We touched on Machine NFTs when we unveiled the peaq network earlier this month, here. This is a more detailed overview.
NFTs or Non-Fungible Tokens are exactly that — tokens that are not fungible. Fungible means indistinguishable from and replaceable by another of the same kind. Non-fungible is the opposite of this — unique. Why do we as an industry continue to do our hardest to confuse people? Beats me.
What are Machine NFTs?
Let’s answer this by first asking a couple more questions. What is ownership? What do you actually, physically own — and how is that determined? Contracts. And contracts come in many shapes and sizes. Physical, verbal, social, and so on.
You own your car because you have contracts signed by the socially agreed upon authority to prove that you do — in this case the government.
An NFT is a digital contract of ownership of something. The core difference is that the social agreement in this case is not rooted in a government stamp, but in a math/code ‘stamp’. The key difference is that any person, anywhere can independently verify the originality and validity of the contract by checking with the math instead of checking with the traditional authority.
A Machine NFT is a non-fungible (unique) contract of ownership of a machine that anyone can independently verify.
Machine NFTs can either be assigned to individual machines or to pools (groups) of machines. This article will focus on ownership of pools of machines, as this is what peaq will be introducing first for reasons outlined below.
Why give machines NFTs?
Web3 is all about verifiable ownership of digital assets on the web, and of physical assets via the web.
So far, crypto projects which target machines have focused solely on fungible tokens which function more like currencies, forgetting probably the most important aspect of Web3 — ownership. peaq is changing that.
We’re giving everyone from investors, to machine manufacturers, owners, users, and even machines themselves (!)— the ability to own the machines that drive the machine economy, allowing the people to govern and profit directly from the machines that serve them. Why?
Machines are on course to replace humans as the primary workforce. We believe that the communities that these machines serve should own the machines.
Vehicles, machines and devices that cater to any specific community are owned by big companies often situated on the other side of the world. Companies that have no idea what that community really needs or desires, and who care more about squeezing profits than sustaining the communities they’re supposed to be serving.
Uber drivers don’t own Uber. What happens when Uber switches to autonomous cars? Delivery drivers don’t own Deliveroo. What happens when drones can make deliveries cheaper and faster than people?
Machines are extensions of ourselves, their data is our data. Giving control over our machines away is giving control over our data — again. Control over machines and the machine economy cannot and should not be concentrated into the hands of a few companies. We know how that story goes far too well.
Just as Web3 will enable us to take back control of our digital identities from the likes of Facebook, Web3 will allow us to take control of our machines, and with ownership comes the ability to profit from them on our own terms.
Skin in the game
In making it possible for machine manufacturers, investors, owners, users and machines to own Machine NFTs, we are aligning everyone’s incentives.
All of a sudden — everyone is betting on the same horse. Everyone has skin in the game.
Think about it — if people are emotionally invested in a football team, they all want the team to win. If people are financially invested in a stock, they all want the stock to go up.
If everyone who forms part of the machine economy is financially invested in the machine economy, they all want the economy to perform well. A machine economy performs well when the machines that power it provide the best possible services, as decided by the market. The market is comprised primarily of people — the same people who own a share in the machine economy. Everyone has skin in the game.
Pools of Machines
Collectively having skin in the game is a major reason behind why we’ve gone for pools of machines rather than individual machines. In fact, to begin with there will be only one pool of machines, and NFTs will represent ownership rights over all machines in the machine economy.
Pools of machines will serve specific communities. We’re enabling communities to have ownership, profit and governance rights over the pools of machines that serve them.
Another major reason is risk vs. potential returns. One machine will likely represent a bigger liability for smaller returns. A pool allows investors to distribute risk while also earning more — a no brainer. This will likely change over time — and we’ll be there to enable it.
To illustrate this point, let’s have a look at the status quo and then compare it to what Machine NFTs will change.
- Investors want a return on their investment. How and how often the machines are used is only of secondary importance to them. Token valuation is closely linked to network use. The primary users of Web3 machine networks? You guessed it. Machines. But with no direct skin in the game (ownership of machines), investors don’t care about how or how much machines use the network. Network use by machines =/= moon.
- Machines need sufficient resources to function effectively, sustain, maintain and improve themselves.
- Machine owners want machines to offer goods and services as efficiently and effectively as possible as this represents more revenue for them and increases the value of their machines.
- Machine users want machines to offer goods and services as efficiently and effectively as possible because they want the best quality goods and services at the best prices.
- If machines are underfunded because people aren’t incentivised by maximising machine output — everyone loses…
… but if they are, everyone wins.
Machine NFTs for a Machine Centric Economy
Since Machine NFTs represent real-life machines providing goods and services to people and other machines, Machine NFTs represent real entities which generate real, recurring revenue. Unlike some Art NFTs, for example, ownership of Machine NFTs therefore entitles the holders to a ‘Decentralized Ownership’ in a recurring revenue stream as well as a stake in an asset which may appreciate — keep in mind it’s a pool of self-sustaining machines, not a single machine. They also entitle holders to governance rights over tangible, dynamic assets.
Whoever owns a Machine NFT (everyone) wants the machines to generate the most revenue possible. The most revenue will be generated by the machines that provide the best services as determined by the market (everyone).
Machines are not the pawns of this machine economy. They are the protagonists. A machine-centric economy enables machines to sustain, maintain and improve themselves. In giving machines a stake in themselves and other machines via Machine NFTs, they become stakeholders. Stakeholders which, like all other stakeholders, earn more the more the network is used.
Welcome to the world’s first machine-centric, self-sustaining, Web3-based economy of machines — the Economy of Things.
Creating an Infinite Value Creation Loop
With all stakeholders aligned on the need to get the most out of machines, the machine economy can flourish. peaq leverages more features of Web3, such as DeFi, to add fuel to the fire and create an infinite loop of value creation.
- Stakeholders (Investors, Manufacturers, Users, Machines), provide liquidity to mint and stake Machine NFTs representing a stake in the Machine Pool.
- Machines equipped with SSIs provide goods and services via dApps and peaq enterprise solutions, and generate revenue.
- Fees generated when using dApps and solutions are automatically pooled and invested in DeFi.
- Profits/Yields are distributed to NFT stakers, to validators and to the machines themselves.
- NFT Stakers get to vote on which new SSIs/Machines are funded.
Machine NFTs give investors, manufacturers, owners, users and machines themselves a stake in the machines that power the economy. Machine NFTs:
- Align all stakeholders. Everyone is directly incentivised by machines providing the best possible services.
- Enable anyone to own a share in the machines on the network. The more the machines earn, the better for everyone — including the machines.
- Empower machines to be fully financially self-sufficient, able to sustain, maintain and improve themselves in the best interests of the economy.
- Enable direct, decentralized/democratic governance of the machines on the network — instead of one company making all decisions.
- Subsidise the purchase of new machines and Self-Sovereign Machine Identities for machines on the network.
The implications of this model on every stakeholder in the machine economy are significant. It is an economy by the people for the people.
We’ve been working with several stakeholders, especially in mobility, automotive and energy, to better understand what the implications will be. Our research is still ongoing, but if you resonate with what peaq is striving to achieve and would like to be a part of it, you’re in luck. There are several ways you can join and support us, big or small:
Want to build the Economy of Things?
· We’re hiring across the board, from engineering to communications. Join us in building the Economy of Things.
· Want to stay in the loop? Visit our website and join the conversation on our channels.