Genius of Things: Combining IoT and Blockchain – MIT Technology Review Panel

I'm gonna push through here we have a really great panel next with with MIT and with of a time crunch they have and their travel I don't want to lose it blockchain is such an important topic it's such an interesting topic when applied to to IOT I think it's one we should push ahead near gender on so I'm gonna bring out our participants for this panel and I'll start by introducing our facilitator for the panel which is Michael Casey now Michael is the partner a genic group and senior adviser for mi t–'s digital currency initiative so bringing Michael out hey Michael do you want to introduce the rest of your panel I'm gonna do it so that's great so from from IBM at about blockchain division I will bring out Ramesh go up enough so Ramesh if you could come out in fact if everybody could come out I will continue the introductions from AT&T we have blue bean kind never being is the IOT strategy leader and product management executive and then from the MIT School of Management we have no are we stopped in their phonetic from MIT it's a very confusing list they have here please welcome our panelists we got the correct information up here thank them very much thank you thanks thanks very much do thank you so yeah it knows Michael Casey I work for something called a digital currency initiative at MIT Media Lab and you know we're exploring this really quite conceptually groundbreaking new technology and the thing that I think we want to emphasize here is that the blockchain should be thought of as an enabling platform it's it's you know I think often it's applied as if it is it is an application you know of itself and that's really not the case the use cases that get built on top of it sometimes the most interesting things to talk about but it's but what we're going to try to explore a little bit today is how those use cases aren't actually possible unless we resolve some of the problems that the blockchain is designed to resolve so you know this is a a new decentralized distributed way of managing information across parties who don't necessarily trust each other but have an interest in some sort of common outcome and that can apply across all sorts of things you would know that bitcoin is the first major use case for the blockchain and and there it is that everybody has to keep track of the records of payments across that system and that's the common interest but we don't necessarily trust that the other person is not being upfront about whether they've counterfeited that money whether they're double spending their money and so this is a way to keep track of those records in a way that doesn't necessarily impinge upon that trust problem and we're going to look at how this matters in the IOT world and how in in that context it facilitates the kind of automation it facilitates things like supply chain management and so facilitates just a broad transactional quality that just simply may and may or may not be possible without this technology I keep on using those hedge languages because it's very very early on this is we're very much in the early stages of something that is that some people think could be the new internet right the infinitive value and as a result we really have to figure out how these protocols work and the one thing that we'll also be looking at is how this is not necessarily a question of the quality of the cryptographic software the technology itself but it's as much a question around the governance and the social components to how these systems work so all this needs to be figured out and the one word that we are going to look at here that I think is critical I mentioned before is this word trust I think it's just to give you some context here and why it potentially is so important to things like supply chains and IOT networks is that trust is this critical component to human exchange so the ability for us to effectively deal with each other tune how to take commerce to civilizations for that matter Trust has always been this key component and we've always had centralized institutions traditionally that have managed that problem so when we don't trust each other a bank sits in the middle and coordinates payments for example but it's not just banks it's public utilities it's all sorts of institutional controls so here's a model that allows us to think about resolving that problem of trust so that we can confidently enter into exchange with each other or in this case devices can do so without having to rely on an intermediary which adds friction and costs and reconciliation problems and all sorts of transactional challenges and so we're going to explore this now I'm actually going to throw it a Christian first to mix things up we're not going sequentially Chris's is an economist who's looked at these kinds of systems in various ways for some time and and I want you to just to sort of maybe dig deeper into this question of trust and and the challenges of verification and and and why in this context in IOT context the blockchain could be could be useful thanks Michael so I think your your setup was was fantastic by centering around trust you know when you think about any marketplace in the economy either digital or offline we cannot imagine any transaction going through any day without some degree of trust of course you know economies like near are much more busy in trying to remove the need for trust so that you know marketplaces can operate without too many frictions so it's it's all a job in removing the reliance on that close tie on that trust and and so when we looked at blockchain now more than four years ago we try to identify you know when you look at problems what are the fundamental economic costs that this technology is changing because if you can pinpoint down those cost then it becomes really easy when you look at a new problem to say is this a problem where blockchain is of any help versus not I think right now there's a lot of confusion there's a lot of debate around you know throwing a blushing and and solving every marketplace problems but this is a technology that is really tailored for for some problems and not others and and in terms of car the two fundamental caste that I think the technology will shape in the next five to ten years are one what we call the cost of verification so when you think about every time you you you wake up you authenticate yourself you you buy something on the internet you engage in any sort of digital transaction or offline transaction you you you you need to verify those attributes that are carried with that transaction who's involved their credentials the amounts exchanged and everything else and society spends a lot of resources to making sure that those attributes are correct and that those transaction can actually be executed without problems so block chaining in the first in the first set of implementations that are already kind of life today is drastically reducing the cost for you to verify that a specific attribute is true that's why you know Michael was also talking about this in terms of the the trade the true machine the truth machine the second cost that the technology is affecting is slightly more nuanced and we call it the cost of networking you should think of this as the cost of running any digital platform most marketplaces today are elaborate digital platforms that interface agents robots devices machines all together with it within the economy and and bootstrapping those digital platform is is extremely costly the way we've done it in the past is by you know purposeful investments by often one entity in building up that infrastructure and and kind of deploying it over a number of years but while you're seeing with box and technology is that you can take much more of an ecosystem perspective you can bootstrap a digital platform without assigning a lot of market power to one single entity and that's actually quite disruptive because you can rethink about a value chain how you create value within an ecosystem are you appropriate value how the different stakeholders kind of come together in in creating value within that slice of the economy without having to give so much control to one single entity most of the platform's you know today most of the services you do you use in your day to day life you know be it Facebook or Google are kind of centralized in their nature and they have a lot of control that comes with you know privacy of your data being exposed to some of these players in ways that maybe if you're trying to you know develop your own AI algorithms and making prediction about the future you don't want one single entity you have access to that much data or maybe your company's data so it really encompasses everything from prices how competitive these markets are to privacy and also broadly to to censorship risk what happens when either you know a government but more often a malicious attacker tries to take down the digital platform I think the system we can design with blockchain are much more resilient to attacks because they're distributed and any that distribution of you know computing power of resources or storage or IOT devices comes a lot of strength in the kind of marketplaces that you can design so the goal I think ultimately is to lift up trust to rely less and less on trust and rely more on a combination of you know digital technology and an offline technology I think one of the things we'll discuss through the panel is this idea that you know blockchain gives you cheap verification once it's digital but how do you get those attributes I'll do you port them in the digital sphere in a way that they're reliable and that's really where that interface with an IOT device or it's something offline becomes really important it's the perfect segue we this is the last mile problem it's all very well to have this consensus based verification system once the data is in how do you get it in and yeah I think it's also worth noting that to them to Christians point about this being censorship resistant the other word that often pops up is immutable it's something you cannot change a blockchain shouldn't be changed even though some fits have decided to build editable not edible but editable block chains which does it seems like an oxymoron to those of us in this in this field nonetheless you have this problem with this immutable system which is the garbage in garbage out we're really we're gonna put bad data into something that's immutable you actually may be creating more of a problems so in the in that context Ramesh you know how useful our IOT devices and in giving us some greater confidence perhaps and how do you design it so that those devices can feed the data yeah so I view it as there are two sides to the coin on the one side you could have blockchain solution I'll give you an example where IOT can have tremendous value and the converse on the opposite direction there are IOT solutions where blockchain can add a lot of value so let me give a list of examples of both let's pick up you know blockchain to do something that is dear to me since I'm working on that food safety hey we heard about it this morning so if I walk into a Walmart store and buy some sliced mangoes where did it come from who all touched it who processed it who packaged it right knowing from farm to folk that entire sequence of steps you know blockchain is a great technology to explore that very good but then the question is let's say you know the mangoes or if whatever it is that you're sending has to be in a certain temperature range through that process going from farm to fork how do you ensure that that information that's getting into the blockchain is accurate and trusted now as long as there are humans the loops ending you know this was the temperature I read it sure you can believe it but if it is coming from a tamper-proof endpoint that is sending the temperature information on a periodic basis it has that much more trust to the blockchain based traceability solution so IOT devices can be a huge help to add value to blockchain based solutions quick another example is if you look at the pharma industry this pharmaceutical counterfeit drug problem is a two hundred billion dollar problem if the final you know sort of unit that is sold to a consumer has a tamper-proof tag on it let's say that sends information about it to a blockchain that keeps track of it through the supply chain besides traceability you have added trust because of IOT devices hopefully this gives you a sense of why i already can add value to a blockchain based solution conversely we all talk about connected cars and i'm sure you've read about incidents with connected cars man you know some third party figures out a way to break your car while you're driving bad things can happen like that there too we believe that essentially you know it's just a simple example right you provision software to upgrade let's say a connected car could you mediate it through a blockchain to ensure that you know the right actors are able to send the transaction to the to the endpoints as well as make sure that you know the software that sent is signed and and not tampered with there you are beginning to see blockchain adding value to you know an IOT based solution but either case if you notice it some of the things that Christiane talked about right the verification cost is basically a dimension that's addressed and the verification could be not just about us and software for an upgrade but it could be more about general things like who are the actors do they have the right permissions do you keep me send right audit trails to auditors etcetera so there is a whole sequence of sort of use cases that we see where in both directions it's tremendous value thanks for miss and Levine you can maybe give us some specific examples because AT&T has been working on some proofs of concept in this field can you give us some details of that yeah so a couple of points though based on what permission and Christian said there are three things that are important in in in this end-to-end iot system number one I believe that the the the data has has its own life cycle you know it's created it it goes it travels from different places through different devices through different subsystems and it may end up in a place where the data is at rest so the trust factor that we were talking about earlier really has to be spread across the entire flow of that data the data at rest the data in motion as well as it has to be trusted across all different types of parties the second point is that the network's themselves and their devices that we are using in this I mean we talked all morning about all kinds of use cases whether it was cars trucks fruits the the the the devices are of very varied types and so it is a huge challenge for us in the industry to make sure that certain standards are maintained around to keep that trust going and and it's a very difficult problem it's an industry-wide problem and that and everybody is trying to work on it I think the third thing is the trust if you break that down into sort of tactical pieces there's the trust on the security piece but there's also around the policy engine around sharing of data I think it's very important because the data being created in different places so for example in your fruit example the data that is being produced at the farm may not all be shareable or it made the the the producer of that data may not want to share that data across with everybody and so how do you design that policy on when to share that data how to share that data and with whom to share that data so I think that the the end solution really has to have a policy engine that can be tweaked at different parts of the value chain so that so that the Trust is maintained that only the data that I want to share is really shared and not not anything else so having said that a couple of use cases that we're working on is for example in transportation logistics I'll touch on that so transportation logistics we for example track a lot of the shipping containers across the world hundred 40 countries and they ship farm equipment Pharma you name it it is shipped across that probably goes into some government facility as it crosses border or borders across the world during shipments and that data needs to get shared with the government entities who have to then either put tariffs on it or not or or do whatever they need to go do from that point on it goes on a train or a truck to a warehouse and then it gets shipped by you know whether it's delivered by a truck or we pick it up at a retail store so from the point of manufacturing you know all the way to the point of purchase there is data being created across that's one item which now needs to be shared across and so it's a very difficult problem you know it's been around from the days of people who have worked on supply chain with EDI and other places where we're trying to exchange data but blockchain happens to be a really good way for us to with with a lot less friction to to to use that use that technology in exchanging data and I think the scenario you painted with such a variety of actors different locations different interests is is a great one to illustrate why it matters because as and said earlier there's a whole brought a question do it what do you need a blockchain for this so could you just use a relational database you know there's there's a whole lot of new data management tools that are being introduced in through the supply chain management business but they don't necessarily resolve this core problem of trust and I think it's that complexity that you described that really captures the problem that they're not going to cooperate with each other because they don't necessarily have they're not gonna lock into a Walmart you know an inventory management system if you're a customs officer in Singapore right that's right and and the other point I would make just is that in order for this to be really valuable and to really provide value to the entire value chain here all of the actors have to subscribe to this model because if you if you if you have gaps in between and if it's not really adopted from an industry basis we won't get the full value of applying this technology so it's really important that the manufacturers and the transportation companies and the retailers and the delivery companies they really subscribe to the model and it's I think as suppliers of this technology it's our job to make sure we convince the industries to adopt these technologies right well we tend to think of supply chains as you know a a set of pre-existing actors they're all members of a club almost right I I often wonder whether you know a more open sort of public blockchain structure might allow for a more fluid environment where suppliers are on board more readily in that Club like nature but given that that's the way the current system works the point you just raised about getting everybody to sign on and agree is is it comes down to that management the consortium but it just brings me to a question to you remission that is you know how do we how do we get there right what is it what's gonna be needed to make this technology operational and viable beyond the pocs to something that's actually functional you know questions like that the the challenge of getting everybody to agree on it you know what are the barriers so I think the example that we're being used as a good one since you're working in this on a project with Merce con shipping containers from point A to point B the ecosystem can be very complex right natural cost that he talked about it can drop over time but when you start there is a significant amount of complexity in the ecosystem so equals some complex is one big challenge what do you mean by that just to make it concrete if you want to have a solution that that does you know container shipping you know end-to-end you basically need to have truckers on the solution it have the ports on the solution in to get the customs authorities on the solution you need to get truck us on the other end on the solution rails so very quickly it gets complex but then again you there are methods to manage the complexity by saying I'll pick a trade lay now pick the authorities on either end of the trade line I'll pick the ports there so there are ways to do it and that's what we're doing but you know if you look at industry spanning solutions like container shipping then you have no ecosystem complexity and the complexity is also just to be clear not just the cost of engaging alone but making sure that everybody has the right economic incentives to participate which is also point a very very important so that's ecosystem another challenge is governance that also was explicitly touched upon but I want to make it in a call it governance Inc you know just give it a label this is all around okay so we all agreed to you know ship containers on the silver show on this platform very good but who owns the data who owns the what I call smart contracts the business logic that runs on the blockchain right and who can add value-added services on top who decides who can join the network who decides who can leave the network and when and how all these questions have to be answered – so there's a complexity related to the governance aspects of such solutions and the third piece is the obvious one this technology has been around for a couple of years now let's say and so in a technology will also mature with time being able to scale more advanced and whistles but that challenge in some sense patient what I've seen so far is the easier of the challenges the the actual the technology as opposed to the governance the human the herding of the cats is the biggest conflicts then right right right but Christian you have this interesting take around what the technology does and how it interfaces with human relations and the sort of that that component right because it's just talk a little bit about that if you don't mind because that's both a challenge and an opportunity I think right yes and and I think this reflects actually similarity with all other general-purpose technologies so when you look back in history steam engine electricity the Internet those are technologies that if you were to look for the productivity gains in society it took like a very large number of years to be implemented across industries and verticals mostly because they do require better governance new forms of governance and interactions between multiple players often across industries not even within the same ecosystem and to your point about kind of the human element of it when you think about the most important contracts that society executes son those are not the formal contracts they're actually the relational contracts these are contracts where if you were to sit down and try to write every possible contingency you wouldn't be able to there's uncertainty things change the environment incentives change and and so setting them in stone or in cryptographic stone as we were discussing before one help you because the human complexity the interactions within the economy do require flexibility and you need that you know better governance form to decide what do we do when something that we hadn't planned for comes up and so when you think about blockchain extremely effective at getting formal contract smart contracts that you know can be very rigid but also very effective we need to do a lot more into working on the relational aspects of them which is partly governance especially this opening and in permissionless infrastructures that have been experimented with they can be very powerful they can encourage innovation from you know any corner on the planet but they need governance and so how do you get to that relation on a human element is particularly hard I was gonna say one one thing I would like to add to the complexity or barriers is the economic model as well because I agree with Ramesh that technical problems are probably the easier problems to solve but you know how does anybody who is adopting this new technology blockchain in supply chain how do they actually write their ROI how did I write their business case for this because there is a significant cost associated with this right you have to instrument everything that's not instrument you have to put the right security levels you have to have network elements then the data starts to flow in so there is an upfront investment required whether this providers do it or the customers do it or the value chain does it and how do you make money do you write a 20-year business case for this or do you you know can you actually build it in a way that they can realize the economic benefits fairly quickly so I think there is a financial element to it are incentives I sometimes think that the real way to look at the value unfortunately has to be from an echo system-wide perspective which i think is where that this stuff gets exciting I think that when we can step back and say okay what's in it for AT&T wasn't afraid p.m. and say what's actually in it for the entire ecosystem involved in the management then that's when we start to see some some pretty exciting ideas right so I we want to go to five minutes left here why don't we just sort of talk through we've gone through some of the challenges and the difficulties there really are some huge opportunities that could come from resolving some of these problems and bringing automation into our supply chains and into our relations give us your vision of the future looks like a point I think the technology is ready for primetime at least in some application which is great right so you can start really putting production system based on blockchain technology the second piece is use cases right there was like Ostia was a year I would always call the year of blockchain tourism people were kicking the tires in pretty much every industry right this sort of trust dimension there are trust gaps at this technology can small so there are plenty of use cases where people have been playing around with but now we are beginning to realize in every industry select use case they're a stopping-off pass if this is something that I want to go into production with in financial markets in supply chains in healthcare in education etc so use cases are maturing to a point where a few are beginning to leverage the technology which is as I said is ready for prime and the third piece has been a few examples that we have seen in in many industries in terms of actual production deployments of blockchain like whether it be in container shipping or food safety or what have you you're beginning to see patterns to solve the many challenges you heard about whether it be governance challenges or they'd be incentivization challenges crawling the ecosystem or all of that also there are examples now where you can look at say hey look you know we can basically solve these net net basically you know very optimistic here is a technology that has the potential to transform industries and it's got great potential and you're beginning to see the first few sort of christian is an economist though what does the economy look like when these systems are running through I think the most interesting technologies is actually complementary to blockchain is a ai ai is all about reducing the cost of prediction and a lot of problems in the economy are turning from problems that we deal with you know humans neighbor to prediction problems think about driving the key complement to prediction is human judgment how do you collect harness and you know empower human judgment I think it's gonna be through blockchain technology because it really allows you to have sensors either real physical sensors or you know out for information in the economy and so wife I think what we will see is that a lot of the digital part from you see today will be challenged will have more effective marketplaces and so that that's gonna be I think good for consumers and for the economy overall yeah I think it's big subscriber of the hype curve you know so we we are at the beginning stages of that so I think we will get through it over time but I think the we are in this this fourth revolution of getting efficiencies in the way we do business and the way we live and and and so you know beyond mobility and the internet you know we're now into this Internet of Things or every internet of everything however you want to call it and the data being created using technologies like walk chain I think we are going to see tremendous amount of efficiencies and come out of the system so so sort of answering my own question from earlier is is you know when we look at even individual use cases of single customers you start to see use cases where they start with one use case every customer that I've worked with start with one use case and within 18 months they have grown that to five to seven use cases so as we collect data as as processes and technologies are put in place you start to get those efficiencies and then you start the human brain going what else can I do and I think that feed itself that's that's exactly right well I'm gonna take the last word cuz I I myself participating this this crystal ball gazing it's the fun it's the fun part of it all and it was one of the ones that really got me excited was actually talking to ramesh your colleague Bridget recently Bridget McDermott who has looked heavily into supply chain applications and she you know everyone focuses on the provenance of food and knowing that you know that we can figure out where the e.coli in that Chipotle unfortunate incident came from and so forth she talked about cement and she said to me this was about a month ago you know one of the reasons why buildings in Tokyo withstood and tend to withstand earthquakes whereas other underdeveloped places it's because there's no way to prove through the supply chain of cement that the cement hasn't been diminished with you know poor quality goods and she says you know there are human lives at stake because buildings get built on poor quality materials simply because we don't know the provenance of that cement and then sure enough you know two weeks later there's an earthquake in Mexico City and an enormous amount of in a furor around these buildings that have all come down right so yeah our entire world is built upon faulty information if we can improve that information if we can find ways to break down the trust barriers so that we can that information is sort of multiple ways in which hopefully it will be a better place so on that upbeat note hopefully that's the right one to end on thank you very much for your time and you know enjoy the rest of your a bit [Applause]

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