Article

BIoT: Integrating Blockchain & IoT for Sustainability

Posted May 23, 2022 | Sustainability | Technology | Amplify
Blockchain

AMPLIFY  VOL. 1, NO. 5
  
ABSTRACT

Cigdem Z. Gurgur describes how a blockchain-based Internet of Things (IoT) can push market systems toward sustainability. Blockchain offers new opportunities relevant to systems design. It connects stakeholders with multiple sources of verified information, generates a richer informational landscape for executing business processes, and enables secure transactions between untrusted actors. Trusted networks can reduce transaction costs, simplify processes, and reduce resource intensity compared to traditional transaction technologies. Gurgur explores the conditions needed to facilitate blockchain deployment in the next generation of supply chains, specifically through IoT technologies that have attractive applications for creating, monitoring, and enforcing sustainability standards.

 

The number of Internet of Things (IoT) devices increased dramatically in the past decade. Estimates put the number of connected devices at nearly 25 billion across the globe, and some experts predict that number to double as soon as 2025. These devices employ sensors to establish network connections and transmit collected information to a remote node.

IoT couples digital and physical objects using robust communications technologies, introducing a future in which computing systems, users, and objects come together to create social, economic, and convenience benefits. IoT makes it possible to monitor any quanti­fiable state, such as the temperature of a product in a cold chain or the amount of a certain type of equipment in a supply chain.

IoT applications have grown exponentially in a wide variety of industries, accelerating industrial globaliza­tion and requiring enormous amounts of data.1 As IoT devices become more common, deficits in the way we currently manage data are becoming increasingly apparent. At the same time, networks and supply chains are growing more complex. Thus, data centers need to spend more to improve their ability to process and store data, but data centers with limited super­vision cannot guarantee needed data transparency and traceability.

Decentralization is essential if we are to sustainably meet our digital needs. The best model for a distributed, decentralized IoT ecosystem is blockchain.2 Indeed, the World Economic Forum predicts that by 2027, 10% of global GDP will be stored on blockchains, and major technology players such as IBM have named blockchain as a crucial technology in democratizing IoT.3

What Is Blockchain?

Blockchain is a decentralized, immutable, time-stamped ledger that provides transaction transparency and data privacy. It began more than a decade ago as the public distributed ledger for the cryptocurrency Bitcoin. Today, it has evolved from a niche technology used for virtual currency into a critical component of business ecosystems, identity systems, and finance and supply transaction systems.

Blockchain applications let organizations exchange goods, services, and information without the need for a central body to verify identity, validate transactions, or enforce commitments — reducing or eliminating intermediaries. Digital transactions can quickly be disseminated and synchronized across a variety of businesses, increasing efficiency and lowering costs.

Because all participants in a blockchain (everything from a supply chain to a financial transaction, business process, or government project) share access to the data, it cannot be transmuted or corrupted by a single actor. Each participant holds identical copies of the data verified by the others, ensuring the highest level of data integrity. This integrity rests on cryptography that validates and chains together the transactions, contracts, or assets, which are then recorded, making data tampering impossible.

What Is BIoT?

As far back as 2015, blockchain was recognized by the Institute for Blockchain Studies as the fifth disruptive computer paradigm innovation, following the Internet, mobile/social networking, personal computers, and mainframes.4 Today, blockchain-based IoT (BIoT) is garnering enormous interest and research dollars within the computing community.

IoT devices are beneficial for collecting and analyzing data, but to be useful and relevant, that data must be extremely secure and retain its integrity. This is where blockchain comes in. Blockchain can be thought of as providing a decentralized “fabric” for IoT’s web of intelligent objects.

Sensors acquire data like temperature, air pressure, CO2 levels, and smoke. Once a sensor produces a signal, the signal must be processed and transmitted. Blockchain offers a medium for reliably sharing information to the IoT, creating secure, immutable records by providing “trustless” record-keeping (i.e., no need to trust a third party).

BIoT’s ability to provide end-to-end supply chain information in real time supports the circular economy paradigm. It allows businesses and consumers to shift from a linear take-make-dispose model (which relies on large quantities of easily accessible resources) toward an industrial model where effective flows of materials, energy, labor, and detailed information interact with each other in a restorative, regenerative, more sustainable system.

Sustainability, Sustainable Development & the UN SDGs

Sustainability and visibility are closely connected. When a company’s supply chain is opaque, its leaders cannot see and track its processes, making it difficult or impossible to guarantee sustainability.

Sustainability is often used synonymously with environmental sustainability in technology discussions. This is in sharp contrast with the United Nations (UN) view, in which social, economic, and environmental sustainability are equally important and interrelated.5

The UN’s concept of sustainability originates from the Brundtland Commission’s 1987 definition of sustainable development as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.”6

Sustainability and sustainable development are closely connected in that context: social and economic sustainability require social and economic develop­ment, because many human needs are currently not met.7 In 2015, the UN launched its 2030 Agenda for Sustainable Development, which names 17 Sustainable Development Goals (SDGs) to address a variety of challenges related to environmental degradation, such as climate change, poverty, hunger and food insecurity, and more (see Figure 1).8

Figure 1. UN Sustainable Development Goals (SDGs) (source: Getty)
Figure 1. UN Sustainable Development Goals (SDGs) (source: Getty)
 

Improved Information Sharing with BIoT

The most important reason to introduce BIoT into a supply chain network is to improve information transparency. BIoT offers significant advantages and opportunities over traditional information-sharing technologies like enterprise resource planning and electronic data interchange.

BIoT provides a platform to connect diverse stake­holders with multiple sources of reliable data, gen­erating a rich information landscape. It can enable information sharing between independent, hetero­geneous firms in a supply chain, letting them lever­age the group’s collective knowledge to improve operational readiness and reduce administrative costs.

Some blockchains are private, allowing only authorized users access to the database, whether for reading or writing. These are sometimes called “permissioned blockchains,” and they tend to exist behind organi­zational firewalls to offer transparency, privacy, and control to a defined set of users.9 Often, permissioned blockchains are created for organizations that are not ready to share information on a platform that could potentially be viewed by competitors.

Permissioned blockchains contain a centralized, trusted identity management system that issues cryptographic certificates to qualified participants and a distributed database under a decentralized administration. This offers an improvement in transparency and auditability across involved parties over traditional distributed databases.

These advancements provide considerable opportu­nities for improvements in supply chain innovation and sustainable development.10 Permissioned blockchains can facilitate new means of green production, better monitoring of activities responsible for pollution and environmental degradation, and real-time collection and analysis of green or low-carbon data for timely decision making.

Creating Robust Supply Chains with BIoT

As supply chains become increasingly complex, the challenges of guaranteeing supplies, increasing transportation speeds, and ensuring product quality are becoming evident, particularly when it comes to food, medical supplies, and pharmaceuticals.

Blockchain’s ability to securely capture data and ensure consistency across supply chain operations is an excel­lent way to reduce (or eliminate) human errors and fraud. By simply collecting and recording data that was previously buried in proprietary databases, BIoT strengthens supply chains.

BIoT can also help track the amount of greenhouse gas generated at every point in the supply chain. Its advanced analytics and predictive algorithms can expose how manufacturers are collecting used products from lower echelons and recycling or salvaging them in safe, environmentally conscious ways — information formerly hidden inside closed-loop supply chains.

BIoT’s data-passport capabilities can be used to design prescriptive algorithms for allocating inventory or capacity to distribution centers and retailers. Manu­facturers and distributors can use blockchain to easily track individual pharmaceutical batches; for example, ensuring that the oldest products move out of the warehouse first and expired products are never delivered to retailers.

The agri-food market is another industry that can benefit from BIoT. Difficulties certifying the origin and quality of an agricultural product are as much a problem for consumers as they are for farms and distributors. BIoT can guarantee the traceability of the entire production system while ensuring more sustainable use of natural resources (like water) and reducing emissions associated with food production and transportation. IoT makes remote data collection efficient while blockchain ensures its security and perpetuity. In the case of food systems, that means providing omnipresent timestamp data from the raw material phase to the store shelf in a completely confidential manner. In transportation, BIoT can be used to track distances trucks travel, along with fuel use and emissions levels, leading to better-planned routes and more thoughtful warehouse placement.

In time, BIoT could be used to enhance and improve emissions trading systems (ETSs). A paper a few years back published in IEEE Access proposed HyperETS, a Hyperledger-based ETS that would provide “credible” trading services for polluters.11 Similarly, a more recent article in Energy, Sustainability, and Society proposed a blockchain-based Global Carbon Surcharge, which mimics a carbon tax but doesn’t require tax collection by governments.12

Achieving SDGs with BIoT

Corporate uses of BIoT have already shown the tech­nology’s potential to transform our way of thinking and even our society.13 As such, it holds tremendous promise for helping achieve the UN’s SDGs in the following ways:

  • Enhancing supply chains. Businesses are facing increasing pressures from regulators, activists, and consumers to develop sustainable supply chain systems that target SDGs. For example, a report commissioned by the EU recommended that blockchain technologies be explored as a way to enhance supply chain visibility in developing countries.14 Other researchers have suggested that developing countries could use blockchain to replace outdated supply chain record-keeping, reverse current public mistrust of sustainability regulators, and encourage more rapid diffusion of modern information and communications technology (SDG 9, 16, and 17).15, 16

  • Improving sustainability supervision. Because monitoring happens in real time, BIoT is an ideal way to improve sustainability supervision. When permissioned blockchain is integrated with IoT, government agencies can act as “nodes” or “peers,” allowing them to closely monitor sustainable business activities. In this scenario, third-party certifiers become less relevant because consu­mers themselves can use BIoT systems to verify sustainability-related information (SDG 3 and 12).

  • Exposing unethical behavior. Blockchains are only as trustworthy as the data entered into them, so systematically making that data trustable is crucial. We must also remember that, from a business perspective, achieving total transparency is not always attractive. There is an inherent tension between businesses that want to increase their knowledge about their suppliers for quality assurance and ethical reasons and businesses that want to hide this information because they know it will hurt their brand. Nevertheless, BIoT has the potential to improve the flow of labor-related information, presenting an opportunity to expose unsavory practices, including modern slavery (SDG 1, 10, and 16).

  • Supporting sustainable infrastructure and empower communities. In a 2016 report on fintech, the UN acknowledged the potential for blockchain technology to aid in SDG development.17 The report showed how blockchain could support sustainable infrastructure (SDG 9) and empower communities (SDG 1, 10, 11). In line with that report, the US state of California is using blockchain to monitor and oversee groundwater usage in Sacramento (an at-risk aquifer), and the UK and EU implemented Share&Charge, which uses blockchain to control an electric vehicle charging system.18 The role of BIoT in supporting sustainability through service delivery, resource management, and city administration is also being explored.19 BIoT can address environmental issues by using cryptocurrency as a reward system for improved waste management, water manage­ment, energy transaction management, and CO2 emissions management. BIoT has the potential to create more livable communities by monitoring energy consumption and waste (SDG 11), devising mechanisms to reward sustainable behaviors, and penalizing environmentally damaging actions, such as polluting water (SDG 14) or reducing biodiversity (SGD 15).20, 21

  • Leveling the playing field. A 2019 Reuters story highlighted the discrepancies between producers of commodities like oil and gas and those at the “wrong end of the value chain” like Ethiopian coffee farmers.22 Blockchain supply networks have the ability to level the playing field, giving small producers a way to compete with much larger players (SDG 1, 8, and 10). BIoT can also bring together small and medium-sized businesses to purchase equipment, raw materials, and/or services as a group, boosting their buying power. BIoT groups can also create crowdfunding campaigns to attract potential investors (SDG 8).23

  • Improving food chains. By providing decentralized, incorruptible, transparent records, BIoT helps reduce fraud (SDG 8 and 10) and improve consumer trust in food (SDG 2, 3, and 12). Improved supply chain traceability also means improved monitoring of protected species (SDG 14 and 15).24

  • Enhancing accountability. By providing immutable financial records, BIoT lets communities more easily share resources and work together to develop a region’s economy. Without fear of fraud, misuse of funds, or malicious data alterations of data (SDG 8), communities can freely nurture technology devel­opment aimed at increasing economic activity (SDG 1, 9, and 11).

  • Achieving clean energy goals. Blockchain supply networks must not only contribute positively toward sustainable development, they must also be able to continue their operations. BIoT aids in the development of peer-to-peer (P2P) clean energy trading, certified carbon-emissions trading, and enhanced climate-finance flows (SDG 7 and 13). It can also contribute to the deployment of smart renewable energy, smooth international climate finance transfers, fraud-free emissions management, and better green-finance law enforcement.25 P2P trading gives consumers without rooftop solar arrays access to renewable energy and significantly lowers electricity transportation costs. BIoT offers utility companies worthwhile ways to innovate and opens up new channels for revenue optimization.

Do the Benefits of Blockchain Outweigh the Energy Costs?

Traditional blockchain algorithms such as proof of work (PoW) require large amounts of energy, negatively affecting the environment. Additionally, server farms are usually located in enormous buildings that have a negative impact on the natural landscape. If the energy being used to power blockchain is nonrenewable, blockchains can have a larger impact on the environ­ment than the problems the technology seeks to alleviate (i.e., climate change).

Recent calculations from Cambridge University’s Bitcoin Electricity Consumption Index (CBECI) suggest that Bitcoin mining consumes 148.4 terawatt hours (TWh) a year of electricity, a best-guess tally that has risen consistently for the past five years.26 CBECI ranks Bitcoin mining just above Norway and Ukraine, at 124.3 TWh of annual electricity consumption, and just below Poland and Egypt, at 149.5 TWh.

However, the proof-of-stake algorithm operates with 99% less computational power compared to PoW, appearing to solve the energy challenge. Expanded use of renewable energy is accelerating, and new, high-performance blockchain technologies are emerging. Blockchain company Solana, for instance, operates without energy-intensive mining. Its network is extremely environmentally efficient due to key technical innovations, including proof of history and parallel processing.27

Achieving Holistic Change Through BIoT

Among the UN’s SDGs is the guarantee of sustainable models of production and consumption, promoting an efficient, responsible approach to natural resources in which companies do more with less. In this context, BIoT plays a decisive role in improving productivity through technological improvements.

For instance, materials is one of the most carbon-intensive industries. BIoT can help materials companies better understand their product lifecycles so that they can identify inefficiencies, leading to improved productivity and a reduction in negative environmental and social impacts. Resin suppliers Domo and Covestro teamed up with blockchain company Circularise to promote circularity in the plastics industry. Together, they achieved:

  • Sustainable management and efficient use of natural resources

  • Environmentally sound management of chemicals and all waste throughout their lifecycle

  • Reduced waste generation through prevention, reduction, recycling, and reuse

  • Provision of relevant information to make people aware of sustainable development and lifestyles28

In another approach to improve productivity, BIoT enables trade-in programs that incentivize consumers to exchange used technology products for newer ones. This increases sales while ensuring the environmental sustainability of products, becoming a value-add strategy for businesses. The use of IoT-ready products and a blockchain-enabled disassembly-to-order system ensures integrative sustainability.29

Finally, BIoT can help create sustainability-related standards for regulative, normative, and cognitive institutions, resulting in transformative change; for example:

  • Regulative institutions. BIoT strengthens the enforcement powers of governments by giving them the evidence they need to sanction individuals or organizations that breach regulations. BIoT promotes transparency and greater accountability in sustainability-related activities, giving smaller players more power to police large corporations.

  • Normative institutions. BIoT increases transparency, which decreases the need for trade associations, industry bodies, and third-party agencies. BIoT’s micro-metering, low cost of investment, and the ability to pinpoint standards of violators leads to attractive operational benefits in swiftly enforcing such standards.

  • Cognitive institutions. The detailed, verifiable information BIoT provides increases consumer confidence about manufacturers’, suppliers’, and distributors’ claims about their sustainability standards and sustainable development. BIoT’s transparency and immutability creates a tamper-proof system that can quickly provide product information to demonstrate realized sustainability, increasing consumer confidence.

Ultimately, BIoT fosters sustainable development and nourishes global supply chains by making them more environmentally friendly, more financially inclusive, less prone to contamination, better protected from health issues and death hazards, and much more accountable to every system tier.

References

1Choo, Kim-Kwang Raymond, Stefanos Gritzalis, and Jong Hyuk Park. “Cryptographic Solutions for Industrial Internet of Things: Research Challenges and Opportunities.” IEEE Transactions on Industrial Informatics, Vol. 14, No. 8, 28 May 2018.

2Malik, Nida, et al. “A Comprehensive Review of Blockchain Applications in Industrial Internet of Things and Supply Chain Systems.” Applied Stochastic Models in Business and Industry, Vol. 37, 3 May 2021.

3Aste, Tomaso, Paola Tasca, and Tiziana Di Matteo. “Blockchain Technologies: The Foreseeable Impact on Society and Industry.” Computer, Vol. 50, No. 9, 2017.

4Swan, Melanie. Blockchain: Blueprint for a New Economy. O’Reilly Media, 2015.

5Transforming Our World: The 2030 Agenda for Sustainable Development.” United Nations (UN) General Assembly, 21 October 2015.

6Report of the World Commission on Environment and Development: Our Common Future.” United Nations (UN), accessed May 2022.

7Holden, Erling, Kristin Linnerud, and David Banister. “Sustainable Development: Our Common Future Revisited.” Global Environmental Change, Vol. 26, May 2014.

8The 17 Sustainable Development Goals.” United Nations (UN), accessed May 2022.

9Babich, Volodymyr, and Gilles Hilary. “OM Forum — Distributed Ledgers and Operations: What Operations Management Researchers Should Know About Blockchain Technology.” Manufacturing and Service Operations Management, Vol. 22, No. 2, 27 June 2019.

10Saberi, Sara, et al. “Blockchain Technology and Its Relationships to Sustainable Supply Chain Management.” International Journal of Production Research, Vol. 57, No. 7, 2019.

11Yuan, Pu, et al. “Design and Implementation on Hyperledger-Based Emission Trading System.” IEEE Access, Vol. 7, 20 December 2018.

12Thess, André, et al. “Global Carbon Surcharge for the Reduction of Anthropogenic Emission of Carbon Dioxide.” Energy, Sustainability and Society, Vol. 10, No. 9, 2020.

13Hughes, Laurie, et al. “Blockchain Research, Practice and Policy: Applications, Benefits, Limitations, Emerging Research Themes and Research Agenda.” International Journal of Information Management, Vol. 49, December 2019.

14Deringer, H., et al. “Study on Due Diligence Requirements Through the Supply Chain.” European Commission, Directorate-General for Justice and Consumers, 2020.

15Kshetri, Nir. “Will Blockchain Emerge as a Tool to Break the Poverty Chain in the Global South?Third World Quarterly, Vol. 38, No. 8, 28 April 2017.

16Yermack, David. “Corporate Governance and Blockchains.” Review of Finance, Vol. 21, No. 1, 2017.

17Fintech and Sustainable Development: Assessing the Implications.” United Nations Environment Programme (UNEP), accessed May 2022.

18Glavanits, Judit. “Sustainable Public Spending Through Blockchain.” European Journal of Sustainable Development, Vol. 9, No. 4, 2020.

19Mora, Higinio, et al. “Blockchain Technologies to Address Smart City and Society Challenges.” Computers in Human Behavior, Vol. 122, September 2021.

20Ahad, Mohd Abdul, et al. “Enabling Technologies and Sustainable Smart Cities.” Sustainable Cities and Society, Vol. 61, 2020.

21França, A.S.L., et al. “Proposing the Use of Blockchain to Improve the Solid Waste Management in Small Municipalities.” Journal of Cleaner Production, Vol. 244, October 2019.

22Maasho, Aaron, and Nigel Hunt. “Coffee Price Slump Leaves Farmers Earning Less Than a Cent a Cup.” Reuters, 14 January 2019.

23Treiblmaier, Horst, and Roman Beck. Business Transformation Through Blockchain. Springer International Publishing, 2019.

24Blakstad, Sofie, and Robert Allen. FinTech Revolution: Universal Inclusion in the New Financial Ecosystem. Palgrave Macmillan, 2018.

25Marke, Alastair (ed.). “Editor’s Prologue: Blockchain Movement for Global Climate Actions.” In Transforming Climate Finance and Green Investment with Blockchains. Academic Press, 2018.

26Cambridge Bitcoin Electricity Consumption Index.” Cambridge University Centre for Alternative Finance, accessed May 2022.

27Rooney, Kate, Jordan Smith, and Mai Tejapaibul. “Crypto World: Crypto Prices Rebound and Solana’s Co-Founder Thinks Bitcoin Needs Proof of Stake.” CNBC, 27 April 2022.

28Moore, Stephen. “Blockchain Technology Applied to Plastics Traceability and Sustainability.” Plastics Today, 23 October 2019.

29Tozanli, Özden, Elif Kongar, and Surendra M. Gupta. “Trade-In-to-Upgrade as a Marketing Strategy in Disassembly-to-Order Systems at the Edge of Blockchain Technology.” International Journal of Production Research, Vol. 58, No. 23, 19 January 2020.

About The Author
Cigdem Gurgur
Cigdem Z. Gurgur is Associate Professor of Decision and System Sciences at Purdue University. She is a data and management science expert with experience in optimization models under uncertainty and decision support systems development with algorithmic theory design. Dr. Gurgur’s work utilizes meta-analytics, computational models, and statistical analysis for resource allocation and applies mathematical programming integrating financial and… Read More