How the Internet of Things Works

The phrase "Internet of Things" was coined by Kevin Ashton, likely in 1999 as the title of a corporate presentation he made at his place of employment, Proctor & Gamble. During his time there, Ashton came up with the idea of putting a RFID tag on each lipstick and having them communicate with a radio receiver on the shelf to track sales and inventory and signal when restocking was needed. He posits that such data collection can be used to solve lots of problems in the real world [sources: Ashton, Gabbai, Simmonds].

Billions of connected devices are part of the Internet of Things. They use built-in hardware and software to send and receive data via various communication protocols. They might use our smartphones as their gateway to the Internet, connect to some other piece of hardware in our homes that's acting as a hub or connect directly through our home Internet service. They often send data to cloud-computing servers where it's then aggregated and analyzed. We can usually access the results via apps or browsers on our mobile devices or home computers. Some can even be set up to update your status on various social networks.

Despite the fact that most of us do not have smart homes full of interacting gadgets yet, the IoT is already quite huge. The estimates are all over the place, with researchers likely using different criteria for inclusion, but by some accounts, there are already between 15 and 25 billion connected devices, with the count expected to grow to anywhere from 50 to 212 billion by 2020 [sources: FTC, Intel, McLellan, OIC]. Some analysts even estimate that there will be around a trillion connected devices by 2025 [source: Wasik].

As huge as that number is, it seems less implausible when you realize that you can embed or attach sensors and tiny computing equipment to just about anything. Many of us have a smartphone, a device used as an access point for many connected gadgets, that's also an IoT device in its own right. Wearable fitness trackers are fairly common, too. And embedded processing, sensing and communication equipment is being added to nearly any device you can think of, from bathroom scales to refrigerators — even shoes. Smart thermostats, smoke alarms and security cameras can track your habits to help you save on energy bills, let you remotely see camera views of your home, send you a warning when something isn't right and make it easy to contact emergency services. You can even buy small tags to put on and track anything from your car keys to your pets and kids.

Lots more connected devices are either out already or hitting the market soon. Right now, we are likely to have a smattering of smart devices that we can interact with individually (often via separate phone apps), but that for the most part don't work in conjunction with one another. However, companies and industry groups are working to create standards and platforms to make it easier for all these devices to be programmed to work together more seamlessly, as well as to improve security. Outside the home, lots of industries and cities are adopting, or have already adopted, technologies that add to the Internet of Things, too.

Once there are more devices that can work with other devices, even those from different manufactures, we'll be able to automate lots of mundane tasks. We've essentially given common physical objects both computing power and senses. They can take readings from our surrounding environment (even our own bodies) and use the data to change their own settings, signal other devices to do so and aggregate it for us to peruse. A lot of them perform actions based on complex algorithms, not just the simple if-then directions of past embedded computing, that either occur within their own processors or on cloud servers.

There is still lots of innovation going on, so all these smart gadgets are bound to enable things we're not even considering right now.

The technology behind the Internet of Things has been a long time in the making, even starting before we had computers. Machine-to-Machine (M2M) communication has been a thing for quite some time, perhaps starting with the telemetric systems of the early 20th century that transmitted encoded readings from measuring instrumentation over phone lines, radio waves or satellite communications. The first was used in 1912 to transmit data from a power plant in Chicago to a central office via telephone lines. Telemetry has since been used for things like monitoring weather and tracking wildlife, and it's even used to monitor the occupants and equipment on the International Space Station (ISS) [sources: Llewellyn, TechTarget].

We have been living in the computer age since the middle of the 20th century, and we've been in the age of the Internet since ARPANET was created by the U.S. Advanced Research Projects Agency in 1969. It wasn't until Tim Berners-Lee unveiled the World Wide Web in 1991 that a lot of people began hopping online, and now it's more unusual not to be connected to the Internet. The web grew, high-speed Internet entered the home and wireless networking became ubiquitous. And all that time, microchips and other computing equipment were getting smaller and smaller until we finally started putting them in mobile devices. Our smartphones of today can hop on the net via cellular or WiFi signals and talk to other devices through Bluetooth and other local communication methods. And thanks to the same technology, so can a lot of other electronic gadgets.

The processing of data on web-connected servers in large data centers, what we refer to as the cloud, has also contributed greatly to the ability of everyday gadgets to become part of the IoT. These devices may connect to the Internet by sending data to your phone or some other dedicated hardware in your home that acts as a hub over a local communication method, such as:

That connection can be made directly through your router or modem via WiFi or wired methods like Ethernet, cable or power line networking (signals sent directly over your home's power lines). It could also bypass your home network entirely via cellular communication. They may also communicate with other smart devices in the vicinity.

The connected gadgets of the IoT contain computing hardware, including processors with embedded programming telling them what to do, sensors that gather various sorts of readings (such as temperature, moisture, light, motion, chemical levels, heart rate and body movement) and communication hardware that can send and receive signals.

Some connected systems may be able to use other nearby devices to gather data, like city road systems that signal smartphones to help monitor traffic conditions. Smart devices can work in conjunction with tagging technology including RFID tags, QR codes, barcodes and the like to obtain data about items. The devices also need a power source, which can include a connection to a power outlet, a solar panel, or even replaceable or rechargeable batteries, provided the embedded hardware is of the low-power variety. Companies are also working on wireless power for a possible future power source.

The devices may be run mostly via their own embedded software or firmware, but they can also offload a lot of the processing to cloud-based software via the Internet, where they can crunch more data. Some use advanced algorithms that let them learn from and adjust to various stimuli and patterns (letting them program themselves, to an extent). This sending and processing of the sensor data is often nearly instantaneous (thanks to the usually lightning-fast speeds of Internet communication), allowing the devices to react in real-time.

At the moment, a lot of connected devices can talk to the Internet and to our phones, and maybe even some related products, but most of them can't talk to one another because of proprietary hardware and software with differing standards, languages and communication protocols. For most of the current remotely controlled smart household items, you'll need to use a different app or website to interface with the device or look at the data, unless they were specifically designed by the manufacturer to work together. In other words, the alarm clock talking to the coffee pot isn't easily achievable just yet unless you are an electronics hobbyist or the same company makes smart versions of them.

There aren't any universal standards or platforms to allow seamless interaction between all smart gadgets and enable you to control them from a central app, but several groups are working on creating standard protocols and software to make interoperability of multiple devices from different manufacturers a reality. The AllSeen Alliance, created by Qualcomm and joined by other companies, is working on an open-source, platform-independent software framework called AllJoyn. Cisco, Samsung, Intel and others are also working on their own open-source platform called IoTivity. The Thread Group, headed by Nest, ARM and Samsung, but comprising more than 160 members including Qualcomm, released the specs and documentation for their IP-based protocol for networking low-powered connected devices in July 2015. And CableLabs is reportedly looking into making cable boxes work as hubs to connect multiple devices.

There are a number of other smart device platforms out or coming out, including Apple's HomeKit, Google's Project Brillo, SmartThings, Ninja Blocks, Evrythng, Samsung Artik and Wink. Some of these are hardware hubs and software, and others are just software applications or platforms (either to be set up by a user or implemented by the manufacturers themselves). Some require licensing, and others are open-source. For the most part, they are compatible with multiple types and brands of devices, but none are all encompassing. Having a variety of equipment accessible from a central point of entry would add ease, convenience and security to automating your smart home.

Another major issue for the Internet of Things is a conundrum for the Internet itself, too. The standard identifier used to route Internet traffic to and from networked devices is the IP (Internet protocol) address. In its first and still-prevalent form (the IPv4 32-bit standard created in 1981), an IP address consists of four numbers separated by periods, each between zero and 255 (that's 256 possibilities for each of the four slots). Because of those limitations, the maximum number of available addresses on this standard is capped at around 4.295 billion. The Wall Street Journal reported that the U.S. will run out of IPv4 addresses in 2015, and that some other countries already have, making companies scramble to buy up unused addresses from others or move to the new IPv6 system [source: McMillan].

IPv6, a 128-bit standard, could allow for more than 340 undecillion addresses (that's 340 followed by 36 zeros). Its format consists of eight sets of four-character hexadecimal values separated by colons. In the cases of IPv4 and IPv6, fewer addresses than the maximum number are publicly available because of related rules and set-aside blocks, but in the latter case, the available number will still far exceed the number of devices that will be available in the years to come (or maybe ever). This means each device could be assigned a unique IP address. Organizations need to put money and effort into making their hardware, software and networks compatible with the new IP addresses, although lots of newer equipment, operating systems and browsers can already handle IPv6 [sources: Fiveash, Hardiman, McMillan].

An interim solution that a lot of entities already use is network address translation (NAT). NAT allows you to map whole networks of devices to a single IP address, which allows the Internet to see the network as its destination device. Then the network servers differentiate between the devices within that network to get data to and from the right places. This scheme is better for computing equipment within organizations than for gadgets in peoples' homes, however.

The devices that contribute to the Internet of Things span personal, household, public, business and industrial spaces, and any area that's not affected by them now likely will be in the future. The smart gadgets that many of us see and interact with daily are our Internet-connected smartphones, which have sensors including accelerometers, gyroscopes, GPS and sometimes heart-rate monitors, but those are just the tip of the iceberg.

In the personal-item sphere, we have wearable devices like fitness trackers and heart monitors that use our phones to send and receive data. Smartwatches, like Apple Watch and Pebble, perform those tasks and many more in conjunction with our phones. Sensors and microprocessors on clothing aren't far behind (and are possible to create now with sewable boards and sensors from Arduino and other companies). Even pets can be added to the list of "things" we can add sensors to for tracking purposes. We also already have cameras that send pictures to the Internet, scales that can share our weight on social media, toothbrushes that monitor our brushing habits and gaming systems that listen for verbal commands.

A lot of household appliances, including thermostats, water heaters, security cameras and lights, can gather data, be accessed remotely and communicate via the Internet when there's a problem. Some even learn your patterns over time to change their settings or alert you when something suspicious happens. Connected garage doors and digital door locks can let you into your home with data from your phone instead of a traditional key. WiFi-enabled stoves and ovens can be monitored or turned off or on remotely. One theoretical appliance that people bring up a lot is a refrigerator that can track its contents and let you know what you're out of or what you could make for dinner with your current ingredients. Be assured, someone is working on it.

We're in the early stages of smart cities, where entire metros are being covered in sensors and other tech. Devices that can take sensor readings and transmit them are ideal for things like utility usage monitoring; in most areas this still requires workers taking meter readings from individual houses. Smart devices could enable monitoring for hazardous road conditions, pollution levels, and water and energy consumption. Roads will (and in some cases do) have sensors to detect potential headaches like traffic and road conditions. Smart cars or smartphones in the vicinity can be alerted to traffic delays. Other potential uses include adjusting traffic lights to suit real-time conditions, monitoring garbage cans to know when they need pickup and providing information on available parking. Scientists are working on tiny sensors to place in cement and other materials so the physical condition of the infrastructure itself can be detected before structural issues lead to disasters such as bridge collapses.

Cars are getting smarter, too. GPS in cars has been a thing for years, and we've had attachable toll tags that pay automatically as we pass through toll stations, but we're starting to add more sensors and computing functions to automobiles. Smartcars can act as entertainment and information hubs, provide WiFi to other devices and track driving metrics (including speed and fuel efficiency). And one day soon, we'll likely have self-driving cars that allow hands- and eyes-free driving, all the while monitoring the road and nearby vehicles to prevent accidents. Already there are cars and services that allow you to start or locate your car and unlock doors remotely, as well as contact emergency services and roadside assistance.

There are already a lot of connected devices in use in the healthcare industry, and many more are in the works. Doctors and other caregivers will be able to monitor patients' vital signs, activity and other important metrics remotely, saving lives and perhaps allowing elderly people to live independently longer. Embedded sensors in hospital beds and garments can also gather important data about patients, and researchers are working on things like carpets that can detect falls and tiny computing equipment that can be injected into the human body.

There are even more smart devices in manufacturing and other businesses where unmanned monitoring can save a lot of time and money. GE experimented with various sensors in the ceramic mixing process for battery manufacturing. The researchers analyzed the data to determine what they needed to monitor to know when the ceramic mix was just right, which has allowed them to get predictably even consistency and greatly reduced defect rates [source: Wasik]. The status and condition of products can be monitored from initial materials all the way to the end of production. Similar monitoring can apply to just about any business. In retail, inventory can be tracked and alerts can be sent when items need restocking. In agriculture, soil and crops can be monitored for irrigation and other needs, and livestock can be tagged and located. In office buildings, environmental controls can be automated to reduce energy waste and cut costs. The possibilities are endless.

A lot of us perform monetary transactions and place loads of information about ourselves online, so we're probably aware that there's data about us floating around in the cloud. But now our inanimate objects are starting to generate and transmit even more information about our daily lives, raising both privacy and security concerns.

Already the analysis of big data is used to target us with appropriate ads, and connected devices like our phones enable the ads to follow us around, alerting us to deals as we're nearing a particular store, for instance. Data is also used to discover things about us, like our purchasing and traveling patterns, our income levels and our health status.

The retail chain Target once angered the dad of a teenager for targeting baby related ads at his daughter. He confronted a store manager, asking whether they were trying to encourage her to get pregnant, only to later discover that she already was. Target had used data analysis to target ads at people they could tell were likely pregnant because of their purchases [source: Hill]. Such data can also be used for things like detecting and stopping fraudulent use of credit cards and bank accounts. But most good things can also be used for ill, and data analysis might enable hard-to-detect biases in awarding credit, jobs, housing and other needs. The amount of surveillance made possible by systems that can recognize faces or identify us by our phones, cars or other smart technology is also a tad frightening.

There's also the danger of connected devices being hacked. That familiar sci-fi plot of our machines gaining sentience and turning against us is unlikely to play out in the near future, but outside entities are another matter. Our machines are gathering and transmitting a great deal of information about us, such as video from inside our homes, our location and activities, health measurements and the like, and ill-intentioned people can potentially break in and steal data, spy on us or wreak havoc on our systems. Imagine people being able to see into your home, turn your stove on all day while you're at work, or shut down or divert your smartcar while you're in it. There have even been some really creepy cases of people using a software vulnerability to hack into web-enabled baby monitors to shout obscenities at small children [source: Hill].

Security flaws have been found in smart devices like security cameras, light bulbs and health monitors. Some security breaches might be minor annoyances, but others could be unsettling or downright dangerous. If personally identifying information is involved, security gaps could lead to identity theft or other financial loss. Security issues can also be costly to manufacturers if they get sued or fined over breaches, or if customers lose faith in the brand.

Heavily testing devices' security, frequently updating firmware and software, and using lots of data encryption will be paramount. Adopting industry standards across manufacturers and devices could also help reduce security issues. Industry businesses can shore up their own internal IT security and put safeguards on who has access to collected data. They can also give consumers options on how much data is collected and kept, and how it's allowed to be used. Some experts also suggest limiting the amount of collected data to only what's necessary to run the devices, deleting old data frequently, programming gadgets to automatically update software, and even programming them to eventually die, especially when they are no longer supported and are likely to get more vulnerable.

There are lots of ways the devices of the Internet of Things may affect the economy. Connected mobile devices have already caused some disruption by allowing small businesses and individuals to easily take payments without expensive registers or credit card processing equipment; rather, all they need is an app on a typical tablet or smartphone, a simple card reader and an Internet connection. Services from companies such Square and Paypal process these payments, taking a small cut of each transaction. The IoT is also poised to disrupt other industries, such as insurance, where the ability to have sensors on just about anything can mean early detection of all kinds of risks and dangers, and could allow them to reward customers for adopting these devices, or penalize them for what they consider risky behavior (like speeding).

The IoT will further automate processes and increase efficiency, which will affect companies' bottom lines. With embedded technology that can communicate conditions immediately, there can be great reductions in waste of perishable goods, materials lost to manufacturing issues, time lost to unexpected machine or system breakdowns, and energy consumption, resulting in cost savings. The increased access to data that can be gathered in real time can also lead to better and more timely business decisions. Companies have been known to monetize data, and now they'll have even more.

These new disruptions, efficiencies and automated systems could potentially reduce jobs, such as the manual labor required to take and stock inventory, monitor manufacturing processes, read utility meters and the like. All industries will be affected as more devices become connected. But although automating tasks has caused job losses in manufacturing in the past, often when automation takes over a mundane task, the skills required for a job just shift to more complex tasks. And sometimes jobs even increase because of product demand. Despite the ubiquity of ATMs, which first came online in the mid-1970s and do a lot of tasks formerly performed by bank tellers, the Bureau of Labor Statics discovered that there was an increase in teller jobs from 1999 to 2009. This is in part because banks opened more branches to reach more customers once lower staffing requirements made each one cheaper to operate [source: Bessen].

The IoT should greatly increase other types of jobs, especially those related to the gadgets themselves and the data they gather. This includes sales and maintenance of the related hardware, development of devices and analytics software, and data analysis (although some are working on programs to do a lot of the analytical heavy lifting). More IT staff and customer service representatives might be needed for monitoring services connected to a lot of these devices. The data centers necessary for cloud computing may also have to expand or increase in number. Cisco estimates that the data created annually by IOT devices will rise from 113.4 zettabytes (ZB) in 2013 to 403 ZB in 2018 [sources: Cisco, McLellan].

Machina Research reported in April 2015 that the value of the Internet of Things was around $900 billion in 2014, and they predicted it will rise to $4.3 trillion by 2024, an amount greater than the economies of many countries. Some other analysts put the potential value at $6.2 trillion by 2025 [source: Intel]. Getting on board with the Internet of Things may take large IT investments from companies and require changes to business processes, new equipment, and lots more Internet bandwidth, storage capability and staff to deal with the new technology. But hopefully the return on investment will be just as great, if not greater.

Costs aside, smart cities, buildings and homes enabled by the Internet of Things can also go a long way toward cutting waste, pollutants and greenhouse emissions, making our modern lives more sustainable over the long run. The devices of the IoT can also provide us with lots of conveniences that save our efforts for more professionally and personally rewarding tasks. Or more nap time. Who's not on board with that?