IoT Chain x Blockchain Hunter Interview

Security is the Foundation of Value Transfer

The Internet of Things is already a billion-dollar industry that continues to grow rapidly. It has vast implications across many aspects of our lives including transportation, housing, energy, finance, medical care, and more. As we become more integrated with IoT devices, we need to be cognizant of the security risks of a connected world. IoT Chain mitigates these risks with their hybrid blockchain approach and is positioned to be a leader in secure IoT connectivity.

IoT Chain co-founder Peter (Lyu) Xinhao was recently interviewed by Blockchain Hunter on the merits of their innovative project. Xinhao is a blockchain technical expert who translated the first Chinese book on blockchain called “Mastering Bitcoin”. He also established the blockchain team at Xiaomi where he worked to solve data isolation problems in digital marketing. Xinhao believes the prosperity of the Internet is due to a steady stream of data from its users. He further believes the value attached to this data should be returned to the users and security is fundamental in properly realizing this value.

Interview by Blockchain Hunter

We talked with Xinhao about the development of IoT Chain including core concepts and fundamentals, device technology, and their competitive advantage. We hope you find the interview inspiring!

Core Concepts and Fundamentals

Blockchain Hunter: What does ITC do?

Xinhao: ITC is simply a “light operating system” for the Internet of Things, powered by blockchain technology and focused on security. There are two parts to our network. The first part is the on-chain, value-based layer. The second is the OS layer which facilitates device-chain interaction for the Internet of Things.

Blockchain Hunter: Do you think that ITC is more of a blockchain company or an IoT company?

Xinhao: We are more of a blockchain company at the moment, but that will shift after the launch of the main network. Many blockchain companies only focus on the development of their chain and then wait for others to join them. We actively plan and develop our chain for use cases that exist today such as smart travel, sharing economies, and more. We also directly invest in IoT companies ourselves.

Blockchain Hunter: The Internet of Things has shown its ability to integrate new technologies such as big data and artificial intelligence. How do you view the relationship between blockchain and the Internet of Things?

Xinhao: The blockchain is not a panacea, and the blockchain for IoT, both itself and its vision, will be limited by the development of IoT. From a technology standpoint, the current communication solutions have been adequate. We are focused on identity, data linking, and security.

Blockchain Hunter: Why start with security?

Xinhao: Security was what drove our use of blockchain technology for IoT. There two sets of rights for each IoT device. One is the right to control the device and the other is the right to the data generated. When transferring on-chain value on the network, we must guarantee user data sovereignty. However, we must first provide a safe environment to do so. By securing control of the equipment on the blockchain, data sovereignty can be realized. Users will increase their focus on data and privacy and find their devices useful rather than infringe on their rights. This fundamental shift will help support the purchase and use of more and more IoT devices.

Blockchain Hunter: So controlling rights are the rights to operate the device?

Xinhao: Yes. IoT devices are becoming like a sixth sense, reflecting on our identity. If hackers gained controlling rights or data access, we would have no security or secrets anymore. Our CEO Xie Zhuopeng has been in the IoT industry for more than three years. He found that most of the security issues plaguing IoT are caused by a centralized structure with control rights to a vast array of devices. Hackers could attack these centralized networks easily, and at low cost, which poses great threat to the system integrity, and in some cases, personal safety. If we use blockchain technology to return control rights to the user, there will be no centralized system to hack. In order to manipulate the network, hackers would need to control of a vast majority of nodes at a great expense.

Blockchain Hunter: How do you achieve user data sovereignty on your network?

Xinhao: There are two aspects of data sovereignty. First, data needs to be authorized for use by its creator. Second, if data produces value, the user should benefit from it. Users can choose which data they authorize for use. There could be third parties hosting the data between the user and its consumer, but the user only needs to care about which data is being used and not its specific usage scenario.

Depending on the data generated, each user will be given a corresponding token for each device. The user can confirm their identity through a private key and manage the corresponding revenue generated by their different devices through the wallet app. These device tokens will have other applications on the public chain as well.

Blockchain Hunter: You mentioned third parties hosting data. If there are central data brokers, won’t they become attack targets?

Xinhao: The data is not stored directly by the broker. Data analysis and resale is conducted in a secure environment. It will ensure that data is input and output in cipher-text without leaking the original data. We are currently working on enhancing the performance of this data processing.

Device Technology

Blockchain Hunter: You mentioned earlier that ITC is a “light operating system” for the Internet of Things. Why do you describe the operating system as “light”?

Xinhao: “Light” means that hardware performance requirements are low and it is easy to integrate with existing smart devices. Instead of restructuring the hardware completely, we are building a module for the chipset to make it compatible with the ITC network.

Blockchain Hunter: If smart devices want to join the network, do manufacturers need to integrate this hardware module?

Xinhao: There are two scenarios. First, we can cooperate with the manufacturer directly to add modules to their original hardware design to enable the communication. Alternatively, because ITC is an open platform, developers can create their own modules according to our APIs and SDK to access the network.

Blockchain Hunter: What is the cost of your chip-based solution?

Xinhao: The current cost is about 20 Yuan for a single device which will come down in time. This is inexpensive for applications like car sharing but is quite a lot for smart lighting products. We are continuing to investigate a variety of usage scenarios.

Blockchain Hunter: As more devices join the network, the amount of traffic on the blockchain will continue to increase. How do you plan on scaling the network?

Xinhao: We are using DAG technology to solve performance and scaling issues. While blockchains such as Ethereum are working on other solutions, DAG can improve performance on the main chain itself. Our goal is to create a truly decentralized DAG main network with excellent performance and security. We do not view competing DAG implementations as safe at this time.

Blockchain Hunter: In what ways do you think current DAG implementations are not safe?

Xinhao: Well known DAG projects such as Byteball and IOTA are not decentralized enough. IOTA is not truly open source, and from their whitepaper, we find it difficult to visualize a decentralized design. In order to improve processing speed, Byteball appointed fixed servers as consensus nodes. Witnesses cannot drift and are vulnerable to DDoS attacks. At a minimum, a node must be added with a drift mechanism and be able to meet the BFT (Byzantine Fault Tolerance) protocol so that it can remain safe when it is attacked.

Blockchain Hunter: So your main chain uses PBFT?

Xinhao: Yes, we are working on making the main chain decentralized using PBFT consensus. Some people think that the current PBFT protocol is similar to the licensing chain. This is due to bandwidth; to ensure efficiency, fewer nodes can participate in voting. However, there are already solutions to this, including the solution we are working on which is to increase the nodes while guaranteeing an efficient consensus. If we implement PBFT, we can guarantee that when there is an attack and only some nodes are working, the main chain can still recover. This is a safer structure.

Blockchain Hunter: How do you prove that your main chain is safe and efficient?

Xinhao: Security testing mainly depends on whether it is decentralized and can withstand DDoS and SYBIL attacks. This is obvious, but there is no unified standard for performance testing. Projects often say that there are millions or even tens of millions of data points on their public chain, but testing performance of a distributed network is not reliable in local, isolated environments and it lacks a unified standard. Take testing of a banking system for example. Although there may be millions of data points, there is no way to truly verify performance of the entire network. We are working to build a standard, using new technical methods to simulate the number of nodes, to baseline the performance of our network. Assuming each node has the same hashing power, we will be able to determine the upper transaction limit our network can eventually handle.

Competitive Advantage

Blockchain Hunter: You haven’t updated your Github for a long time. Where are you in development?

Xinhao: The DAG local network has been created. The next steps are to improve the DAG structure, do performance optimization, and work on the decentralized consensus of the main chain. It is expected that the main chain will be completed by the end of 2018 or early 2019. We decided to suspend updating Github for a while after the DAG test code was completed. The team is mainly focused on designing a safer consensus model. Less time was spent on main chain code development at this stage. More time was spent on research and comparison of concepts and mathematical proofs.

Blockchain Hunter: What is the difference between developing blockchain for yourself versus Xiaomi?

Xinhao: I started mining cryptocurrency at the end of 2013 and got to know Bitcoin and the blockchain. At the end of 2016, I worked on the blockchain team for Xiaomi to help solve data collaboration problems. Millions of Xiaomi users produce data that can be used for targeted advertising, risk management, finance, and more. Through the blockchain, the valve of data is extracted on the premise of protecting data privacy. Contrary to what you may think, I believe this actually protects the data valve of the enterprise. It is the data generated by the users that continuously makes the Internet more prosperous and artificial intelligence smarter. Sooner or later, organizations will be forced to return a portion of the value generated to the users.

Blockchain Hunter: Xiaomi’s innovations in the Internet of Things have done well. Why did you decide to leave?

Xinhao: I worked in big data which was separate from their IoT department. I left because I feel Xiaomi did not have development breakthroughs in 2017 and likely will not this year either. A big company like Xiaomi is conventional and they do not start a new project until they are sure that it will work. Xiaomi faces competition from JD.com, Huawei, and Tmall, and it may not be able to compete with them using this traditional approach. It became apparent that it would be difficult for them to develop in a way that returns data sovereignty to the users and this was a primary reason that I left.

Blockchain Hunter: We have also seen companies like IBM and Microsoft developing blockchain services. How can the ITC compete with them?

Xinhao: Big companies are launching their own blockchains in succession, but at present they are all promoting their own cloud services and simply adding blockchain modules into them. At this time, there is not much importance placed on their solutions. A more inclusive and open blockchain initiative is yet to be seen.

If the big companies do put energy and resources on the blockchain, it will be a good thing. They can promote the industry and let all the participants enjoy the more reasonable valve distribution and benefits brought on by the blockchain. We think that big companies have their own mission. Although blockchains are popular, they may have plans in other fields. It is difficult for them to use all their strength for a certain direction. This is also my original intention that drove me to leave Xiaomi and work on this.

Blockchain Hunter: How do you see the market competition in 2018?

Xinhao: 2018 will be a year of products launching. Only at this stage can we really all start to compete. At present, the market is still a vast ocean and not at the point where companies are gaining their major share. Every company in the IoT space can transfer their business model on to the blockchain. There will be competition and amalgamation, though we can look forward to better technical solutions and collaboration on common goals as well.