A Perfect Fit
Innovative technologies such as Blockchain, IoT, and AI can pave the way for digital transformation and disrupt different industries. These three technologies will converge and build new business models: autonomous agents (i.e. sensors, vehicles, robots, and other IoT devices) will operate as their profit centres
1) with a digital twin leveraging IoT,
2) sending and receiving cash autonomously using blockchain technology and
3) autonomously making decisions as independent economic agents leveraging AI and data analytics
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The growth of such autonomous business models and the digital transformation of companies would be driven by the convergence of these technologies. As we can see in real life as well, artificial intelligence assistants like Siri in Apple have made their place in our life and they are not merely a toy. People take suggestions for the weather, stock markets, and their health and fitness as well. The future of artificial intelligence, IoT, and Blockchain looks bright and we will keep using them even without noticing. This is just the start, but these are transformational technologies and even the start of them has changed our life to a great extent if we think about the cash era in terms of payment and the diary era in terms of reminders and suggestions.
Introduction
Today, blockchain technology, artificial intelligence (AI), and the Internet of Things (IoT) are remarkable technologies that will strengthen business processes, put new business models into existence and disrupt entire industries. So in this consortium, there are three new-age digital technologies:
- Blockchain
- IoT
- AI
1. Blockchain
Blockchain is a data recording mechanism that makes it hard or impossible to alter, hack, or cheat the system. A blockchain is a digital transaction ledger that is duplicated and distributed on a chain of blocks through the whole network of computer systems. Each block in the chain includes many transactions, and a record of that transaction is added to the ledger of every participant every time a new transaction occurs on the blockchain.
Distributed Ledger Technology is defined as a shared database operated by many users (DLT). This implies that if one block in one chain was altered, it would be instantly obvious that it had been manipulated. They would have to change every block in the chain, through all the distributed versions of the chain, if hackers were to corrupt a blockchain system. As blocks are added to the chain, Blockchains such as Bitcoin and Ethereum are continuously and continually increasing, which greatly adds to the protection of the ledger.
2. IoT
The Internet of Things (IoT) refers to a system of interrelated, internet-connected objects which, without human intervention, can collect and transfer data over a wireless network.
There are infinite personal or business possibilities. A 'thing' can refer to a connected medical device, a biochip transponder (think livestock), a solar panel, or a connected car with sensors that alert the driver to a multitude of possible problems (fuel, tire pressure, maintenance required, and more) or any item that can capture and transmit data over a network, equipped with sensors.
Today, IoT and the possibilities of rising sales, reducing operating costs and enhancing efficiencies inspire companies. Businesses are often motivated by a desire for compliance with regulations. IoT system implementations provide the knowledge and insights needed to streamline workflows, envision user trends, automate processes, satisfy compliance requirements, and perform more effectively in a changing market setting, regardless of the reasons.
3. AI
Artificial intelligence (AI), the ability to perform tasks typically associated with intelligent beings by a digital computer or computer-controlled robot. The concept is also used in the project of designing structures that are endowed with human intellectual mechanisms, such as the capacity to reason, discover meaning, generalize or learn from experience. Since the invention of the digital computer in the 1940s, it has been shown that computers can be programmed with great competence to perform very complex tasks, such as finding evidence for mathematical theorems or playing chess. Despite continuous improvements in computer processing speed and memory power, there are still no programs that can equal human versatility across broader domains or tasks that require a lot of daily knowledge.
On the other hand, in performing such particular tasks, certain algorithms have surpassed the output standards of human experts and specialists, such that artificial intelligence in this restricted context is used in applications as diverse as medical diagnosis, computer search engines, and recognition of speech or handwriting.
The core of the intelligent systems these technologies provide is the intelligent use of data and providing information where it is needed and when it is needed. A high volume of data is generated by IoT devices, such as sensors, robots, vehicles, or intelligent grids. Mostly, this information is stored in a centralized database. There should be any standardization technique so that there is uniformity while processing data and getting information out of it. When you have a standard set, the algorithms are also easier to develop.
Current Progress and Data Management
With data and its security at its core, the Blockchain with its supporting AI and IoT technologies has the following examples of businesses and stakeholders trusting this consortium with their precious data.
- Blockchain Euro
- Digital currencies of the Central bank
- Blockchain-based authentication
- Smart contracts Automatization
- Data security and privacy
- IoT devices Monetization via tokenization
- Scalability
- Data Standardization
1. Blockchain Euro:
There is only one way to unleash the full potential of smart contracts. To "flow through" the smart contract, a Blockchain-based fiat currency is required. Only a digital Euro based on the blockchain will allow Euro-denominated smart contracts so that IoT devices would provide services such as pay-per-use, leasing, and factoring directly on their own. Such new business models could become reality due to a digital blockchain-based Euro: fully autonomous machines making decisions on their own by leveraging AI and 'economically surviving' by using blockchain for financial transactions while introducing a device-level profit center logic.
Micropayments for IoT devices could be done conveniently and cost-effectively with such a digital blockchain-based currency. Both transactions denominated in the currency based on the blockchain would be included directly in the internal accounting and IT systems and would not have to be converted. A further benefit would be that the new law would comply with such a blockchain-based Euro. These currencies were first produced in 2019 by startups such as CashOnLedger and Monerium. For the tokenization of fiat currencies, they use e-money licenses. Companies demanding such payment options, unlike crypto assets and secure coins in particular, do not have to worry about regulatory uncertainty, as all players are working under existing regulations.
2. Digital currencies of Central bank:
As previously mentioned, banks and e-money institutions currently issue a blockchain-based Euro. Such a digital currency may also be introduced by the central bank. In literature, this is referred to as the"digital currency of the central bank" (CBDC). More than 70 central banks worldwide are studying the effects of the CBDC, according to a new report by the Bank for Foreign Settlements (Boar, Holden, Wadsworth, 2020). However, such a currency has not yet been adopted by any central bank. Nevertheless, central banks are beginning to interact with digital currencies, such as the announcement by the ECB of the "EUROchain" project, which will be a CBDC prototype built under the Corda DLT system.
A blockchain-based CBDC provided by the ECB will make it possible to use central bank money for smart contracts. Why is this needed? Compared to a digital Euro issued by e-money institutions, what are the advantages of a digital euro issued by a central bank? Although money issued by the central bank is central bank money, e-money counts as commercial bank money. Even if both forms of money reflect a digital version of the euro, commercial bank money could default in the event of bankruptcy, while central bank money is a central bank assertion and will not default. In the event of a financial crisis, as banks and e-money institutions potentially face bankruptcy, this disparity becomes highly important.
3. Blockchain-based authentication:
Also, blockchain technology can be applied for authentication purposes and can manage the identity of IoT devices to increase confidence in network participants. Identity management generally refers to individuals and corporations in general, but it may also apply to IoT devices and computers. Blockchain-based identities would ensure that transaction parties obtain a digital identity based on their current "real" physical identity: identity cards for individuals and their entry into the commercial registry for businesses. Transactions between individuals and businesses, e.g. car sharing, but also between individuals and machines, e.g. passenger transport of an autonomous car, or between two machines, e.g.autonomous cars pay for parking, can be carried out and processed effectively with low transaction costs and a high transaction speed based on those identities.
IoT Analytics predicts that by 2025, there will be more than 20 billion devices connected to the internet. These systems will be partially linked to a payment network that will require a new payment infrastructure. To participate in this new payment network, people, enterprises, and machines must have their digital identities registered. Blockchain technology is a natural match to provide a mechanism to safely and easily install and manage digital identities. In the future, identity management on the blockchain would also be of major importance. The blockchain identity system often has to comply with data privacy rules, as with traditional centralized systems.
In fact, with its inherent access systems and encryption processes, blockchain technology is much better than non-blockchain-based systems that are able, first, to secure data by design, second, to organize data ownership, and, third, to enable data monetization. Blockchain also allows identity authentication since the records are permanent and hard to fake.
4. Smart contracts Automatization:
The automation of business processes is another area that benefits greatly from the joint implementation of blockchain, IoT, and AI. Smart contracts have enormous potential in different industries to deliver productivity gains but are currently not widely implemented in the industry. This is because crypto assets are needed by classical smart contracts. However, because of regulatory and economic constraints, businesses are usually reluctant to use crypto assets. The primary downside of crypto assets is their fluctuations in price. When a smart contract is denominated in crypto assets, due to the volatile price, the receiving party is exposed to a high exchange rate risk.
Even if coins have a high degree of price stability (secure coins), due to some disadvantages, most industrial firms may not consider them: first, stable coins are currently unregulated. Risk-averse enterprises, therefore, do not seek to use these properties. Secondly, companies' IT and accounting systems are not denominated in crypto assets, but in fiat currencies such as the Euro or the US dollar. For accounting purposes, transforming stable coins into fiat currencies is an organizational burden as it costs both workers and financial capital.
5. Data security and privacy:
The underlying cryptography of blockchain systems allows for a high degree of privacy. Transactions are carried out pseudonymously on most blockchains, e.g., the blockchain used by Bitcoin or Ethereum. However, it is also possible to allow fully anonymous transactions, as is the case with Monero or Zcash, for example. The architecture of blockchain systems, i.e. the private/public key infrastructure, often enables stored and distributed data to be completely protected so that only the device may read and write its data if required.
Data privacy is particularly advantageous in the IoT sense. A high volume of sensitive data is stored in the IoT, machines, and computers. Ensuring the privacy and protection of stored data is important. Sending IoT data directly from the computer to the respective database for collection purposes is standard practice. This knowledge does not, however, have a high degree of privacy since it is not encrypted. Blockchain technology adds value since the protection of the data collected can be easily guaranteed. There is, however, a trade-off between a high degree of privacy and illegal activity monitoring. If transactions are anonymous, the name and address of the transaction sender cannot be inferred. Illicit practices such as money laundering or terror funding are included in this anonymity. In this case, by detecting illegal activities, AI can be helpful and can increase protection. Using AI to reduce the possibility of fraudulent activity on the blockchain, arising from the confidentiality of transactions, by using data analytics. Notice that, as AI algorithms learn from data, AI technologies profit from the high amount of IoT data supplied.
6. IoT devices Monetization via tokenization:
Blockchain technology will unlock new business models for the monetization of IoT devices, in addition to enhancing data management, enabling network participant authentication, and promoting the automation of business processes. The dematerialization of assets ("tokenization") is made possible by blockchain technology.
For example, think of a lamp (e.g. a street light) that has its own identity (blockchain-based) and works with a Euro-based blockchain. The use of blockchain technology renders the lamp, running on its own, an autonomous entity. Direct payments to the lamp are possible through intelligent contracts. The lamp will turn on if a corresponding payment is made. Individuals, corporations, or even the public government may provide such payments. As a result, pay-per-use payment systems are becoming feasible. Also, such lamps can be tokenized to allow investors to invest in them in the form of digital assets. As investors obtain a share of the lamp's earnings, investors will have an opportunity to build and operate the lamps on a full scale. A new wave of investment could be created by providing incentives for investors to invest in the construction and maintenance of lamps. Not only for lamps, but also all forms of IoT devices, such as sensors, vehicles, computers, or cameras, tokenization is advantageous. A connection to the Internet and a blockchain network are the only conditions for tokenization.
7. Scalability:
Management of the vast amount of data generated is a primary weakness of the IoT. The use of blockchain technologies and AI can be highly advantageous to increase scalability. Blockchain technology critics contend that blockchain networks are not scalable per se because consensus processes are rather energy-intensive, such as proof-of-work. There are, however, alternative consensus mechanisms that are more energy-efficient and flexible, such as proof-of-stake or proof-of-authority.
Consensus processes, of course, can and must be further strengthened. AI can be useful to achieve a higher degree of scalability on a blockchain. The use of a platform for blockchain-enabled IoT systems for performance optimization is suggested and Machine learning may be based on this scheme. The authors propose a "DRL-based algorithm to dynamically select/adjust block manufacturers, consensus algorithm, block size, and performance-enhancing block interval."
8. Data Standardization:
A high volume of data is generated by IoT devices, such as sensors, robots, vehicles, or intelligent grids. Mostly, this information is stored in a centralized database. Usually, because numerous legacy systems are used to capture and store data, these data lack standardization. By setting up a harmonized digital network for IoT data open to multiple parties, blockchain technology may promote data standardization. Data is stored in one data format on blockchain networks because of the use of hash functions. Data will then be highly standardized.
Moreover, since hash functions convert the received data into a string of a particular length, the size of the stored data will be greatly reduced. Data processing may also be streamlined by improved data standardization.
Final Words
Blockchain, IoT, and AI are technologies that give enormous encryption, openness, immutability, privacy, and business process automation benefits. However, when blockchain, IoT, and AI are combined, the effect of these technologies is even greater. In the future, these developments will converge, pushing the digitization of the business. By achieving a higher degree of standardization, privacy, and data protection, this integration would improve the efficiency of data management.
Also, new business models are permitted to set up autonomous agents (e.g. sensors, vehicles, robots, trucks, cameras, and other IoT devices) as profit centres that send and receive money autonomously. To realize productivity benefits executives will have to engage with these innovations. Combined with IoT and AI, blockchain technology will pave the way for a new era of digitization.
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