Blockchain & Internet of Things: Synergy of Technologies

blockchain IoT

We sometimes forget how our entire lifestyle is dependent on technological advances. Turning on the light in the morning and flipping the switch on the kettle, we don’t think about the long thousand-year path of technological evolution that allows us to do this. Meanwhile, the technological capabilities of humanity have already passed through three periods of sharp and large-scale changes, and now we’re preparing for the fourth industrial revolution.

industrial revolution
Four technological revolutions: source

Industry 4.0, which will be built after the completion of the fourth techno revolution, is a complex term. Though this concept is still a matter of professional debate, one thing is clear right now: this revolution will rise from the convergence of several 21st-century technological trends.

We would like to thank the team at PopulStay for their contributions to the design and implementation of the research and to the analysis of the result.

Internet of Things today

The most important among these breakthrough technologies is the Internet of Things (IoT). Returning to the kettle from the first paragraph: imagine that you don’t need to turn it on yourself, because your fitness bracelet has already calculated what phase of sleep you are now, thought about the optimal time of your awakening, in consultation with the task scheduler on your smartphone, and gave the command to the kettle wirelessly. There are dozens of items in the house that possess artificial intelligence and communicate silently over Wi-Fi – this all this sounds a little crazy, but this is the essence of the concept of the Internet of Things. This technology is fascinating and a little scary at the same time, but according to many experts, it is the future face of our everyday life.

The Internet of Things is still at a relatively early stage of its development. However, the age of the flowering of this technology is only coming: McKinsey predicts that the IoT market will be worth $581B by 2020. Analysts expect to see an exponential growth in the number of interconnected devices (projected to triple to $75 billion by 2025).

It’s easy to see why the IoT is an achievement of the 21st century, an achievement that will certainly change the face of the world in which we live. It would seem that the technological base for such a transformation is ready – so why don’t we still live in the world of Isaac Asimov with self-driving cars and smart homes?

internet of things

It turns out that the reason for this is the imperfection of technology. Despite all of its breakthrough potential, the idea of the IoT has a number of key problems that need to be solved in order for the technology to become massively adopted. The main ones are security and scalability (by the way, do these words remind you of something?).

Security, as applied to the IoT can be described in two ways. The first is the resilience of the smart device network to external attacks. Here everything is clear: an attacker should not be able to intercept the information exchanged by network participants. IoT networks may be vulnerable to botnet attacks, such as the ones that have recently affected Facebook and Twitter.

The annual economic cost of cybercrime is now estimated to be at $600 billion.

Given the future size of the Internet of Things market, it’s easy to see that low-security networks will become coveted prey for anyone who seeks to steal your personal information or money.

On the other hand, there is a possibility of a “monopolization” of the Internet of Things market by several IT giants, this is the second aspect of the security problem. Contextual advertising algorithms have shown us that digital corporations sometimes know more about us than we do ourselves. With the advent of the Internet of Things, this problem will only get worse if the technology becomes centralized.

Will you allow, say, Google to get access to all of your info from different devices: where and how long do you sleep, what you eat, what your social surroundings are, etc.? The threatening power that IT corporations could have gained in the IoT world of the future is already a matter of concern to a lot of developers.

Speaking about scalability, this issue will become critical with the widespread adoption of IoT. To be honest, you will hardly notice the difference between a low and high-loaded network when it comes to cooking your morning coffee automatically, because the number of devices involved in this is quite small. A completely different situation is the flow of self-managed machines connected by a single information network: scalability and the possibility of uninterrupted operation is important.

Blockchain: a panacea for IoT?

If you look closely at the list of existing problems in the field of the Internet of Things, you can certainly say, “Guys, you need the blockchain!” Indeed, distributed ledger technology is perfectly suited to supporting a huge number of transactions in a network of smart items.

Following Reuben Jackson, “In many ways, the blockchain and IoT are a perfect pair. The blockchain is currently securing the most valuable cryptocurrencies in the world, and its embedded smart contracts and decentralized network are significant solutions for IoT’s security concerns.”


Blockchain architecture also solves the “firewall problem”:  it destroys the risk coming from third parties. With the use of the blockchain, it doesn’t matter whether Google or some government decides to “close” the gates to some groups of devices or completely turn off some part of the global network. The nodes will stay connected regardless.

The blockchain is going to win from such a symbiosis, too. Following Lorenco Pieri, we may say that “The main benefit of the blockchain is removing the need for trust between different actors, which should just trust the underlying mathematical soundness of the decentralized data structure. But logistics and the other areas are full of actors, middle men, and leaps of faith”. In the long term, IoT development can become a catalyst for the development of blockchain technologies and offer new markets to them.

What’s already done?

Projects aimed at working with the Internet of Things have already appeared on the cryptomarket. One of the promising players in this area is a blockchain-based peer-to-peer property management system: PopulStay project. One of the project’s advisors is Jeffrey Wernick – an early Bitcoin investor who managed to invest in Airbnb at an early stage. The concept of the project is quite similar to that of Airbnb, but the key feature of PopulStay is that it is replacing the third parties with smart locks powered by the blockchain.

This is where the project idea meets the Internet of Things field: the main advantage of an IoT integrated smart lock + blockchain solution is that the system can automatically schedule payouts to the host as soon as the guest checks in (through the the smart door lock) by using PPS tokens. So blockchain-connected smart locks offer all of the classical advantages of distributed ledger technology to both the host and the guest: the need for third-party centralized institutions is eliminated together with the payment clearance period.

The project’s business model is not based on commission fees taken from participants. Their white paper states, “PopulStay does charge 3% between owners and guests, 1.5% of the fee is used to maintain the operating cost of the team and 1.5% is redistributed to the token holders, so the early token believer will benefit from the growth of the community, and hence be more loyal to the product.” PopulStay will also be monetized by offering paid service via the integration of third-party services (transportation, cleaning, washing, etc.).

The PPS token is the utility token for the platform. One of its most interesting use applications is the guarantor system. The guarantor can come in to provide his or her personal guarantee that an agreement between the guest and the host will go through without any problems. For this, the guarantor stakes their PPS tokens. When an agreement comes to a conclusion without any issues, the guarantor gets his tokens back with a bonus for taking the risk on the contract. A guarantor has access to the information about the parties involved, their ratings, the property information, and they can decide if they want to partake in the guarantee process for the agreement.

We’ve created an infographic to better explain this idea to you:

internet of things


The two main technological trends of the 21st century – the Internet of Things and the blockchain – perfectly complement each other. A distributed ledger could provide just what  a network of intellectual objects needs: information protection and data integrity.

At the same time, the blockchain is not a cure-all. For example, scalability issues are inherent in both technologies and limit their potential. Perhaps one of the non-standard implementations of the idea of a distributed registry, such as the algorithm of IOTA’s Tangle, will be a good solution. Another issue is that the blockchain cannot fix once and for all is the security of the network in relation to external threats. Smart contracts are still vulnerable to hacker attacks, and this problem must be solved before IoT becomes commonplace in our lives.

These two powerful technologies are able to create a strong tandem and, provided that the technical difficulties are successfully resolved, seriously transform the world around us.

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