Next-Gen Explainable AI (XAI) for Federated and Distributed Internet of Things Systems: A State-of-the-Art Survey

Background: Explainable Artificial Intelligence (XAI) is deployed in Internet of Things (IoT) ecosystems for smart cities and precision agriculture, where opaque models can compromise trust, accountability, and regulatory compliance. Objective: This survey investigates how XAI is currently integrated into distributed and federated IoT architectures and identifies systematic gaps in evaluation under real-world resource constraints. Methods: A structured search across IEEE Xplore, ACM Digital Library, ScienceDirect, SpringerLink, and Google Scholar targeted publications related to XAI, IoT, edge/fog computing, smart cities, smart agriculture, and federated learning. Relevant peer-reviewed works were synthesized along three dimensions: deployment tier (device, edge/fog, cloud), explanation scope (local vs. global), and validation methodology. Results: The analysis reveals a persistent resource–interpretability gap : computationally intensive explainers are frequently applied on constrained edge and federated platforms without explicitly accounting for latency, memory footprint, or energy consumption. Only a minority of studies quantify privacy–utility effects or address causal attribution in sensor-rich environments, limiting the reliability of explanations in safety- and mission-critical IoT applications. Contribution: To address these shortcomings, the survey introduces a hardware-centric evaluation framework with the Computational Complexity Score (CCS), Memory Footprint Ratio (MFR), and Privacy–Utility Trade-off (PUT) metrics and proposes a hierarchical IoT–XAI reference architecture, together with the conceptual Internet of Things Interpretability Evaluation Standard (IOTIES) for cross-domain assessment. Conclusions: The findings indicate that IoT–XAI research must shift from accuracy-only reporting to lightweight, model-agnostic, and privacy-aware explanation pipelines that are explicitly budgeted for edge resources and aligned with the needs of heterogeneous stakeholders in smart city and agricultural deployments.