Among others, I think there is one of the main unsolved problems with blockchain - the possibility of blockchain compaction, which prevents it from real use in IoT.

Without this, IoT device is just acting as a light client, so why use  blockchain on small device at all?

For example, imagine you've got a security system in your house. Many small sensors are watching and listening whats going on around. Where do they send the collected data and store it for, say, years? Where the algorithms of how they work are stored? On central server?

You can say it is possible to make blockchain take less data, using UTXO, I believe it is implemented in Bitcoin. But how long would it take to plug in new device and sync with others then? Not sure, probably I'm missing the point, please correct me in this case.