Internet of Things commerce will require blockchain-driven payments
Blockchain-based digital assets are here to stay because decentralized applications are just beginning to sweep through the world of commerce, government and beyond.
The immutable records that blockchain provides and the speed and certainty with which transactions can be completed—without third-party mediation—are too ground-shaking to ignore. Blockchain represents a new and more efficient way of conducting business across a spectrum of use cases.
The Wall Street Journal, in an article titled “Blockchain is the Internet of Money,” quoted Silicon Valley visionary Balaji Srinivasan as saying, “Blockchain—which is not just bitcoin—is the most important invention since the internet.”
Blockchain-based, smart contracts will revolutionize everything from supply chain logistics to integrating the billions of devices of the Internet of Things into autonomous networks that enable smart homes and smart cities.
Along the way, as more and more blockchain-based applications are launched, we’ll likely see a commensurate demand for digital currency—or tokens. Tokens simplify the execution of blockchain-based commerce and other value transactions because they provide a peer-to-peer currency for immediate payment, without the need for existing credit card or bank transfer mechanisms.
From a payments perspective, blockchain and tokens open the way for autonomous device-to-device transactions. The research firm Gartner estimates that by 2020 there will be some 20.4 billion IoT devices. As billions of devices interact in trillions of transactions, autonomous payments will be required because there simply won’t be enough humans on earth to look at them all.
To be sure, humans will need to retain a governance role to mitigate risks as billions of devices start making autonomous payments back and forth. Even this role may someday be augmented or replaced by machine learning and artificial intelligence designed to mitigate risk across autonomous machine-to-machine payments. Security will also be an issue. Hackers and other bad actors will be attracted to the idea of one device having the ability to send payments to another.
From an investment standpoint, one concern is that a large number of digital currencies will enter the marketplace in tandem with the new generation of blockchain-based applications, and it’s likely that not all of these digital currencies will retain long-term value.