We examined the main trends in the development of cryptocurrencies of the Internet of Things (IoT) in 2018. Herbert Slobodskov, editor-in-chief of the BitFin.info website, expresses his opinion on the development of IoT: “The Internet of things today is one of the hot topics in the technology world in 2018. Many IT teams want to connect the Internet of things with blockchain technology to enhance security and conduct transactions within the network of IoT devices. Recently, large corporations have taken a great interest in such developments, for example, IBM and Dell are already researching and implementing cryptocurrency technologies in IoT. This is the future – blockchain technology provides a simple infrastructure for devices – security, scalability, speed, and lower transaction costs. ”
This material provides an overview of promising cryptocurrencies for the Internet of things.
Using Cryptography on the Internet of Things
The IOTA cryptocurrency is already synonymous with IoT, and some people do not even know that the industry itself existed before the coin appeared in 2015. The very idea of the internet of things was voiced back in 1999, and 10 years later it became one of the trends in information technology. The basic idea of IoT is to combine physical objects to interact with each other without human intervention. The interaction of the two machines is called M2M (machine to machine). So why does this technology need cryptocurrency, why is it not enough to connect to the Internet to conduct transactions?
Let’s look at two examples:
- This example is from Spain and Germany, where the use of the Internet of things allows you to monitor the condition of the soil, humidity and the amount of solar heat. Built-in sensors transmit information to the central system, which, without human control, distributes the necessary fertilizers and regulates the irrigation of vineyards. In such a system, it is sufficient to connect sensors and a server to the Internet.
- Car refueling is automatic without human control. It is necessary to ensure the correct calculation of the amount of fuel through the sensors, as well as payment between the on-board computer and the gas station. Unlike the previous example, there are two systems using IoT: a gas station and a car. The calculation between these systems should be decentralized to avoid fraud of one of the parties.
Practical application of IOTA in two projects: CognIOTA machine learning and Masked Authenticated Messaging protocol for data transmission, working at weather stations, vehicle locators and radio beacons. Ultimately, the IOTA Internet of Things cryptocurrency should become the connecting link between non-human systems.
The basis of the IOTA network is the acyclic graph DAG, which was called Tangle. Interestingly, the blockchain was developed later than the DAG and not vice versa. Due to the lack of mining, there are legitimate doubts about the degree of decentralization of IOTA, which are confirmed. Indeed, the network has one central coordinator node and cannot be considered completely independent.
On the other hand, transactions without blockchain go through without commissions. Just imagine that Bitcoin has become the base payment system for the interaction of 10 billion devices. Blocks of 1 MB in size will fill up instantly, and transactions between devices will be very expensive and slow. Perhaps there is a way out in alternative consensus algorithms. It is also worth noting that the central coordinating node of the IOTA should be abolished after connecting a certain large number of devices to the network, which will provide the necessary power to counter hacker attacks.
An IOTA transaction from one device can only be carried out if this device has verified two other network transactions. Thus, mining is replaced.
After identifying the vulnerability of their own cryptographic function Curl, the organizers decided to switch to the standard and proven SHA-3 function.
The IOTA wallet has also been criticized more than once. The most high-profile case was the theft of $ 4 million. The vulnerability was that account registration is carried out with the generation of seed phrases. You can register it manually or use the service to generate passwords. Some of these services were hacked and hackers stole cryptocurrency.
IOTA features do not end with the absence of a blockchain. Also used is something between the Lisk sidechains and Lighting Network Bitcoin – Flash channels. Without going into details, it is worth noting that the “fast” channels allow you to conduct transactions offline.
HyuindaiPai takes the marketing of this project seriously and even allows itself advertising on television. Hyundai developers still decided to use blockchain and mining, while changing the PoW algorithm.
HDAC cryptocurrency uses the ePoW algorithm – Electronic Proof of Warranty.
One of the differences between this algorithm and PoW is the block window method.
According to this method, blocks can be generated in a period of time, the size of which is determined by the formula:
f (t) = [(N × 0.7) × (total number of blocks at present (t))] / (cumulative block number over 10 years ™)
Node N is calculated from the list of last successful nodes, and throughput should reach 1000 transactions per second. 86% of cryptocurrencies are available for mining HDAC, the remaining 14% is divided between developers and buyers on the HDAC ICO, which took place in November-December 2017.
It is important to note that the network provides a private blockchain, not a public one. The structure is as follows:
- blockchain containing transactions;
- Gateway for device management
- network administrator adding devices and users to the blockchain;
- A regular node (node, user) that stores blocks;
- a device (sensor, telephone) that does not store blocks.
At the moment, a mining pool and an HDAC wallet are working. The first was hacked in May 2018.
XAIN – Overview
This project is known for collaborating with Porsche.
Like HDAC, it uses a blockchain with an alternative PoKW algorithm (Proof of Kernel Work). The method is based on the Ethereum blockchain with a change in the node that defines the contents of the block – Block Producer. Block generation can be carried out exclusively by miners from the “white list”. The list is controlled by a smart contract, is public and subject to change. The selection of a specific node generating a block occurs through a lottery. The “white list” is determined using a verifiable random function that cannot be manipulated by any of the nodes in the network.
Advantages of using Porsche – XAIN cryptocurrency:
- recording traffic data on the blockchain for direct communication with other vehicles;
- giving someone temporary access to a Porsche, even if the car owner is not nearby;
- Receive real-time notifications of who and when contacted Porsche.
Is all this impossible to do without cryptocurrencies? It is possible, but without cryptography, transactions cannot be considered fully protected, and there is no guarantee that the car will not leave somewhere itself. In addition to the benefits for users, there are advantages for the manufacturer:
- increased confidence in-vehicle data, fully tested and suitable for use in reports, certificates, and especially in relation to access to local data for intelligent maintenance and autonomous driving;
- XAIN Blockchain as a distributed, lightweight and reliable “application store” for fast integration of third-party software;
- Increased customer confidence in compliance with data usage requirements;
- training distributed machine learning to achieve the best local models of autonomous driving.
Another promising competitor to the cryptocurrencies described above is the VeChain project, which collaborates with BMW.