The Role of Distributed Ledgers in IoT

Without a doubt the technology that is the distributed ledger is a masterful feat of engineering and creativity. Bringing together hashing with the concept of peer-to-peer relationships to fundamentally rethink an existing concept, the ledger, is an astonishing achievement.[1]

The brilliance of the engineering however, does not mean that blockchain is relevant in all applications. Some technologies end up creating the most value for the purpose originally intended, others create value in a completely different application, while still others never find an application that equals the technological advance in magnitude.

If blockchain, in the form of bitcoin, was originally intended as a wealth storage and medium of exchange – what are the alternative applications? In particular, what are the applications of a distributed ledger, or a chain of blocks, in the Internet of Things (IoT)?

At, a leader in the IoT location space, we are thinking deeply about the potential offered here and want to share our thoughts. To do that effectively, first we’ll need to take a slight detour to discuss our view of IoT before bringing in blockchain.

Ordering the layers that make the Internet of Things

In basic terms the Internet of Things value stack has three components: width=

The sensing layer – capturing business relevant information

The sensing layer captures information. This includes physical properties such as the temperature, humidity, vibration patterns or the concentration of a particular gas. Other “sensed” information could be the status of a particular device that is being monitored, for example an error message of a medical machine or alerts triggered by an engine.

 width=An example of a device in the sensing layer, the Asset Tag.

The connectivity layer – getting the information to where it is useful

Once the information is captured by the sensing unit, it needs to get to where it is useful. Normally, that is an application that triggers alerts, analyses and stores the data. This application is typically run by a remote computer in the network or, increasingly, the cloud, that is the internet. This then means the information needs to get to the internet. The communication part of the IoT stack is responsible for this task. Technologies and concepts like SigFox, NB-IOT, LTE-M1, Bluetooth Low Energy or Mesh all address the problem of getting data from the sensor to the internet or a local network.

In this context of blockchain, it is important to visualize that there is no “direct connection” to the internet. There is always a gateway or edge between the sensor and the internet. This could be a cell phone tower that links the sensor to the internet or a Zigbee Gateway that relays the information from a Zigbee sensor to the internet. 

 width=An example of a gateway.

A unique case is Bluetooth which is standard to all mobile phones. A Bluetooth Low Energy sensor could send information to a mobile phone, the mobile phone is then connected to the internet through a cell phone tower. Of course, there are also regular Bluetooth gateways but the universality of mobile phones and thereby the universality of internet connections for Bluetooth Low Energy sensors creates a special dynamic.

The application layer – doing something useful with the information

Lastly, the application layer. The application is the user facing part and combines the components: user interface, storage, analytics and integration. A user interface could take the form of a dashboard or just consist of SMS notifications. Analytics that require larger amounts of computing power to, for example, machine learning applications to understand the correlation between different sensor data are run on the application layer as well.


Excurs: Fog, Edge and Cloud Computing

Ever since computers came into existence they have been getting faster at a fantastic rate. This has a large effect on IoT as well. Computations, logic or algorithms that needed so much computing power that they could only be done by powerful computers now can be done by less powerful devices. For example, a sensor that has some computing power (and most do) can do more and more advanced algorithms. This is often called “fog computing”. In another version of this, called “edge computing” operations that used to be run by computers in the cloud are done on the gateway level.

Both fog computing and cloud computing reduce reaction times and simplify architecture because information no longer has to travel all the way to the cloud. Decisions are made closer to the where the information is sourced.

Excurs: How beacons fit in

Because of the multiple roles Bluetooth plays in the IoT stack it is sometimes confusing what beacons are. The right way to think about them is to view them like a new type of data that a phone can sense. A phone already is sensing vibrations, temperature and measures time but now it can also sense if it is close to a beacon.

Next, the phone also runs the application. That means, it can use the information to display content based on the proximity to a beacon, like wayfinding directions.

But, as we described above, because a phone usually has an internet connection it can also act as a gateway to the internet for information it receives via Bluetooth from a sensor.

The value of a distributed ledger in IoT

A technology can only be as valuable as the value of the problem that it solves or the additional value that it generates. Thus, at we have developed a number of hypothesis along which we see the largest potential for applications of distributed ledgers.

It is important to understand, that most things a distributed ledger can do, can also be done by a database. For example, money, in a simplified sense, is a database or table that accounts for who has how much money. That database is run by the banking system and central banks. Bitcoin replaces that with a database that is administered by everybody and can’t be changed. The trust in central authority is replaced by a mechanism that can only be altered by consensus and is publicly inspectable.

Thus, in general, the potential for distributed ledgers is highest where multiple parties interact in a way that requires trust. Because of the fragmented nature of the value chain in IoT, as discussed above, and the multiple use-cases for the same type of data, the potential is massive.

Potential 1: Basic data integrity

Typical supply chains have multiple stages and touch points (otherwise they would not be chains). In perishable goods these reach from the farmer to logistics service providers to multiple quality assurance agents to intra-logistics, storage and the retail facility. Data that is generated and used to settle claims, for example temperature records, must be trusted. A distributed ledger solves that problem by making it impossible to alter entries and distributes the same information to all parties participating in the chain.

This reduced friction and data discussion (no emailing of excel files), creates historic records and enables companies operating on the same data to simplify operations. In essence, the need for a database, database maintenance and API systems has been abstracted away into the distributed ledger.

Obviously, the data entered into the ledger can still be bad or rigged data, however that is a separate problem treated in the next approach.

Potential 2: Sensor device integrity

The number of connected device sensors is set to bloom. The problem for IoT applications is in understanding who owns, runs and maintains these devices. What sounds like a trivial problem becomes complex very fast, especially as multiple parties with multiple systems are set to coordinate. Sensors moving across facilities and between parties create another layer of complexity that requires an understanding of who runs a sensor at what point in time.

Once again, a distributed ledger drastically reduces the complexity of agreeing and recording the movement and addition of sensors across physical boundaries and commercial entities.

Potential 3: Trusted edges

As we have seen above, wireless IoT connectivity requires gateways to relay the information from the sensor to the local network or the internet. These gateways form the edge of the network towards the sensor.

Sensors which move between physical location gateways at some point stop being gateways and become bottlenecks or security threats for the data transfer. That is because distributing fleets of gateways across all stakeholders leads to doubling of infrastructure, massive increases in maintenance cost through dedicated requirements and reductions in time. This problem is particularly pertinent in the case of Bluetooth based sensors where the edge infrastructure widely exists (many routers and all mobile phones have both Bluetooth and an internet connection) yet both the access as well as the integrity is unclear.

Enabling a trusted network of edge devices, visible to and controlled by all participants in the value creation process, enables a drastic increase in the penetration of the edge devices, thereby reducing a major blocker of the internet of things.

Potential 4: Data commerce

Once data resides in a trusted, shared ledger it becomes possible to sell access to that data to enable more applications to utilize the same data. This increases the economic benefit to the Internet of Things multifold because the upfront investment in sensors and connectivity can be utilized in more than one way while marginal costs stay virtually at zero. This has a potentially dramatic effect on the economics of the Internet of Things.

Multiple usages of data is only a viable model with a couple of additions: ability to grant selective access to data and charging for the data. This is the focus of IOTA, an especially interesting instance of the distributed ledger.

IOTA is a new, next-generation public distributed ledger which has no blocks, no chains, and no miners. It also involves no fees and enables almost unlimited transaction throughput. This makes IOTA the first distributed ledger technology that can be naturally applied to the IoT environment, where at any given moment, potentially millions of devices can execute billions of data transfers of little value.


The fragmentation of the IoT value stack among stakeholder, technologies and geographies provides ample opportunity for valuable distributed ledger applications. At we are consistently deploying experiments in the real world to provide value to our partners and customers.

Yesterday, we announced our partnership with the IOTA Foundation to enable secure and transparent sharing of telemetry data in asset tracking and condition monitoring applications. This is the first step to leveraging the potential of Distributed Ledger Technology in the IoT. We believe there is a lot more potential in this space, and we are committed to exploring further viability.

If you want to learn more about distributed ledgers, IOTA, and how we integrate them into our solutions, join us in a webinar on May 22nd.