by Don Tapscott
6. Health Care
In the health care sector, professionals use digitization to manage assets and medical records, keep inventory, and handle ordering and payments for all equipment and pharmaceuticals. Today, hospitals are full of smart devices that oversee these services, but few communicate with one another or take into account the importance of privacy protection and security in direct patient care. Blockchain-enabled IoT can use emerging applications to link these services. Applications in development include monitoring and disease management (e.g., smart pills, wearable devices to track vital signs and provide feedback) and improved quality control. Imagine an artificial hip or knee that monitors itself, sends anonymized performance data to the manufacturer for design improvements, and communicates with a patient’s physician, “Time to replace me.” Technicians will be unable to use specialized equipment if they haven’t taken prerequisite steps to ensure their reliability and accuracy. New smart drugs could track themselves in clinical trials and present evidence of their effectiveness and side effects without risk of modified results.
7. Financial Services and Insurance
Financial institutions could use smart devices and the IoT to tag their claims on physical assets, making them trackable and traceable. Because digital currencies enable the storage and transfer of value rapidly and securely for all users large and small, they also enable risk assessment and management. Thinking further, could the poor and disadvantaged earn small amounts of cash, or perhaps electricity or other “credits,” if they allowed their limited assets to be tagged and shared as in the earlier microgrid example? Owners will be able to tag priceless objects, antiquities, jewelry, the stuff of museums, anything ever handled by Sotheby’s and insured by Lloyd’s. Insurers could adjust payment according to where the object is and its environment—if it’s in New York’s Metropolitan Museum of Art under controlled climate, then a lower insurance rate; if traveling to Greece, then charge a higher rate. The object could tell whether it was in a vault or around a celebrity’s neck. Insurance rates could be higher if the device was hanging on Lindsay Lohan’s neck versus, say, Anne Hathaway’s. Driverless cars would surely have lower insurance rates, and devices themselves could settle insurance claims on the spot based on sensor data.
8. Document and Other Record Keeping
As we have explained, physical assets can become digital assets. All documentation relating to a particular “thing” can be digitized and carried on the blockchain including patents, ownership, warranties, inspection certification, provenance, insurance, replacement dates, approvals, et cetera, significantly increasing data availability and integrity, reducing paperwork handling, storage, and loss, and other process improvements related to that documentation. For example, a vehicle will not start if it failed a recent safety inspection, if its liability insurance has expired, if its owner has failed to pay parking tickets or moving violations, or if the driver’s license of the person attempting to drive it has been suspended. Items on the shelves will notify store managers when they’ve passed their “sell by” date. Store managers might even program these items to lower their own price as the sell-by date approaches.
9. Building and Property Management
An estimated 65 percent of the twelve billion square feet of commercial real estate in the United States is vacant.22 Digital sensors can create marketplaces of these real estate assets by enabling real-time discovery, usability, and payment. Vendors are now entering this field and developing new service models to rent the space in off hours. In the evenings, your conference room can moonlight as a classroom for neighborhood youth or an office for a local start-up. Other applications will include security and access control, lighting, heating, cooling, and waste and water management. The greenest of buildings will run on the Ledger of Things. Imagine the data on elevator usage and flow of people through the building, how these will inform an architect’s design of public and private spaces. Spare residential space can list itself and negotiate through the Ledger of Everything to help tourists, students, managers of homeless shelter programs, and others find space that meets their needs. These ideas apply to all types of residential, hotel, office, factory, retail/wholesale, and institutional real estate.
10. Industrial Operations—The Factory of Things
The global plant floor needs a global Ledger of Things, aka the industrial blockchain. Factory managers will use smart devices to monitor production lines, warehouse inventory, distribution, quality, and other inspections. Entire industries may adopt the ledger approach to significantly increase efficiency for such processes as supply chain management. Large and complex machines, like airplanes and locomotives, consist of millions of parts. Each individual component of a jet engine or railcar could have sensors that send out an alert when it needs fixing. Imagine a train on its way from Baltimore to Long Beach notifying the maintenance crew in Long Beach three days ahead of time that it needed a critical new part. The sensor could even issue an RFP and accept the best bid and delivery for the part, cutting time and massive cost out of the operating efficiencies of large corporations like General Electric, Norfolk Southern, and others. Even more significant, manufacturers in realms from cars to light bulbs to Band-Aids are investigating how they can embed smart chips into their products or parts thereof and monitor, collect, and analyze performance data. With such data, they could provide automatic upgrades, anticipate client needs, and offer new services, in effect changing from product suppliers to ongoing software-based services.
11. Home Management
Feeling lonely? You can always talk to your house. Your own home and numerous products and services are entering the market to allow automated and remote home monitoring. These services go beyond the “nanny cam” to include access controls, temperature adjustments, lighting, and, eventually, just about everything else in your home. While “smart homes” have been relatively slow to take off, companies such as Apple, Samsung, and Google are working to simplify installation and operations. According to BCC Research, “The U.S. home automation market is estimated to go from almost $6.9 billion in 2014 to $10.3 billion in 2019 . . . the growth will be steady and long-term.”23
12. Retail Operations and Sales
Walking down the street, your mobile device advises you that the dress you love is available at the Gap. Walk into the store and the dress, in your size, is waiting for you. After trying it on, you scan it and the payment is complete. But you’ve got other things to do, so the dress finds its way to your house before you get home. In addition to operational efficiencies and environmental monitoring, retailers will be able to personalize products and services to identifiable customers as they walk or drive by based on their location, demographics, known interests, and purchasing history, provided that those customers opened their black boxes to retailers on the blockchain.
THE ECONOMIC PAYOFF
Throughout this chapter we’ve referenced numerous potential benefits of the distributed, blockchain-enabled IoT at many levels (individual, organizational, industrial, societal). Redesigning and automating processes across peer-to-peer networks, rather than through people or centralized intermediary apps, could bring numerous benefits as already identified including:
Speed (end-to-end automation)
Reduced costs (associated with sending nearly infinite amounts of data to giant central processing facilities; elimination of expensive intermediaries)
Increased revenue, efficiency, and/or productivity (freeing up excess capacity for reuse)
Improved effectiveness (built-in checklists and other protocols reduce impact of human error)
Increased security and integrity (person-to-person trust is not required as trust is designed into the network architecture)
Reduced likelihood of system failure (elimination of bottlenecks, built-in resiliency)
Reduced energy consumption (energy required by the network itself offset by increased efficiency and reduced wastage, dynamic pricing, and feedback loops)
> Increased privacy protection (intermediary can’t override or ignore rules defined in the blockchain)
Improved understanding of underlying patterns and processes and opportunities to improve them through the collection and analysis of “infinite data”
Strengthened predictive capability of various events whether negative (severe weather, earthquakes, failing health) or positive (best time to plant crops, buying patterns).
The distributed open model means that IoT networks can be self-sustaining even after a company pulls out or a manufacturer fails. Interoperability, when designed into the system, will enable the connecting of different IoT networks and will unleash even greater value.24
Many of these benefits depend upon the concepts of distributed, or decentralized, networks and the elimination of a central (e.g., command and control) or other intermediary (e.g., a clearinghouse or management app). Once these new intermediaries are in place, others will feel pressure to “work around” or eliminate them. In Eric Jennings’s view, “People will do the things they’ll do to minimize their own discomfort, leading to silos and concentration and centralization. What’s a short-term gain for those particular people is a long-term loss for everyone else.” He said, “The Internet of Things should be completely decentralized where devices can be autonomous, discover each other directly, establish secure communication with each other directly, and eventually pay each other in value, directly between machines.”25
The IBM Institute for Business Value has conducted research into what it calls the five major “vectors of disruption” that will increase our leverage of physical assets as the result of the blockchain-enabled IoT.26 While IBM clearly has a business interest in the IoT, its work on business value is nonetheless very helpful.
First, the institute noted that these new networks will enable users to instantly search, access, and pay for available physical assets, such as underutilized storage or computing capability. The assets in supply can match themselves to demand. Because we can assess risk and credit automatically online and repossess virtually, we can reprice credit and risk significantly downward. Automated usage of systems and devices improves operational efficiency. Finally, firms can crowdsource, collaborate, and optimize with business partners in real time through digitally integrated value chains.
In short, you have an opportunity to make conceptually simpler, more efficient markets. You can access previously inaccessible assets, determine price in real time, and reduce your risk. Once the basic infrastructure is in place, barriers to entry are low (e.g., just develop an app), and the ongoing costs also relatively low (e.g., no more third-party service fees). It drastically lowers the cost of transmitting funds and lowers the barrier to having a bank account, obtaining credit, and investing. It could even support micropayment channels, matching minute-by-minute service usage with minute-by-minute payment.
The Ledger of Things enables “distributed capitalism,” not just redistributed capitalism. Far from a free-for-all, these markets can be shaped according to our values—as individuals, companies, and societies—and these values coded into the blockchain, such as incentives to use renewable energy, use resources from our closest neighbors first, honor price commitments, and protect privacy. In short, the Ledger of Everything on top of the IoT animates and personalizes the physical world even as we share more. As IBM stated, “At a macroeconomic level, we are all winners in the IoT future, even though different industries will experience a mix of different effects.”27 According to the McKinsey Global Institute, the economic value of the IoT has, if anything, been underestimated; the economic impact—including consumer surplus—could be as much as $11.1 trillion per year in 2025 for IoT applications.28 That’s a 10 percent lift on current global GDP of well over $100 trillion; that’s huge!
Networked intelligence, a phrase coined in The Digital Economy, referred to how the network would be smarter than its smartest node in one domain after another. As we have explained, the first generation of the Internet dropped transaction costs somewhat. We have faster supply chains, new approaches to marketing, and peer-to-peer collaborations like Linux and Wikipedia on a massive scale, with many innovative new business models. Blockchain technology will accelerate this process. As the Internet of Things takes hold, these trends will go into hyperdrive.
THE FUTURE: FROM UBER TO SUBER
We’ve covered a lot of ground in this chapter. Now let’s pull all the strands of innovation together in just one scenario.
Consider service aggregators like Uber and Lyft. Uber is an app-based ride-sharing network of drivers who are willing to give other people a lift for a fee. To use Uber, you download the Uber app, create an account, and provide Uber with your credit card information. When you use the app to request a car, it asks you to select the type of car you want and marks your location on a map. The app will keep you posted on the availability and whereabouts of your prospective driver. At the end of the ride, Uber automatically charges your credit card. If you don’t want to give the default tip, then you need to change your billing settings on Uber’s Web site.29 Uber Technologies, Inc., the company behind the development and operation of the Uber app, retains a share of the price paid for every ride.
It sounds great, particularly in cities with a small taxi fleet. But Uber’s services come with a number of problems and red flags. Driver accounts have been hacked, rides are subject to surge pricing, and passengers have been subject to reckless driving and sexual harassment or assault.30 Uber is also tracking users’ every move, releasing some of this information to city officials for traffic studies. To top it all off, drivers create considerable value but they get to keep only part of it.
Now let’s imagine the Uber experience if it were a distributed application on the blockchain. Mike Hearn, a former Google employee who quit his job to work full time on bitcoin, laid out this alternative universe based on bitcoin technology at the 2013 Turing Festival.31 Hearn called this network “TradeNet” and described how, with the help of bitcoin, people could begin to rely on driverless vehicles.
It works like this. Most people don’t own cars, but rather share vehicles in a commons. In Chicago, Melissa requests a car through SUber (think blockchain Super Uber). All the available vehicles start automatically posting offers, which Melissa’s node ranks and presents to her based on her selection criteria. Melissa factors in how much she’s willing to pay for faster routes (e.g., higher-priced toll lanes).
Meanwhile John, unlike most users, is a SUber vehicle owner and as his self-driving car is taking him to work, it identifies all the parking options, both public and privately owned, selects a space, and reserves and pays for it through an autonomous parking marketplace. Because John’s predetermined parameters always include seeking the cheapest available spot within a ten-minute walk of his destination, he almost always goes with his car’s first choice. The underlying parking database that supports the parking also contains information on parking rules for specific streets on different days and at different times of day, whether or not the parking space is covered or in the open, or whether the owner of the space has established a minimum price. All this runs on a distributed peer-to-peer platform—connecting multiple apps—so no centralized company is mediating the orders or taking part of the fee. There is no surge pricing and no unexpected fees.
What is striking about this proposed model is not the driverless vehicles, because self-driving cars will be commonplace—probably sooner rather than later. Rather, the cars could be fully autonomous agents that earn their own fares, pay for their own fuel and repair, get their own auto insurance, negotiate liability in collisions, and operate (“drive”) without outside human control, except when they need to take some entity—maybe a human being—to court.
As a condition of operating, SUber administrators could program the vehicles’ protocols into the blockchain to obey all traffic rules, take the most direct, fastest, or least expensive route, and honor their bids. The drivers’ initial entry and regis
tration into the SUber system could require vehicles to register necessary documentation including ownership, safety inspections, and insurance, and the system would permanently log these records to ensure reinspection or insurance and permit renewals as required. Sensors could monitor the overall “health” of the vehicle and signal necessary repairs, make the appointment at the appropriate repair shop, and preorder any necessary parts. Because the vehicles are driverless, they’re not subject to sarcasm, cronyism, sexism, racism, or other forms of human discrimination or corruption. Plus, they won’t try to push their politics or line the dashboard with incense. All of this happens behind the scenes, between objects, and powered by an autonomous application. The drivers have created a blockchain cooperative as described in the previous chapter and they receive nearly all the wealth they create. The users—Melissa and John—experience only the convenience, with none of the hassle. What’s not to love?
Where the Internet reduced the costs of search and coordination, a digital currency like bitcoin on the blockchain will enable us to cut the costs of bargaining, contracting, policing, and enforcing these contracts. We’ll be able to negotiate the best deal and get the promised delivery from any other entity that will accept bitcoin, including a driverless taxi. How will the Ubers of the world compete?
But the scenario doesn’t stop there. Intelligence designed into the city’s infrastructure will move traffic along (variable lane direction, variable pricing, automated traffic signal management based on traffic flow), further reducing wasted energy and costs. The blockchain could support safety controls, both on the vehicles (driver and driverless) and/or on the infrastructure, such as proximity warnings and automated braking, as well as antitheft or prevention of unqualified or inebriated drivers from taking the wheel. In addition, cities will use the sensors to help manage the transportation infrastructure, including asset management of infrastructure and fleets, monitoring rail line and pavement conditions, generating maintenance plans and budgets, and dispatching repair crews when necessary.