Most current research on decentralized IoT applications focuses on a specific vulnerability. However, for IoT applications, only a limited number of techniques are dedicated to handling privacy and trust concerns. To address that, blockchain-based solutions that improve the quality of IoT networks are becoming increasingly used. In the context of IoT security, a blockchain-based authentication framework could be used to store and verify the identities of devices in a decentralized manner, allowing them to communicate with each other and with external systems in a secure and trust-less manner. The main issues in the existing blockchain-based IoT system are the complexity and storage overhead. To solve these research issues, we have proposed a unique approach for a massive IoT system based on a permissions-based blockchain that provides data storage optimization and a lightweight authentication mechanism to the users. The proposed method can provide a solution to most of the applications which rely on blockchain technology, especially in assisting with scalability and optimized storage. Additionally, for the first time, we have integrated homomorphic encryption to encrypt the IoT data at the user’s end and upload it to the cloud. The proposed method is compared with other benchmark frameworks based on extensive simulation results. Our research contributes by designing a novel IoT approach based on a trust-aware security approach that increases security and privacy while connecting outstanding IoT services.