Blockchain as a Foundation for Industrial IoT | Dr Craig S. Wright

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Blockchain Technology as a
Foundation for Industrial IoT
Dr Craig Wright | Chief Scientist | nChain
IoTaIS 2022, Bali

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• Challenges of Industrial IoT (IIoT) & GlobalLogistics
• Bitcoin as a Base Layer
• IoT in a World of Bitcoinand IPv6
• IP-to-IP TransactionsUsing IPv6
• Decentralisation:Forming the Edges of the Network
• Blockchain Technology& IndustrialIoT (IIoT)
BLOCKCHAIN TECHNOLOGY AS A FOUNDATION FOR INDUSTRIAL IOT
Contents

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ChallengesofIndustrialIoT(IIoT)&
GlobalLogistics

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Security
The integration of simple
systems in IoT-based
supply chain management
has failed to consider many
security and reliability
issues, such as within
sensor-based distribution.
Privacy
The requirementsfor IoT
solutions in any industry are
primarily based on low-cost,
secure systems. Centralised
infrastructure with
traditional client/server
cloud structures often
compromises privacy.
Standardisation
Current monitoring and
sensor systems, combined
with the lack of
development in electronic
data interchange (EDI) and
logistics bills, have led to a
wide fragmentation of
solutions and standards.
Challenges of Industrial IoT (IIoT) & Global Logistics
BLOCKCHAIN TECHNOLOGY AS A FOUNDATION FOR INDUSTRIAL IOT 4
1 2 3

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BitcoinasaBaseLayer

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Bitcoin as a Base Layer
Key:
Node
Node
Node
Intra-layer
Ancestor
Core Ancestor
Example of a Layered Network

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Key:
Node
Node
Node
Intra-layer
Ancestor
Core Ancestor

8
Key:
Node
Node
Node
Intra-layer
Ancestor
Core Ancestor
i= 2
i= 1
i= 3
i= 2
i= 4
i= 3
i= 5
i= 4

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IoTinaWorldofBitcoinandIPv6

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An IoT Communication
Protocol on Bitcoin (BSV)
• Integrationof payment
services and security
controls into one network
• Using existing
infrastructure to piggyback
messages regarding
device-state changes
• Fasteruser-device
interaction
Theme IoT requirements Blockchain solution
Scalability
Automation Automated contracts
Internet traffic P2P transaction throughput
Resource-constrained devices Lightweight clients
Security
Cybersecurity in the cloud Distributed data storage; Validation
Access control Key management; Derivative keys

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Multilevel IOT (MIOT)
Architecture
The MIOT combines a
command-control hierarchy
with the use of a blockchain
network infrastructure.
MIOT users create their own
multilevel control hierarchy,
which includes client-server
and peer-to-peer
relationships.
Localised Control
MIOTtopology
MIOT
Master
MIOT
Servant
MIOT
Slave
MIOT
Devices

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MIOT Architecture
Devices on the MIOT network
are classified according to
computing resource and
connectivity constraints.
MIOT wallet
• Secure messaging using
Bitcoin transactions
• Including new peers with
digital certificates
• Command
acknowledgment using
sighash
• Command approval using
multisig transactions
MIOT Devices
MIOTtopology
with exampledevices
MIOT
Master
MIOT
Servant
MIOT
Slave
MIOT
Devices
Master, servant, and slave devices use the MIOT-configured Bitcoin wallet to communicate with each
other and the Bitcoin network
Devices Wallets Miners

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Payment for Printing
Example Use Case
The MIOTnetwork for
public-library printing services
MIOT
Master
MIOT
Servant
MIOT
Slave
MIOT
Devices
Library Administrator
Device
Library User
Devices
Devices
Controllers
Printer
Devices
Devices

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IP-to-IPTransactionsUsingIPv6

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Non-Interactive Bitcoin IP
Transaction Using IPv6
CGA(++)
The procedure here is a
modification that takes
advantage of the beneficial
properties of IPv6 (and CGA).
To send a Bitcoin transaction
to a recipient who isn’t online
(non-interactively),the sender
can take advantage of the
imbedded authentication,
using a signature, in CGA++.
𝑇𝑥𝐼𝐷
Inputs Outputs
< 𝑆𝑖𝑔 𝑃> <𝑃>
OP_RETURN <IP_Tx prefix> <IPv6_CGA(++)>
<M>
OP_DUP OP_HASH160 <𝐻 𝑃𝐼𝑃 > OP_EQUAL
OP_CHECKSIG
OP_RETURN Output Format
Example Non-Interactive Bitcoin IP Transaction Using IPv6 CGA(++)
<IP_Tx prefix> || <Domain_Name> || <M>
Used to easily search
the blockchain for
OP_RETURN outputs
of this type
Used to identify who the
transaction is being made
out to
Can include
anything such
as the invoice

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Domain Name Bitcoin
Payments Using
IPv6CGA(++)
To send a payment to a
domain name rather than an
IPv6 CGA(++), the sender
simply adds an extra step in
the beginning of the
procedure to resolve the IP
address that maps to the
domain name required.
In the CGA parameters,there
is an extFields parameter
where an optional variable-
length field (default length 0)
can be added.
Client issues DNS query to
resolve the IPv6 (AAAA DNS
record) address mapping to
the required domain name.
Verify DNS record(s) – if
DNSSEC is being used.
Check that the domain name
in the DNS record matches the
domain name in the extFields
CGA parameter.
Procedure continues as with
Non-Interactive Bitcoin IP
Transaction Using IPv6
CGA(++) or Interactive
Bitcoin IP Transaction Using
IPv6 CGA.

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Decentralisation:FormingtheEdgesof
theNetwork

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Decentralisation: Forming the Edges of the Network
The purpose of a blockchain lies in low-cost transactions.
Parties engage directly in an exchange or trade.
The system replicates servers to add resilience.
It is electronic cash.
Decentralisationinvolves pushing information to the edges.
The term ‘decentralisation’ refers to individuals being able to
exchange information and minority groups being able to act
independently.
Blockchain technology is not about decentralisation.It merely uses decentralisation.

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Decentralisation: Forming the Edges of the Network
Alice engagesdirectly with Bob
Alice Bob
Blockchain Network
P2P Communication
Transaction is recorded and settled
on the blockchain
Nodes return the
status of the
transaction to Bob

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BlockchainTechnology&IndustrialIoT
(IIoT)

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Blockchain Technology &
Industrial IoT (IIoT)
Integrating blockchain-
based technologies into IoT-
based systems will create a
more resilient and secure
system.
I. With the adoption of more secure systems based on
blockchain technology, peer-to-peer systems operating
across a distributed, resilient network will replace
traditional centralised models.
II. Simple technologies such as RFID can be integrated using
IoT bridges to create smart factories directly integrated
with retail and logistic systems.
III. The deployment of IoT systems will lead to new paradigms
of mass customisation and the integration of complex
device-based identity.
IV. Integrating both agents and distributed hash table (DHT)
databases linked and monitored for integrity against a
blockchain network can lead to a more resilient and secure
system.

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Blockchain Technology & Industrial IoT (IIoT)
IoT and IIoT systems can be implemented to run over
decentralised peer-to-peer architecture using advanced 5G-
based network technologies.
When linked to a single public network, the ability to integrate
simple authentication methodologies can reduce the power
consumption and computational overhead associatedwith such
devices.
Such integrationwould benefit global logistics and enable the
integrationof supply chain management,purchasing, accounting,
and sales applications to reduce cost and risk and increase
profitability.
For IoT-based systems tobe successful, simplified blockchain-based distributed control systems that leave verification to
external nodes must be created and implemented in a standardised manner.

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Blockchain Technology &
Industrial IoT (IIoT)
Like a Mandala Network
Layer 1: Nodes
Nodes form a near-complete
graph
Layer 2: Service providers
Service providers such as
suppliers connect to nodes in
the central core
Layer 3 and above: Users
Clients connect to service
providers
Private information can be
stored exclusively in a single
jurisdiction of the data
holder’s choice.

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Thankyou

www.nchain.com
contact@nchain.com

Blockchain as a Foundation for Industrial IoT | Dr Craig S. Wright

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