Internet of Things (IoT)

Quick definition

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Updated: Jan 20, 2023

The Internet of Things (IoT) is the concept of connecting devices to the internet, creating a network to collect and share data.

Key details

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  • Any electronic device with sensors can become part of the IoT.
  • Some of the most popular examples of the IoT at work are self-driving cars using sensors to navigate themselves, or fitness apps tracking the performance of athletes.
  • You can invest in the Internet of Things by purchasing IoT stocks or cryptocurrencies.

What is the Internet of Things?

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The Internet of Things describes everyday physical objects that feature sensors, processing ability, software, and other technologies that can be used to share data with other devices and systems via the internet. The connection types that can be used for this data sharing are Wi-Fi, Bluetooth and near-field communication (NFC).

This creates a giant network of things and people that allows cooperation, increasing efficiency and productivity for individuals and businesses. As a result of these uses, the IoT has transformed the landscape of numerous industries, from online shopping to consumer data collection.

The IoT does not include devices like laptops and serves. Instead, it features ‘smart’ devices such as appliances, home security systems, wearable tech like Apple Watches, and speaker systems like the Amazon Echo.

How does the IoT work?

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The Internet of Things is created by connecting many devices to the internet so that they can all interact together, collecting and sharing data.

On a more complex level, devices connected to the IoT use Internet protocol (IP) – this is effectively an Internet address, and it is how computers are identified, allowing them to communicate with one another.

Because devices within the Internet of Things can self-report in real-time, this allows important or helpful information to rise to prominence without any need for human interference.

Pros of the Internet of Things

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One of the major advantages of the Internet of Things is automation – tasks can be performed faster and more easily, saving time and capital for individuals and companies. Rather than having to rely on your human intervention, devices can do the work for you while you work on a more important assignment.

The benefits of the IoT are perhaps clearest in a business environment. Bottlenecks are removed and system breakdowns and damages are prevented, and all while making important information more readily available so better decisions can be made, both by machines and humans.

Cons of the Internet of Things

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There are some significant disadvantages to consider with the IoT, though many of them are moral quandaries rather than qualms about the quality of the technology on show. For instance, there are potential privacy and security concerns that inevitably arise when trying to connect more personal devices to the internet.

In addition, while automation is beneficial in some respects, it puts many human jobs at risk. These issues are compounded by the fact that there is no current universal standard for IoT compatibility, making it hard to know which tech is best for you to use or invest in.

Finally, the complex nature of the Internet of Things means that a single network failure can have major impacts on overall performance.

How to invest in the Internet of Things

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You can invest in the Internet of Things by purchasing the stocks or cryptocurrencies of companies involved in the technology. Make sure you check out our guide to the best IoT coins for more information.

Should I invest in the IoT?

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That really depends on your appreciation of IoT tech and moral values. To summarise, if you wholeheartedly believe in this technology and can cope with the ethical question marks held against it, the IoT is a rapidly growing sector that appears to promise much from a financial standpoint.

Where can I learn more?

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To find out more about the Internet of Things, check out our investing hub page for links to all the resources you need.

Sources & references
Risk disclaimer
Charlie Hancox
Financial Writer
Charlie is a Financial Writer for Invezz. He covers commodities, cryptocurrencies, and breaking news. Prior to joining Invezz he helped grow Crux Investor into the fastest-growing... read more.