# Leveraging the Internet of Things and Blockchain Technology in Supply Chain Management
## 5 Combining IoT with Blockchain Technology: Emerging Research Areas
### Scalability  
Unlike mining nodes in cryptocurrencies, IoT devices such as sensors have limited computing ability, which is both difficult and computationally expensive to improve [72]. Several Blockchain solutions have been developed and introduced to address the scalability requirements of IoT in the supply chain. Depending on the industry type, consensus mechanisms and Blockchain structures might  
Figure 1: The impact of Blockchain technology on IoT characteristics  
be more or less compatible with IoT applications. In this regard, private or consortium Blockchains are viewed as highly beneficial for many supply chain applications because they have a limited number of nodes and can apply IoT data filtering to increase the scalability of the Blockchain. Applications can integrate IoT networks with smart contracts and benefit from enhanced scalability with a capacity of tens of thousands of transactions per second [73]. The evolving Blockchain architecture leads to the emergence of 'off-chain' scaling solutions. These include so-called sidechains, which are chains that run in parallel to the Blockchain and allow the transfer of value between them [74]. The ever-increasing data generated from IoT devices in the supply chain can be encrypted and stored in the sidechains, and a reference to them can be added into the main Blockchain. This functionality helps to significantly reduce the storage complexity by offloading the data from a Blockchain in terms of transactions processed [75]. Moreover, although in its infancy and with a lack of interoperability standards, inter-Blockchain communication promises higher levels of scalability [76]. Examples of transactions that can run on the sidechains include fast payment systems, crowd sale and token distribution, transfer of digital assets, and ID generation. Off-chain models widen the scope of Blockchain uses by setting up networks which operate certain functions within the Blockchain model, but also localizing certain operations outside the Blockchain system [77]. These might include off-chain smart contracts, raw files of third-party food safety, quality, or faith-based certifications (e.g., HACCP, BRC, Halal, Kosher); third party analytical laboratory results and quality records. A configured Blockchain could be administered in either a centralized database (e.g., MySQL) or in the form of Distributed Hash Table (DHT) technology [78; 79]. In this way, (off-chain) transactions are performed faster, and scalability is enhanced [80]. Beyond this, off-chain solutions hold promise for being compatible with business infrastructures containing non-vital information [81]. More examples of off-chain methods include multi-chains (e.g., the Cosmos network powered by Tendermint [82]), the lightning network [83], payment channels (e.g., Raiden [84], and Sprites [85]). Furthermore, Blockchain-enabled IoT applications in the supply chain are evolving to the specific network characteristics of IoT, such as heterogeneity, dynamic topology, complexity, scalability, throughput, and memory size. These methods aim to enhance the scalability by altering the core elements of the Blockchain transaction, including the increase of the block size, the use of new or specific lightweight network protocols for IoT devices [73; 74; 75; 76; 77; 78; 79; 80; 81; 82; 83; 84; 85; 86], sharding techniques (i.e., splitting work between subsets of nodes in order to increase throughput) [87] editable Blockchains [88] and the Directed Acyclic Graph (DAG) [89; 90]. Increasing the block size of public Blockchains can further enhance scalability and offer additional storage and processing capabilities but may slow down the propagation rate of blocks in the network. The development of Blockchain scalable protocols for IoT applications (e.g., Delegated Proof of Stake, Practical Byzantine fault tolerance, Proof of Assignment [91]) could significantly improve the scalability and the flexibility of the Blockchain system.