Hyperledger: How Blockchain and IoT Can Work Together

by Steve Hoffenberg | 08/08/2016

by Jamie Traverso, with Steve Hoffenberg

HyperThe Hyperledger Project* is a collaborative, open source project hosted by the Linux Foundation. The project aims to apply the blockchain concept to transactional markets other than cryptocurrencies. Started in 2015 and currently comprised of 61 members, it is a relatively new initiative that has gained a lot of industry support in advancing blockchain technology. The Hyperledger Project is made up of different codebases donated to the Linux Foundation. Members such as IBM, Digital Asset Holdings, and Blockstream have provided code to further the project. All code is made available under the Apache 2.0 license.

Blockchain technology sits at the foundation of the project. A blockchain is a system for validating transactions in a distributed ledger. The blockchain was first implemented as the backbone of the Bitcoin cryptocurrency, which records all of the Bitcoin network transactions on one ledger and allows users to remain (largely) anonymous.

Although Hyperledger and Bitcoin share the same blockchain fabric, they differ greatly in their purposes. Hyperledger offers a solution for automating consensus processes whereas Bitcoin is a payment network. The underlying fabric of Hyperledger is its consensus algorithm which utilizes Practical Byzantine Fault Tolerance (PBFT) protocols. Hyperledger’s consensus algorithm recognizes a transaction as valid after some threshold number of nodes verifies the transaction. This eliminates the need for hashing power and reduces the time it takes for transaction validation to mere seconds. Power consumption and validation time are both major disadvantages of a Bitcoin-style network. While Hyperledger will use PBFT protocols initially, its developers plan on allowing users to bring their own consensus algorithms in the future.

Security and privacy are also common concerns for users of blockchain technology. Hyperledger addresses these issues by creating a permissioned network. An issuing authority grants identities to transactors on the network and assigns the appropriate level of access. The permissioned network can provide privacy by granting different levels of access and also provides accountability with a record of all the transactions for an identity. Bitcoin is largely trustless, whereas Hyperledger establishes trust by assigning identities to transactors.

The technology behind Hyperledger has diverse applications. One example is supply chain logistics. Hyperledger can be used to create a supply chain network where every member can input information about required materials/supplies. This network would generate a more responsive supply chain and the ability to better manage suppliers. Another potential application is business contracts. Instead of having one ledger, Hyperledger can have several ledgers that interact with one another. The different ledgers allow for some contracts to be made easily discoverable by all parties on a ledger and some contracts to be made private.

The IoT space can greatly benefit from blockchain technology. For example, connected devices could communicate with blockchain ledgers through barcode and RFID tags. When the barcode is scanned, the smart contract in the ledger could be updated and validated to reflect that the device has been delivered. This information would be provided in almost real time to interested counterparties, providing a record that can satisfy accountability or traceability requirements. Additionally, Hyperledger-connected devices such as industrial machinery might one day be able to contact suppliers and order new parts or services with less human oversight. Another benefit of using blockchain in IoT is that it can be used in decentralized networks to enable secure peer-to-peer machine communication. Machines on the same blockchain network will be able to execute pre-programmed contracts for ongoing services, exchanging resources such as compute cycles and storage in an automatic, decentralized fashion.

There are many possibilities for the future of Hyperledger and blockchain, but there are also barriers to adopting blockchain such as security, energy consumption, and integration issues. Since Hyperledger is an open source project it is more adaptable to individual users’ needs, but converting existing business processes to accommodate blockchain technology can be challenging. Competition in the blockchain space is also increasing, and to be successful, protocols need to be differentiated to gather a critical mass of developer support. ¬†While Hyperledger has gained attention in the media due to its well-established members and the project’s impressive goals, it is still a relatively new initiative and has a long way to go before it can be widely adopted.

*The Hyperledger Project is not to be confused with Hyperledger which was created by the company Hyper. Digital Asset Holdings acquired Hyper and allowed the Linux Foundation to use the name. For the purposes of this blog “Hyperledger” is referring to The Hyperledger Project

View the 2017 IoT & Embedded Technology Research Outline to learn more.
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