by Don Tapscott
THE EVOLUTION OF COMPUTING: FROM MAINFRAMES TO SMART PILLS
Unlike our energy grid, computing power has evolved through several paradigms. In the 1950s and 1960s, mainframes ruled—International Business Machines and the Wild “BUNCH” (Burroughs, Univac, National Cash Register Corp., Control Data, and Honeywell). In the 1970s and 1980s, minicomputers exploded onto the scene. Tracy Kidder captured the rise of Data General in his 1981 best seller The Soul of a New Machine. Like mainframe companies, most of these firms exited the business or disappeared. Who remembers Digital Equipment Corporation, Prime Computer, Wang, Datapoint, or the minicomputers of Hewlett-Packard or IBM? In 1982, IBM hardware and Microsoft software brought us the decade of the PC, with Apple’s Macintosh barely nipping at their heels. How things change.
Driven by the same technological advances, communications networks evolved, too. From the early 1970s, the Internet (originating in the U.S. Advanced Research Projects Agency Network) was evolving into its present-day, worldwide, distributed network that connects more than 3.29 billion people, businesses, governments, and other institutions. The computing and networking technologies then converged in mobile tablets and handhelds. BlackBerry commercialized the smart phone in the early aughts, and Apple popularized it in the iPhone in 2007.
What is relatively new and very exciting is the ability of these devices to go beyond relatively passive monitoring, measuring, and communicating (weather patterns, traffic patterns) to sensing and responding; that is, executing a transaction or acting according to predefined rules of engagement. They can sense (falling temperatures, traffic jams) and respond (turn on the furnace, lengthen the green light); measure (motion, heat) and communicate (emergency services); locate (burst water main) and notify (repair crews); monitor (location, proximity) and change (direction); identify (your presence) and target (market to you), among many other possibilities.
The devices can be static (poles, trees, pipelines) or mobile (clothing, helmets, vehicles, pets, endangered animals, pills). Caregivers are using smart—or edible—electronic pills, for example, to identify and record whether and when a patient takes his medication. A skin patch or tattoo captures the data and can measure heart rate, food consumption, or other factors and communicate this information to a physician, caregiver, or the patient himself through an app to identify patterns and give feedback. The medical profession will soon be using similar technology for targeted drug delivery to certain types of cancer, measuring core temperature and other biomarkers.10
The devices can communicate with one another, with computers and databases directly or through the cloud, and with people (send you a text message or call your mobile). These devices, through their evolving machine intelligence and the data they collect, are putting analysis of data, pattern recognition, and trend spotting into individual hands.11 The industry term big data hardly describes the myriad data that the physical world will generate. By the most conservative estimate, the 10 billion or so devices connected via the Internet today will grow to more than 25 billion by 2020.12 Call it “infinite data” from infinite devices.
So why don’t we live in smart homes and drive smart cars and practice smart medicine? We see six big obstacles. One is the Rube Goldberg rollout of applications and services. Simply put, few of the early consumer IoT devices have delivered practical value, unless you want your smoke detector to ask your night light to call your smart phone and warn you of a fire.13
Another is organizational inertia and the unwillingness or inability of executives, industry associations, and unions to envision new strategies, business models, and roles for people. While some creative entrepreneurs have developed new businesses on some of these principles (i.e., enabling physical assets to be identified, searched, used, and paid for) and thereby disrupted existing markets (e.g., Uber, Airbnb), the impact is still comparatively minor and reliant upon a company and its app as intermediary.
A third is fear of malicious hackers or other security breaches that could modify the information and rules of engagement, overriding devices with potentially disastrous consequences. A fourth is the challenge of “future-proofing,” critical for capital things with very long life spans, longer than the life span of a typical application or even a company. Start-ups go bankrupt or sell themselves to larger firms all the time.
A fifth is scalability; to realize the full value of the IoT, we must be able to connect multiple networks together so that they interoperate. Last is the overarching challenge of centralized database technology—it can’t handle trillions of real-time transactions without tremendous costs.
To overcome these obstacles, the Internet of Everything needs the Ledger of Everything—machines, people, animals, and plants.
THE INTERNET OF THINGS NEEDS A LEDGER OF THINGS
Welcome to the Internet of Everything enabled by the Ledger of Everything—distributed, reliable, and secure information sharing, sensing, and automating actions and transactions across the Internet, thanks to blockchain technology. Technologists and science fiction writers have long envisioned a world where a seamless global network of Internet-connected sensors could capture every event, action, and change on earth. With ubiquitous networks, continued advancements of processing capability, and an increasing array of cheap and tiny connected devices, that vision of an “Internet of Things” is edging closer to reality.
Remember, Satoshi Nakamoto designed the bitcoin blockchain to ensure the integrity of each bitcoin transaction online and the bitcoin currency overall. By recording each transaction at every node and then sharing that record with every other node on the network (i.e., the blockchain), the blockchain ensures that we can verify the transaction quickly and seamlessly across the peer-to-peer network. We can conduct transactions of value—in this case financial—automatically, securely, and confidently without needing to know or trust each node on the network, and without going through an intermediary. The Ledger of Everything requires minimal trust.
Blockchain technology enables us to identify smart devices with relevant core information and program them to act under defined circumstances without risk of error, tampering, or shutting down in the Australian outback. Because the blockchain is an incorruptible ledger of all data exchanges that occur in the network, built up over time and maintained by the collaboration of nodes in that particular network, the user can be sure the data are accurate.
There is growing agreement among technology companies that the blockchain is essential to unlocking the potential of the Internet of Things. None other than IBM, the progenitor of large, centralized computer systems, has come on board. In a report, “Device Democracy: Saving the Future of the Internet of Things,” IBM identified the value of the blockchain:
In our vision of a decentralized IoT, the blockchain is the framework facilitating transaction processing and coordination among interacting devices. Each manages its own roles and behavior, resulting in an “Internet of Decentralized, Autonomous Things”—and thus the democratization of the digital world . . . devices are empowered to autonomously execute digital contracts such as agreements, payments and barters with peer devices by searching for their own software updates, verifying trustworthiness with peers, and paying for and exchanging resources and services. This allows them to function as self-maintaining, self-servicing devices. . . . 14
Therefore, by using the blockchain, whole new business models open up because each device or node on the network could function as a self-contained microbusiness (e.g., sharing power or computing capability at very low cost).
“Other examples are a music service, or an autonomous vehicle,” noted Dino Mark Angaritis, founder of Smartwallet. “Each second that the music is playing or the car is driving it’s taking a fraction of a penny out of my balance. I don’t have a large payment up front and pay only for what I use. The provider runs no risk of nonpayment. You can’t do these things with traditional payment networks because the fees are too high for sending fractions of a penny off your credit card.
”15
Spare bedrooms, empty apartments, or vacant conference rooms could rent themselves out. Patents could license themselves. Our e-mail could charge spammers for each item received. You get the idea. With machine learning, sensors, and robotics, autonomous agents could manage our homes and office buildings, interactive sales and marketing, bus stop shelters, traffic flow and road usage, waste collection and disposal (i.e., where the bins speak to the trucks), energy systems, water systems, health care devices embedded or worn, inventories, factories, and supply chains.
Carlos Moreira, CEO of WISeKey, said that the greatest opportunities lie in what he called the industrial blockchain.16 WISeKey, a Swiss-based company working in the area of identity management, cybersecurity, and mobile communications, provides secure transactional capability to watches and other wearable devices and is now offering its trust model to manufacturers and chip makers for outfitting a very large number of other IoT devices to be authenticated and to communicate across the Internet or other network. “We are moving into another world where the trust is delegated at the object level. An object that is not trusted will be rejected by the other objects automatically without having to check with a central authority,” Moreira said. “This is a huge paradigm shift that has tremendous consequences in the way that processes will be conducted in the years to come.”17
In this emerging world, users connect with smart devices using secure identification and authentication, potentially public/private keys, and they define the rules of engagement, such as privacy, with other devices, rather than going along with the rules of a centralized node or intermediary. Manufacturers can transfer maintenance, ownership, access, and responsibility to a community of self-maintaining devices, future-proofing the IoT and saving infrastructure costs, replacing each device exactly when it hits obsolescence.
Thus the blockchain can address the six obstacles to a functioning Internet of Things. To sum up, the new Ledger of Everything has nine nifty network features:
Resilient Self-corrects; no single point of failure
Robust Can handle billions of data points and transactions
Real-time Stays on 24/7/365 and data flows instantly
Responsive Reacts to changing conditions
Radically open Constantly evolves and changes with new input
Renewable Can be multipurpose, reused, and recycled
Reductive Minimizes costs and friction, maximizes process efficiency
Revenue-generating Enables new business models and opportunities
Reliable Ensures integrity of data, trustworthiness of participants
Why do we believe the IoT enabled by the blockchain has such huge potential? The primary driver is that it allows animation of the physical world. Once we bring these objects to life on the ledger, they can sense, respond, communicate, and take action. Assets can search, find, use, and compensate one another according to smart contracts, thereby enabling highly disruptive new markets, just as the Internet has previously done for people and all manner of digital content.
The questions for managers, entrepreneurs, and civic leaders: How will you take advantage of these new opportunities to change and grow? How will your organization respond to the inevitable disruption to your existing operational model? How will you compete with the creative new models of start-ups and collaborations?
Opportunities for greater efficiency, improved service, reduced costs, increased safety, and better results abound in our lives, and we can improve each by applying blockchain logic to the Internet of Things. We’re beginning the next major phase of the digital revolution. Michelle Tinsley of Intel explained why her company is deeply investigating the blockchain revolution: “When PCs became pervasive, the productivity rates went through the roof. We connected those PCs to a server, a data center, or the cloud, making it really cheap and easy for lean start-ups to get computer power at their fingertips, and we’re again seeing rapid innovation, new business models.”18 Intel wants to accelerate the process of understanding what’s working, what’s not working, and where the opportunities lie. “We could see this technology be a whole other step function of innovation, where it enables all sorts of new companies, new players. To be a leader in the technology industry, we cannot be absent from the conversation,” she said.19 Just imagine the potential of applying these capabilities across many types of businesses, many untouched by the Internet revolution.
THE TWELVE DISRUPTIONS: ANIMATING THINGS
What possibilities are there for animating the physical world? Unlike Pinocchio, we don’t have a Blue Fairy. (And unlike Pinocchio, the blockchain doesn’t lie.) But today, right now, we have distributed ledger technology that will actually enable not only GE to “bring good things to life.” Even better, Pinocchio can’t go long-nose on the ledger.
We’re in the early days of thinking about the possibilities of the Ledger of Everything (built into the IoT). While consumer devices have received the most attention in the popular media to date, there are potential applications across virtually every sector. There are many ways of classifying and grouping potential applications because so many applications cross boundaries and could fit into more than one category. McKinsey, for example, uses the concept of settings in its classification of the IoT.20 We’ve identified opportunities for the Ledger of Everything in twelve major functional areas. Specific benefits—and the business case—will be specific to each application. The categories below illustrate the potential and the potential significant disruption to existing markets, players, and business models.
1. Transportation
In the future, you’ll call up an autonomous vehicle to get you safely where you need to go. It will intuitively take the fastest route, avoid construction, handle tolls, and park all on its own. In times of traffic congestion, your vehicle will negotiate a passing rate so that you arrive at your destination on time, and freight managers will use the blockchain-enabled IoT on all cargo to clear customs or other required inspections quickly. No red tape. Allianz, a manufacturer of street sweepers, could equip its municipal machines with minicam or sensor technology that identified cars whose owners hadn’t moved them (if they couldn’t move themselves) on alternate-side-of-the-street-parking days in New York City, feed that sensor data to the traffic police, and spare the physical writing of parking tickets. Or, the street sweeper itself could extract the parking fine in bitcoin from the car itself as it swept by—because the New York State Department of Transportation would require all cars registered in the five New York City boroughs to maintain bitcoin wallets connected to their license plates. Autonomous vehicles, on the other hand, would sense the oncoming sweeper and simply move themselves to let it pass.
2. Infrastructure Management
Many professionals will use smart devices to monitor location, integrity, age, quality, and any other relevant factors of pavement, rail lines, power poles and lines, pipelines, runways, ports, and other public and private infrastructure in order to monitor conditions, detect problems (e.g., breakage or tampering), and initiate a response both rapidly and cost-effectively. That’s where companies such as Filament will come in, with new affordable technologies to animate existing infrastructure without the huge capital required to replace it. Eric Jennings of Filament estimates that “over 90 percent of infrastructure is currently disconnected, and it’s unfeasible to rip it all out and replace it with brand-new, wireless, connected assets.”21
3. Energy, Waste, and Water Management
“Send a truck to empty me,” said the overflowing waste bin. “Fix me,” said the leaky pipe. The Internet of Things should inspire a hundred new children’s books. Traditional utilities in both the developed and developing world can use the blockchain-enabled IoT for tracking production, distribution, consumption, and collection. As we’ve already seen, new entrants without significant embedded infrastructure are planning to use these technologies to create entirely new markets and new models (e.g., community microgrid).
4. Resource
Extraction and Farming
Cows can become blockchain appliances, enabling farmers to track what the cows eat, which medications they’ve had, and their complete health history. This technology can also help track expensive and highly specialized equipment and make it more widely available for just-in-time usage and cost recovery; improve miner and farmworker safety through tagging of safety equipment and automated checklists (to ensure that equipment is being used properly); monitor weather, soil, and crop conditions to start irrigation, automated harvesting, or other actions; and compile “infinite data” analytics to identify new resources or advise on agricultural best practices based on past patterns and results. Sensors in soil and on trees could help environmental protection agencies to monitor farmers and their usage of the land.
5. Environmental Monitoring and Emergency Services
Remember autonomous weather agent BOB? BOB will live in a world of weather sensors and make money collecting and selling critical weather data. Examples here include monitoring air and water quality and issuing alerts to reduce pollutants or stay indoors; flagging dangerous chemicals or radioactivity for emergency workers; monitoring lightning strikes and forest fires; installing earthquake and tsunami early warning and alert systems; and, of course, storm monitoring and early warning. In addition to improving the response time for emergency services and reducing the risk of these events to human life, we could use this longitudinal data to increase our understanding of underlying trends and patterns, identify preventive measures in some cases, and improve our predictive capability to provide even earlier warning.