Leveraging Blockchain Technology …

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network standards. IoT and BCT eliminate a substantial chunk of manual processes

and bring in place ’smart contracts’ that enable monetization of transactions accu-

rately and at real-time speed, thereby simplifying the whole process. 5G enabled

IoT speeds up the process involved in clearing and settlements, and Blockchain

technology bestows the advantage of securely validating such transactions, thereby

incorporating the “trust” factor through its distributed consensus and cryptography

features. This makes both these technologies complementary to each other [30]. IoT

devices can fill in for the requirement of participating nodes in blockchain required

for consensus, while blockchain technology can mitigate the IoT’s security issues.

Thus, the banking sector needs to upgrade its business strategy by adopting private

blockchain technology to streamline the clearing and settlement process. Adopting

BCT will weed out the requirement of a third-party intermediary, the clearinghouse,

and enable speedy peer-to-peer settlement leading to a massive reduction in costs

of settlements. A typical clearing and settlement bank transaction will take on an

average a few days if done traditionally due to the limitations posed by the existing

financial infrastructure and the complicated system of intermediaries, but involv-

ing the blockchain technology will reduce the time to few seconds with the added

advantages of reduced costs, impenetrable security and accompanying secured docu-

mentation. Clearing and settlement systems essentially include the transfer of assets

between parties. When IoT is adopted, these physical assets are converted into digital

assets. However, the main drawback is that the owner of a physical asset can show

the asset and prove his ownership before he intends to transfer it to the other party,

whereas in the case of digital assets, an individual can claim ownership for an asset

which he does not own and create multiple copies of digital data that he had owned in

the past. Traditionally, this limitation is addressed by appointing a central authority

to maintain and overlook the data that is authenticated to transfer the ownership of

data when transfer requests arise. If there are more parties involved, then there arises

a need for some mechanism to be in place that connects their database and syncs it.

Nevertheless, the threat of data security breaches remains, and also the time taken

for completing the transaction will be in days. The solution to this is to enable IoT

through BCT, wherein all the participants individually and remotely control their

nodes and execute the decided steps to update their respective ledgers, which are

interlinked. When new transaction requests crop up that necessitate a change in the

ledger, each participant will verify the transaction and authenticate it according to

the consensus protocol rules. In the blockchain setup, every participant will own a

public key and a private key in pairs. The private key will be used to sign a trans-

action, and the rest of the participants will then use their public key to verify the

transaction which helps the participant justify that they indeed signed the transac-

tion. The ownership of data on a blockchain is associated with an address. The public

key gets this address through the hashing mechanism and includes additional bits

to it. The participant proves his ownership of the address by signing the transaction

with the private key. Thus, the transactions are authenticated and are pooled into

a block. When new transactions come in, they get authenticated and added to the

block through the consensus algorithm. Figure6 details the IoT-based Clearing and

Settlement System mechanism through the application of BCT.