Analysis: Three Things May Limit Blockchain Use on the Internet of Things

Blockchain, which was developed as a way to provide assurance for Bitcoin transactions has applications on the Internet of Things. But first there are some technical hurdles to clear.
Blockchain, which was developed as a way to provide assurance for Bitcoin transactions has applications on the Internet of Things. But first there are some technical hurdles to clear.

In-brief: Blockchain technology will have to clear a number of hurdles before it will be ready to serve as a core infrastructure for the Internet of Things, the author explains.

 As technology and commercial firms look for ways to deploy and secure Internet of Things technologies at scale, blockchain has emerged as a clear favorite for managing issues like identity and transaction security. IBM, for example, is offering a commercial blockchain to developers who use its Watson IoT platform and Bluemix platform as a service.

There is reason that technologists interested in the Internet of Things are looking to technologies like Blockchain: traditional IT security technologies are poorly suited to applications on the Internet of Things, where the scale of deployments and the diversity of endpoints present real challenges.

Given those constraints, Blockchain technology has much to offer. Originally developed as a means to secure Bitcoin transactions, Blockchain’s distribute ledger can provide device identity, secure data transfer, and immutable data storage for all manner of online transactions and communications. Importantly: these features can be implemented without any centralized authority and a completely transparent system with cryptographic proofs capable of being audited.

[Interested in blockchain? Read this Security Ledger coverage. ]

Recent years have witnessed an explosion of interest and investment in Blockchain technologies, as applications in industries like banking, financial services and technology are continuously being developed. Evolutions on the original Bitcoin technology, like Ethereum, have made significant progress, adding Turing completeness to blockchains.

Author Varun Mamillapalli is a graduate student at Northeastern University majoring in Information Assurance and Cybersecurity.
Author Varun Mamillapalli is a graduate student at Northeastern University majoring in Information Assurance and Cybersecurity.

Today, blockchain and blockchain variants like Ethereum offer a trust-less, decentralized system that can facilitate execution of code (read Smart Contract) and perform further actions based on the logical conditions in that code.

In spite of these unique and valuable features, there are still impediments to the incorporation of blockchain technology as a foundation for Internet of Things ecosystems. This article will discuss a few of them.

Mining Power

The first and major impediment to the growth and adoption of blockchain technologies is the concentration and consolidation of mining power.

Bitcoin and Ethereum were intended to function as distributed and decentralized systems of coin mining and exchange. In practice, that hasn’t come to pass. Instead, the financial rewards offered by cryptocurrency systems created a huge incentive for expensive, concentrated coin mining operations featuring mining farms, rigs, and pools. Sporting blindingly fast and efficient mining rigs with immense hash rates, simple, general purpose computers have been pushed out of the mining business.

Practically, that means that on the Internet of Things most endpoints will not be suitable for mining. Low-end devices like Raspberry Pis and embedded systems with minimal CPU power have and will continue to take a back seat to high-end machines that are designed just for calculating hashes and mining. Centralized mining introduces a single point of failure into the blockchain network. This is not desired, especially in a system that was meant to be peer-to-peer, where a fault in a single node shouldn’t affect the whole system. In centralized mining, if a mining pool which contributes majority of the hashing power stops functioning, the security of the blockchain network decreases which might ultimately render the system useless. Moreover, a mining pool with majority of the hashing power can perform some attacks on the network like adding/deleting transactions from the blockchain and double spending.


The second factor is storage capacity. The blockchain protocols are designed in such a way that each node should maintain the same copy of the blockchain and the blockchain should contain every transaction from the beginning of time. This means that any new device, in order to become a node in the Bitcoin network, should download all the transactions right from the first block which was mined back in 2009.

The same principle holds for other blockchain applications as well.Bitcoin’s blockchain size is more than 100GB and Ethereum’s blockchain size is approximately 50GB. These are just financial transactions and these systems limit the no. of transactions per second. For example, the Bitcoin network supports 3 transactions per second and the blockchain size grows 1MB for every 10 minutes. In an IoT application, the system should support thousands of transactions per second and the blockchain size will be bloated in no time. Due to the replicated storage mechanism, every device should hold a copy of blockchain in order to be a part of the network and a simple IoT device might not provide the demanded storage capacity.

Block Time

The third factor is the block time, which is defined as the time taken by a node to validate all the broadcasted transactions, arrange all the legitimate transactions into a block, and find the correct nonce value that provides the desired block hash.

Bitcoin’s block time is 10 minutes and Ethereum’s block time is 15 seconds. For a financial transaction, this block time might be desirable. But, for an IoT application with cyber physical capabilities, even a latency of a few seconds might not be feasible. In a smart vehicle or a piece of life-sustaining technology, actions need to be performed immediately. While not an urgent issue today, in the future, block time will need to be shortened drastically to clear the way for widespread adoption of blockchain technology.

The Future

As I write, researchers are exploring solutions to address these problems and others like them. To solve the storage capacity problem, for example, light client protocols are being designed which include pruning methods. In these implementations, the number of blocks to be stored on a node can be mentioned in the blockchain clients.

The limitations imposed by the mining requirements of Bitcoin are more difficult to solve. The computational capacity and block time problems derive from the Proof-of-Work algorithm that is used to secure blockchain data. That algorithm is not energy-efficient. In response, a Proof-of-Stake algorithm offers the most promising alternative to Proof-of-Work. It doesn’t require a node to perform millions of calculations and is more energy-efficient.

The storage and management of blockchain accounts or keys has also proven to be a weak link. Most of the bitcoin hacks to date have been the result of an attacker stealing the keys from a cold or hot wallet storage. These incidents are not related to the technology itself, but attention to bitcoin thefts tends to undermine confidence in the technology.

An effective solution for this would be to have another factor, such as a password or PIN that is used to initiate and sign transactions. This is already being implemented in Ethereum.


Blockchain is still a nascent and controversial technology. It goes without saying that blockchain’s applications within the Internet of Things is still a matter of conjecture and trial, and that it will take more time to determine whether and how blockchain might be implemented to secure IoT ecosystems.

Experts estimate that it might take 5 -10 years for the mainstream adoption of blockchain technologies like IOTA and Hyperledger that have the most direct applications to the Internet of Things. However, with all the popular banks and companies in the FinTech sector jumping aboard the blockchain train, setting up labs, developing proofs of concept and filing patents, that long runway may end up much shorter than anybody expected.


  1. You cite mining power as one of the limiting factors for blockchain on the IoT. As I understand it, the difficulty of creating a new unit is set by the algorithm. In the case of Bitcoin, they make this hard, to limit the supply of bitcoin, and also increase the difficulty every so often to slow down the creation as mining rigs improve. (as they did around June this year).
    There is no need to limit the supply of IoT devices, so no need to make the algorithm particularly compute-intensive. All it actually needs to do when used for IoT is to create a verifiable chain of unique units, surely?

    • Varun Mamillapalli

      It is true that the difficulty adjustment algorithm sets the difficulty to maintain an average block time of 10 minutes in Bitcoin. This difficulty increases as the overall hash rate in the Bitcoin network increases. However, this difficulty is not directly responsible for limiting the supply of Bitcoins. The mining reward is halved every 210,000 blocks irrespective of the mining difficulty and only 21 million bitcoins will ever be created. In the context of IoT, these bitcoins, and any other cryptocurrency has nothing to do with the supply of IoT devices. All the devices will be uniquely identified by a cryptographic key pair (public and private key). Bitcoin normally has 256-bit keys so if you were to use Bitcoin blockchain for your IoT application, you can uniquely provide identity to 2^256 devices (more than 115 quattuorvigintillion). In short, it is not possible to run out of these keys. I mentioned mining power as a limitation because an IoT ecosystem will have a number of high-end devices to process the data and derive intelligence collected from low-end sensors. If these high-end devices were to participate in the mining process, they would have more control on the network as they have more hashing power i.e., a better chance of mining blocks. Moreover, if these devices contribute to more than 50% of the hash rate, the blockchain network will be vulnerable to 51% attack or majority attack. Although much harm cannot be done with this attack, it is essential that such scenarios do not occur. So, along with creating a verifiable chain of unique units, it is necessary to have a strict mechanism which protects the integrity of the chain and prevents data corruption.

      P.S 51% attack is a theoretical attack and never really happened till date. The major problem with this attack is double spending and this makes sense only in a financial application. “Double spending” in a financial application is analogous to “re-transmitting the same information again” in an application that supports IoT device communication. So, duplicate information might not be a serious problem.