matters as the industry tries to weed through the froth and spin.
Get your engines ready
The alliance seems to have cut through some of the hype within the blockchain IoT space, at least in the automotive and transportation industry. Three presentations at the event focused on this sector, including a demo by Stephan Tual, founder and COO at Slock.it (of The DAO fame).
Slock.it's Share and Charge project built autonomous electric-car charging stations using Raspberry Pis. The effort also allows owners of charging stations to share their energy reserves with others.
According to Tual, there are only 6,181 charging stations throughout Germany for a population of more than 82 million. But the number of Germans with electric cars and personal charging stations is estimated at over 45,000.
"By sharing charging stations with each other, you can double the number of charging stations in the country," Tual said.
Slock.it's app for the electric charging service is currently downloadable, with about a thousand charging stations currently connected. The project, which was built on ethereum but abstracted the cryptocurrency from consumers, was very popular and captured people's attention, Tual claimed.
There were hurdles, however. Installing Raspberry Pis in charging stations came with its challenges, including needing to measure temperature changes so the machine wouldn't shut down. Further, the public key infrastructure used to secure cryptocurrency transactions is not only difficult for consumers to understand, but also comes with serious consequences in the case of loss or theft.
And the tools available for blockchain are still young and underdeveloped, Tual said. For example, because the economic 'gas' price estimation is off, transactions on ethereum are not as cheap as the industry first touted. Gas is the term for the internal price for making a transaction or running smart contract on ethereum.
Although Vitalik Buterin, the founder of ethereum, has said he'll fix the issue with various hard forks, according to Tual, he argued a more sensible approach would be to initiate a state channel transaction, where each subsequent transaction and receipt is replaced by the next. This means "there's only one blockchain transaction instead of 147 ... so it's way cheaper".
"Block-ifying things is not straightforward." Tual said. "But we've proved that we can do blockchain development outside a [proof-of-concept] and we're quite proud of that."
Executives from Oaken Innovations and Bosch also presented automotive applications for blockchain in the IoT space.
Oaken demoed its tollbooth proof-of-concept, which uses IPFA and ethereum to allow Tesla cars to pay automatically at toll booths. The project won first place at a United Arab Emirates-sponsored blockchain hack recently.
"The car goes to the tollbooth and it's a true machine-to-machine transaction, as they both have ethereum nodes inside," said John Gerryts, cofounder and CEO of Oaken. "We were able to reduce transaction costs, going from the traditional card models with 2% to 4% transaction fees and reduce that to a 0.1% fee."
And Bosch demoed its blockchain-based system to prevent odometer fraud.
According to Timo Gessmann, director of Bosch IoT Lab, nearly one in three cars' odometers are manipulated before they are sold. With a lower number of miles on a car, both individuals and car dealers can sell a vehicle for a higher price.
"Odometer numbers can be like a cryptocurrency," said Gessmann during his presentation at the event.
The company is currently testing the project as a white-label solution, offering certificates that guarantee the odometer reading is correct, because the data has been recorded on a blockchain. The company has also developed CertifiCar, a consumer-facing mobile application that tracks car mileage.
Echoing Tual's sentiments, Gessman said blockchain-based solutions are not easy builds. Ethereum transaction costs are high and it costs a considerable amount to build trust within consortia sharing data, he said.
The physical-digital link
Nearly all the other demos at the event focused on tracking the provenance of products along the supply chain.
BitSE demoed its work with VeChain to develop unique tags for all sorts of luxury goods.
Currently the company is working with the biggest wine importer in China. The company developed a tag embedded with a chip that sits on the top of the wine bottle. The chip monitors vibrations, temperature and other characteristics throughout the supply chain. And if someone wanted to tamper with the contents inside the bottle, upon opening it, they would destroy the unique tag.
The company also has its blockchain-based tags in luxury brands.
BitSE has more than two million product identities in production running on VeChain. Those products are worth about $450m renminbi, according to DJ Qian, CEO of BitSE.
Qian said that, in June, the company will be announcing a particular luxury brand using BitSE's tags, which will not only allow consumers and merchants to scan the tags with their phone to verify the authenticity of the piece, but will also allow them to interact with the brand.
Chronicled then presented its tamper-proof crypto-seal for packages, documents and other high-value goods, such as electronics and forensic evidence bags. Sam Radocchia, the chief product officer at Chronicled, said the company has been working with the pharmaceutical industry too.
Filament also demoed a sharing economy handheld drill. The drill contained what Filament calls "the path", a small Bluetooth-enabled device with a built-in contract that allows people to lease the tool for a specific amount of time. When someone signs a digital lease, the information is sent to the drill and an LED light on the tool lights up green indicating it's ready for use. When the lease expires, the drill ceases to function.
"It's kind of gimmicky," said Filament's Kumar. "I don't think we should have a sharing economy for drills [due to their short lifespan] ... but our clients are thinking about other industrial infrastructure."
For instance, many construction companies are wondering if they can not only monetize the leasing of their large equipment, but also monetize the data that's collected from those machines in use.
Experimentation and governance
While a legal entity has not yet been created, the alliance has set up a working governance structure.
So far, the alliance's model will have 21 industry board seats with five executive board seats. Two in-person meetings per year will see the board review new proposals and allocate funding. And as the alliance grows, smaller committee working groups will be created to focus on particular niches.
"It was also important to show that there was some validation of the technical idea, that it makes sense to do a blockchain-agnostic IoT-oriented working group," said Zaki Manian, founder of SKUChain, a DLT startup focused on supply chain, and one of the founding members of the alliance. "The initial thing we put some effort into was a basic proof-of-concept of this idea of a unified registry."
The unified registry allows companies to put IoT device identities onto a blockchain and give each device its own private key. The API, which the alliance announced about a month ago, allows all these registries on separate blockchains to be unified.
"We clearly demonstrated with limited resources that we can make this work," Manian said.
And it worked without recreating the wheel, said Nannra. Instead, the group developed a model for portability of identities and interoperability between blockchains.
Yet, the group's mission isn't to create standards – Orr thinks it's too early for that. Instead, the aim is to build an open-source blockchain base layer via which collaborating companies can then compete with the applications built on top, he said.
According to Orr, the group is focusing on getting 15 pilots running in the next 12 months.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Filament.
Image via Bailey Reutzel for CoinDesk