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What is the Internet of Things (IoT) and what is it for?

March 22, 2023

12 min

What is the Internet of Things (IoT) and what is it for?

Have you ever looked up the definition of Internet of Things, to understand what it is, or maybe searched for some examples of IoT to understand its meaning? Let’s look for an answer by starting from our daily lives, where we can find smart devices: smartphones and smartwatches, voice assistants (such as Siri or Alexa), through home automation and the latest generation of household appliances. These tools are useful precisely when they can communicate with each other, creating a network: the Internet of Things (IoT).

What is the Internet of Things (IoT)

A network of physical objects and data processing systems (such as servers or clouds) that, connected through the Internet, exchange the information they collect and/or process, so as to make predictions or modify the environment: this is what the Internet of Things is, but let’s try to go deeper into the meaning of IoT, giving some examples.

Let’s consider smart cars, vehicles with integrated sensors and software that constantly monitor any operating parameter and analyse it to recommend interventions (so-called ‘predictive maintenance‘). Likewise, the autonomous driving function monitors the surrounding space to prevent collisions and is complemented by communications with traffic management infrastructure. In addition to diagnostic and support tools, however, smart cars connect to smartphones and other devices, via Bluetooth, USB, and WiFi, to provide information and entertainment. NFC (Near Field Communication), finally, makes car sharing possible, again managed through mobile apps.

All these interconnected elements, however, are only a subset of a large system: to truly understand the definition of the Internet of Things, we must look at how the layers of its overall structure interact. The following paragraphs, therefore, represent precisely the path followed by information in the IoT, starting from the ‘extreme’ devices, passing through the Cloud, and then returning to the user or directly influencing the environment.

IT structure


We can represent the meaning of IoT using the image of a ‘virtual’ organism. The 5 senses act as sensors for the system, monitoring the environment: they send sensations (physical phenomena) through the nervous system (the communication protocol) to reach the brain (the cloud). Here, the information is recorded in memory (storage) and processed (computing) to find solutions. These will then be translated into commands to be sent to other nerve centres (actuators) that will direct them to the limbs (targets), to change the conditions of the environment surrounding the organism.

In this anatomical explanation of what the Internet of Things is, then, sensors are devices, or parts of devices, that collect information from the environment and translate it into raw data in order to send it to other IoT units. Their main task is to transform physical phenomena (temperature, heartbeat, air composition, etc.) into digital data.

Communication protocols (connectivity layer)

Continuing with the definition of Internet of Things, data aggregated by sensors must be transmitted to other devices, to ‘smart gateways’ or to the cloud, so peripheral IoT devices need a language to communicate.

Existing protocols and standards can be divided by distance of competence: WiFi, Bluetooth and NFC (Near Field Communication), for instance, handle short-range communication; whereas, to send data to the cloud via the Internet, a TCP/IP protocol is required.

The meaning of IoT is therefore determined by the smart gateways and the Cloud, the two possible ‘recipients’ of communications.

Smart Gateway (security and management layer)

All sensors could connect directly to the Cloud via the Internet, but this would require a lot of energy. Therefore, it is preferred to transfer the collected data to a smart gateway, via WiFi or Bluetooth for example, which manages two-way communication with the Cloud.

Gateway brokerage also serves other purposes:

  • maintaining security by controlling access to the IoT and encrypting data;
  • transmitting commands to the actuators;
  • performing preliminary processing of data, so as to create a summary and transmit only relevant information, also reducing communication latency.

To understand what the Internet of Things is, therefore, we have to get to the Cloud, its core.

Cloud (computing and storage layer)

Data collected by the sensors is analysed, processed, and stored in the Cloud, which is the set of software resources made available by an Internet network. Here, the data in itself finds a purpose: it is organised to be useful to other IoT devices. Actually, there is an alternative way of processing information: Edge Computing

In this case, calculations and data operations are performed directly by devices that are at the ‘edge’ in the definition of the Internet of Things. Thus, there is no need to communicate with the Cloud, because the ‘objects’ process the collected information themselves, reducing traffic and improving network performance. Edge computing will be a typical element of Web 3.0, the next phase of the Internet, but it is already happening with smartphones, smartwatches and computers.


After being processed by the cloud or hardware, the information gathered by the sensors may signal the need for a change,. Therefore, the information is transformed into commands and sent to actuators, which in turn will cause the response of target objects. These are tools or other physical entities capable of exerting an influence on the environment so as to change its state. Actuators, therefore, do not act directly on the context, but by delegating the task they complete the meaning of the Internet of Things: we now know what it is, having observed a complete ‘cycle’ of it.

Applications/user interfaces

The IoT is not just about automation, the user plays a key role in the definition of the Internet of Things. Through applications and interfaces, often hosted in devices such as smartphones, tablets or smartwatches, we can interact with the IoT and exploit it for our own purposes. Not only can we remotely control our ‘smart’ objects, ordering changes, but we can set our own ‘preferences‘ and receive customised notifications from sensors.

The IoT, however, also has utility beyond everyday use: researchers from all fields can harness the computing power of the Cloud to process Big Data collected from sensors, useful for statistical and experimental purposes.

Now that you have a better understanding of what the Internet of Things (IOT) is, you may have guessed the importance of interoperability in object networking. In other words, the need for a shared register for information and the value of sharing resources. Sounds familiar? These are characteristics of blockchain technology, of which cryptocurrencies are the main products. So, what examples of the Internet of Things can we find in the crypto world? Let’s discover the applications and some use cases.

Blockchain and IoT: decentralisation, reliability and security

The blockchain is renowned for solutions in the financial field, and Bitcoin was the first real world application of this technology. Blocks, however, could contain information other than just the exchange of coins and tokens: any data can be recorded immutably and distributed. Therefore, we could use this technology as a communication layer between IoT devices, thus solving some critical issues in the definition of the Internet of Things.

Information recorded by sensors is only useful if it is true, so the current form of the IoT uses a validation mechanism based on intermediaries (gateways) and centralised entities. The blockchain, on the other hand, would transform the structure of the IoT from Client/Server to Peer-to-Peer. Distributing the verification of information, through consensus mechanisms (as in cryptocurrencies), can be useful to take care of issues of trustworthiness from the very beginning of the process. This would make the IoT a trustless system, thus supporting direct communication between devices, without the need for intermediation.

Most units in the IoT are already in a Public Key Infrastructure (PKI). However, if encrypted messages were recorded on a blockchain through cryptographic identity, they would give rise to a ‘reputation‘. In addition to knowing whether a device has a reliable ‘history’, the blocks would also store what it has transmitted and to whom, transparently and always accessible in an eternal timeline. Despite the traceability of communications, each entity retains its privacy, being represented by alphanumeric strings. The security of encryption, if extended to the entire network, could ward off the possibility of DDoS (Distributed Denial of Service) attacks: the dual-key architecture would thwart hacking attempts.

Finally, the meaning of Internet of Things would be expanded by smart contract technology, supported by many blockchains. The IoT structure could thus get rid of ‘actuators’, replacing them with decentralised software on blockchain. 

Internet of Things examples and use cases

Let’s remain in the crypto world to look at some applications of blockchain technology to the IoT, demonstrating several use cases

The first of the Internet of Things examples can be found in supply chains, these can be defined as the network of entities (companies and people), activities, resources and information that allow products and services to be delivered to the end consumer. An example would be the network of suppliers, warehouses and supermarkets that makes us find products on the shelves.

This process needs close monitoring to meet safety, hygiene and sustainability standards, but also efficiency and profitability. Therefore, tracking goods at different levels is essential: IoT sensors can detect any kind of useful supply chain parameter, such as product location or storage conditions, send them to the cloud for processing and, after that, stimulate action.

Whereas, blockchain can record all the data generated in this exchange in a distributed manner. This makes it possible to reconstruct material paths, from production to distribution to sales, and to formulate predictive and prescriptive analyses to optimise processes and coordinate units.

There is already an implementation of IoT and blockchain in supply chains, it was presented at the Polkadot Decoded event at the end of June 2022. It is called Origin Trail, a multichain infrastructure (Ethereum, Polygon and Polkadot parachain, among others) that collects information and organises it in blockchain through knowledge graphs, making it reliable and searchable.

The second example of the Internet of Things is another intersection with blockchain, that occurs in the cloud component: the resources processed and contained here can also be administered by blockchain technology in a decentralised manner. In this regard, we have already discussed the cloud storage of IPFS, Storj, Filecoin and the data indexing of The Graph, but let us briefly summarise.

Data from IoT devices can be stored in IPFS‘s decentralised repository: users with unused hardware can contribute by lending their storage space, in exchange of tokens such as FIL or STORJ. Finally, decentralised repositories can host the information generated by the IoT, but how can we retrieve it? The Graph makes it easy to find any data recorded on the blockchain.

The third example concerns the integration between the IoT and Distributed Ledger Technologies (DLT), the group to which blockchain also belongs. IOTA‘s distributed ledger and its cryptocurrency MIOTA are designed to store and process transactions generated by IoT devices. The structure used to verify the information exchanged is called the Tangle: based on directed acyclic graph (DAG), a protocol that processes multiple messages in parallel. The Tangle differs from the blockchain because, in the latter, transactions have a single ‘hook’ point, i.e. the next block, produced individually by a single node. Whereas, in IOTA’s network, each new message can be attached to up to eight others that preceded it, without creating blocks or choosing a leader for validation. In IOTA, several nodes attach multiple transactions to multiple points in the Tangle at the same time: a guarantee of speed for communications in the IoT.

Now that we know from the definition of Internet of Things (IoT) what it is and understand its meaning, you can look for more examples, perhaps starting with applications to Artificial Intelligence and machine learning.