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Bitcoin: Enabler for the IoT?

photo golden bitcoins new virtual money Source: fotolia/ulchik74

There’s no question that Bitcoin has gone mainstream, although many people still associate the decentralized digital currency solely with criminal activities on the dark web. However, more and more established corporations and well-known investors are getting interested or even involved in Bitcoin businesses.

It’s hard to nail down precisely what Bitcoin is because it has so many facets. Bitcoin is a protocol, a network, and an open source software platform. Its main value proposition is transferring money instantly over the Internet without the need for a central authority – just as e-mail (or spam!) does for information.

Due to its built-in scripting language, Bitcoin is truly programmable money. The underlying technology, the blockchain, might even lead to innovation outside the financial sector.

Well, what’s that got to do with the Internet of Things?

We at the Bosch IoT Lab view the IoT as a system where “… virtually every physical thing in this world can also become a computer that is connected to the Internet”. When thinking (and writing) about business models for the IoT, this quickly leads to the idea that “virtually every physical thing” can become an autonomous actor in a worldwide data market. “Market” implies that data is being exchanged for money, right?

Let’s take an example: some organization installs a nationwide network of sensors to detect the availability of parking spaces. The infrastructure costs a lot of money (it’s nationwide, after all), but the data collected is valuable for many interested parties. As you drive around on your quest for a parking space, you pull up an app and see the real-time data from some 20 sensors.

How do you pay for those datasets? Today, we would think the service provider has a contract with the sensor infrastructure provider. You as the user would have to have a subscription with the service provider, or you would have to “pay” with your personal data while using the app. But there’s another possibility: why not pay the sensor directly for each and every dataset it provides? This is where Bitcoin could be extremely helpful – or even necessary.

Bosch IoT Lab

The Bosch Internet of Things and Services Lab has been formally opened in September 2012. It is a cooperation between the University of St. Gallen and the Bosch Group. Both organizations agree that the cooperation between academia and industry is an ideal setting to explore the opportunities the Internet of Things will provide.

Bitcoin is open to everyone and everything, and thus every sensor can have its own Bitcoin account, at no cost and without human involvement. But how much would an individual dataset be worth? Probably not much; let’s say less than one cent. While I doubt that traditional payment systems would be able to manage this in a cost-efficient way, numerous developers (remember, Bitcoin is open source) are working on micropayment systems using Bitcoin right now.

Do you share that point of view? Or do you think existing money transaction systems can adapt to the scenario outlined above?

More about Blockchain and Bitcoin

Ten things you need to know about blockchain

Are machines with wallets the next big thing in Industry 4.0?

When Money Learns to Fly: Towards Sensing as a Service Applications Using Bitcoin

When Your Sensor Earns Money: Exchanging Data for Cash with Bitcoin