# What Is the Internet of Things (IoT)? How It Works and Benefits

## What Is the Internet of Things (IoT)?

The Internet of Things (IoT) is a name for the aggregate collection of network-enabled devices, excluding traditional computers like laptops and servers. Types of network connections can include Wi-Fi connections, Bluetooth connections, and [near-field communication (NFC)](https://www.investopedia.com/terms/n/near-field-communication-nfc.asp). The IoT includes devices such as "smart" appliances, like refrigerators and thermostats; home security systems; computer peripherals, like webcams and printers; [wearable technology](https://www.investopedia.com/terms/w/wearable-technology.asp), such as Apple Watches and Fitbits; routers; and smart speaker devices, like Amazon Echo and Google Home.

## How the Internet of Things Works

These devices use Internet protocol (IP), the same protocol that identifies computers over the world wide web and allows them to communicate with one another. The goal behind the Internet of things is to have devices that self report in real-time, improving efficiency and bringing important information to the surface more quickly than a system depending on human intervention.

> **Important**
>
> The term “Internet of Things” is attributed to Kevin Ashton of Procter & Gamble, who in 1999 used the phrase to describe the role of RFID tags in making supply chains more efficient.﻿﻿

### Benefits of the Internet of Things

The Internet of Things promises to transform a wide range of fields. In medicine, for example, [connected devices](https://www.investopedia.com/terms/w/wearable-technology.asp) can help medical professionals monitor patients inside and outside of a hospital setting. Computers can then evaluate the data to help practitioners adjust treatments and improve patient outcomes.

### Key Takeaways

*   The Internet of Things (IoT) is a name for the aggregate collection of network-enabled devices, excluding traditional computers like laptops and servers.
*   Types of network connections can include Wi-Fi connections, Bluetooth connections, and [near-field communication (NFC)](https://www.investopedia.com/terms/n/near-field-communication-nfc.asp).
*   IoT includes devices such as "smart" appliances, home security systems, computer peripherals, [wearable technology](https://www.investopedia.com/terms/w/wearable-technology.asp), routers, and smart speaker devices.
*   The Internet of Things is transforming a wide range of fields, from medicine to urban planning to consumer data collection.

Another field that’s also experiencing a transformation is urban planning. When sensors that have an IP address are placed under a busy street, for instance, city officials can alert drivers about upcoming delays or accidents. Meanwhile, intelligent trash cans are able to notify the city when they become full, thus optimizing waste collection routes.

The use of smart devices will also likely mean a competitive advantage for businesses that use them strategically. For instance, by tracking data about energy use and inventory levels, a firm can significantly reduce its overall costs. Connectivity may also help companies market to consumers more effectively.

By [tracking a consumer’s behavior](https://www.investopedia.com/terms/b/behavioral-analytics.asp) inside a store, a retailer could theoretically make tailored product recommendations that increase the overall size of the sale. Once a product is in a consumer's home, that product can be used to alert the owner of upcoming service schedules and even prompt the owner to book the appointment.

As with all questions of personal data, there are many privacy concerns that have yet to be addressed when it comes to the Internet of Things. The technology has advanced much faster than the regulatory environment, so there are potential [regulatory risks](https://www.investopedia.com/terms/r/regulatory_risk.asp) facing companies that are continuing to expand the range of Internet-connected devices.

> **Article Sources**
>
> 1.  Avast. "[How Kevin Ashton Named The Internet of Thing](https://blog.avast.com/kevin-ashton-named-the-internet-of-things)." Accessed May 28, 2021.