Ethereum and IoT is a partnership for the next Industrial Revolution | Steemit Crypto Mag | Issue #5 | 8 August 2016

Ethereum and IoT is a partnership for the next Industrial Revolution

I believe Ethereum will beat Bitcoin to the mainstream for micro-transactions, and this will also signal the beginnings of the next Industrial Revolution. The next Industrial Revolution will be lead by the power of IoT devices and lightning fast micro-transactions on (and off) the blockchain. Machine-to-machine transactions. There will be literally trillions of them, and we are going to need a lightning fast network that can handle all of these tiny micro-transactions. Let me tell you in part, why I believe Ethereum + IoT will herald a new era of Industrial Revolution.

A bit of background, I am an Ethereum blockchain developer in talks with IoT hardware developers, and this is very, very exciting news to us.

Two words.

Raiden Network.

This looks good. Really, really good.

Raiden Network is a proposed extension to Ethereum which scales-out asset transfer capacity. It's inspired by the Lightning Network (for Bitcoin), which leverages off-chain asset transfers to carry out the vast majority of transactions. In other words, it can handle 1 million transactions per second, at a fraction of the cost and time of current transactions on the Ethereum network.

What does this mean?

The basic idea is to switch from a model where all transactions hit the shared ledger on the blockchain to a model where users can privately exchange messages which sign the transfer of value. Raiden uses a network of p2p payment channels and deposits in Ethereum to preserve the guarantees expected from a blockchain system.

Raiden is implemented as an extension to Ethereum. A Raiden node runs alongside an Ethereum node and communicates with other Raiden nodes to facilitate transfers and with the Ethereum blockchain to manage deposits. It offers a simple API which makes it easy to use Raiden in DApps.

Ethereum will be able to handle up to 1 million transactions per second. Currently, Ethereum handles 25 transactions per second.

Just let that sink in for a moment. 1 million transactions per second.

Currently, no crypto currency could handle the transaction volume if it became even halfway remotely mainstream - I am talking credit card mainstream. Why?

They simply don't have the transactional processing power. There would simply be too many transactions happening, causing bottlenecks in the blockchain. We are seeing this currently with the long Bitcoin transaction times.

Let me take you on a journey, into the future. Lay back, and imagine we are 5 years into the future, it is now 2021, and the Denver Broncos are once again the Superbowl Champions (I can dream, right)?

Enter Internet of Things

This is where things get interesting.

The Internet of Things is estimated to add about $20,000 to the average U.S. income and an estimated gigantic sum of $15 trillion to the world’s economy by 2030. Machine-to-machine transactions will be a much, much larger volume of transactions, than that of 'human-to-machine' or 'human-to-human' (those numbers will be huge as well, though).

When all these types of different sensors, gauges and widgets are able to pay each other, or transact some sort of micro-value, when or whilst certain conditions are met under a strict set of rules as defined by smart-contracts, entirely new industries will be created. Giants. Think the Facebooks or the Youtubes of the IoT/Crypto world.

A simple example; a sensor checks the levels of radiation in a particular region. This use case would have been highly useful in the recent Fukushima Daiichi Nuclear Power Plant disaster. I am sure we will also see amazing consumer based IoT + blockchain application as well - think Uber + blockchain for starters, or slock.it + Airbnb is another amazing combination of these two technologies in syncopation.

You may be thinking..."Ok great! So what is the problem? This all sounds great, lets do this! IoT and blockchain should be everywhere, why isn't this everywhere!?"

Scalability is the problem stopping crypto from reaching the mainstream

Boring, isn't it.

You see, the biggest problem with scalability at the moment with the Ethereum blockchain is, every node duplicates every transaction. In fact, it is probably one of the most redundant systems, ever. I am not poking fun at Ethereum. This is well known. In fact, the Ethereum Virtual Machine (EVM), the underlying tech behind the Ethereum blockchain, is actually no more powerful than an old Nokia phone. Vitalik (the Founder of Ethereum) is perfectly aware of this. He even points jokes at this characteristic. But this characteristic is also what makes it such a great tool. A consensus based, deterministic Immutable (well, sorta) blockchain. Just one that is really, really redundant, and this is a problem when you are trying to scale to the size that IoT will be.

Raiden Network solves the problem of scalability.

Raiden Network uses off-chain transactions, to solve the issues around scalability.

What does Raiden bring to Ethereum?

Raiden Network uses lightning-style, off-chain transactions, it means that not every transaction is actually sent to the public blockchain, this also adds a new, bonus characteristic to Ethereum - privacy.

But, it is the speed, and the frequency at which the machine-to-machine transactions will be able to take place that will make decentralized money easier to use and bring the technology's capabilities much closer to how users were told it was "supposed to work" – fast and nearly limitless in supply, while still maintaining decentralization, a feature that still distinguishes Bitcoin and Ethereum from other digital payment methods.

Scalable: it scales linearly with the number of participants (1,000,000+ transfers per second possible)
Fast: Transfers are confirmed and final within the fraction of a second
Confidential: Single transfers don’t show up in the global shared ledger
Interoperable: Works with any token that follows Ethereum’s standardized token API
Low Fees: Transaction fees can be 7 orders of magnitude lower than on the blockchain
Micro-payments: Low transaction fees allow to efficiently transfer tiny values

The cost of sending micro-transactions, worth fractions of a cent will be linear, no matter how large you scale when using Ethereum + Raiden Network.

This was the single most limiting problem with scaling Ethereum out to IoT devices.

This problem is now looking to be solved, and the Raiden Network is poised to be released in the next 3-months.

I know Ethereum really has had a tough time lately, with all the drama from the hacking of the DAO way back in June 2016, and now the ETH/ETC fiasco, but I do strongly believe the powerful combination of Ethereum, Raiden Network and the IoT will eventually carry Ethereum into the stratosphere, not necessarily in price, but definitely in worldwide usage and adoption.

After all, if IoT is set to add $15 trillion to the world's economy by 2030, all Ethereum needs to do is capture a tiny fraction of that market in order to see an explosive demand for Ethereum in general and Ethereum based micro-transactions using the Raiden Network, thanks in part to the scalability issue being solved by Raiden Network.

To learn more about the Raiden Network:
http://raiden.network/

---

#steemit #bitcoin #ethereum #money #blockchain

---

Enjoy all the latest crypto news in one place with my weekly Steemit Crypto Mag | Issue #5 out now
http://steemit.com/steemit/@darknet/steemit-crypto-mag-or-issue-5-or-8-august-2016

Did you enjoy my content and find it informative and a worthwhile read? Please let me know with a comment or an upvote, every upvote I receive is very much appreciated, thank you.