Web3 gives us the ability to own things in the real and digital worlds without having to rely on an intermediary to prove it. Converting your rights to an asset into a token is called tokenization, and it promises a paradigm shift not just in the way we own and trade assets, but in the way we function and collaborate as communities on a local and global scale.
In the context of the Economy of Things, Web3 allows us to tokenize any sort of connected machine, vehicle, robot, or device, so that we can own and earn from it, either individually or as communities. On-chain, these machines become a whole new class of real-world assets (RWAs) – Machine RWAs.
In this piece, we’ll be diving into the economic potential of machines to get a sense of how much value different kinds of machines can create for people and other machines in the Economy of Things. Now’s just the time, considering so many machines, vehicles, robots and devices are being imbued with AI and providing services via Web3 apps known as DePINs (Decentralized Physical Infrastructure Networks).
Which Machine RWAs will produce the most bang for your buck? Let’s find out.
The Ownership Revolution
Let’s start with what Web3 is all about — ownership.
You’re reading this, so you probably own a device. Or at least you think you do. You see, you do… and you don’t.
You own the physical device, sure, but not the data it generates about you or your environment. That’s because Web2 / Big Tech is in the way. Everything you do, you do through a traditional corporation which monetizes your data. Like a cow being milked, but not twice a day — literally every second..
Doesn’t feel so good, right?
Don’t fret, the tide is turning. We’re transitioning from corporate-controlled Web2, to community-run Web3. From the walled-off Internet of Things to the open Economy of Things. And at the heart of this transition is a revolution in the way we own things.
Ownership Revolution Part #1 - Full Ownership
Remember I said you don’t own what you think you own because corporations own your data? That’s changing. As part of the transition to Web3, your machines are getting their own Self-Sovereign Machine IDs. Long story short — the data and value they create stays with your device and you. You’re in charge of how it’s monetized, not Zuckerberg, Bezos, or Pichai.
Curious about these Machine IDs? Check this out.
Ownership Revolution Part #2 - RWA Tokenization
Tokenization refers to the process of converting rights to a real-world asset (RWA) into a digital token on a blockchain. Essentially, it's a method for transforming tradable assets or rights to assets into digital form, making them easily transferable and divisible over blockchain networks.
Tokenized assets can be anything from real estate and stocks to digital goods, or as in the context of the Economy of Things, connected machines, vehicles, robots or devices. These assets are presented as tokens and these tokens can then be traded, sold, used or earned from.
On the peaq network, we refer to tokenized machines, vehicles, robots and devices as Machine RWAs — represented by Machine NFTs. Machine NFTs can represent individual machines, a piece of a machine, a fleet of machines, or all the value being generated by all the machines in the Economy of Things. As the machine generates revenue, its value changes, and you earn.
Whoever told you NFTs were just digital art had no idea what they were talking about.
So, where does that leave us?
You have full ownership of the machines you thought you owned, and they can be tokenized. This has big implications on the perceived value of any given machine, vehicle, robot, or device.
And now we get to the crux of what this piece is all about.
Connected machines are not static assets, and as we transition to the Economy of Things, they’re about to show us just how dynamic an asset can be. If you’ve never stumbled upon the term ‘Economy of Things’, here’s an overview.
The Economy of Things is a decentralized network-economy built and owned by the people and machines that use it. It’s the next generation of the Internet of Things. It’s what happens when the Internet of Things meets Web3 and AI.
‘Things’ in the Internet of Things simply means vehicles, robots and devices connected to the internet. In the Internet of Things, things are contextually aware and connected. They are able to send and receive information via the internet.
In the Economy of Things, these connected things monetize (earn money from) the value they create. Things become autonomous and economically independent.
When making the shift from Internet of Things to Economy of Things, ‘things’ move beyond the status of a tool, to that of an independent entity. From being a ‘thing’ — to simply being.
Machines are value creators, they’re independent economic agents, they’re service providers, and they’re providing services to communities, not just individuals.
The ‘economic potential’ of any given machine as a Machine RWA is taking on a different light.
Take something as seemingly trivial as a thermometer or thermostat to make the point. You probably think of this as a personal device. It’s a personal device in the Internet of Things, but in the Economy of Things, it’s more than that.
In Web3 you can plug it into a DePIN (Decentralized Physical Infrastructure Network), and it can form part of a local, national, or global weather data network. It can record weather data and sell it in conjunction with all the other sensors on the network.
The economic potential of your thermostat has just gone from zero to one.
You can apply this to any connected device, robot, machine, or vehicle. Let’s take another couple of examples.
Charging stations are built for one main purpose: for people to charge their electric vehicles. They can also have secondary revenue streams, like selling usage data to city planners or vehicle manufacturers for improving infrastructure design.
In the Internet of Things these charging stations are kept behind corporate walls, meaning they can only provide charging services to people who have signed up with the provider, and sell data in the same fashion — via corporations.
What changes when charging stations make the transition from IoT to EoT?
Any charging station can offer charging services to any vehicle. You can buy a charging station, plug it into a DePIN, stick it in front of your house, and drivers can use the DePIN to charge their car, peer-to-peer, and pay you — directly. Cheaper for the driver, and more money for you.
Same is true for the data the charging station collects. Depending on what data it collects, you can sell it via the appropriate DePIN.
From zero-sum, to positive-sum.
From ‘I — the corporate — win, you lose’, to a ‘win-win-win’. Person charging, person providing the charging station, its manufacturer, and the planet — they all win.
Let’s step it up a notch, and let’s skip the Internet of Things bit. I think you get how cumbersome and limited it is by now. Let’s look to the future.
What’s the economic potential of an autonomous car?
You probably know what an autonomous car looks like and what they do today — mainly ride-hailing — but what will they do when they’re not just autonomous, but independent actors in the Economy of Things?
Let’s answer this by looking at the different DePINs a Web3-ready autonomous car could choose between to provide services:
- Ride-Sharing (Web3 Uber)
- Mobility Data (Traffic conditions, road quality, events)
- Street Mapping
- Vehicle-to-Grid Energy Sales
- Vehicle-to-Vehicle Energy Sales
There are probably more. There will be more.
An AI-powered car can ‘compose itself’, meaning it can decide from moment to moment via which DePIN it wants to provide a service based on any given set of incentives (ex. more profitable, or less energy intense) or disincentives (ex. reputation downvotes from the local community, or bad sustainability score).
So it’s clear that the way we think about machines and the value they generate is changing drastically and fast. It’s also clear that some Machine RWAs can and will create more value than others as the Economy of Things, DePIN, and AI sectors continue to mature. Which begs the questions:
- How can I know which machines will generate the most value in this new era?
- How are machines likely to change as new revenue streams open up?
The Machine RWA Economic Potential Matrix
…is not some magical crystal ball that will tell you what you should and shouldn't buy, but the questions it poses should serve to guide those decisions and shed light on how we take these purchasing decisions going forward.
The matrix looks at any given machine’s utility and independence and asks questions to derive a score to be able to rank and compare machines.
If you’d like access to the Matrix Google Sheet, hit me up on Twitter at @MaxThake.
The Utility Index
The Utility Index is designed to gauge the utility or usefulness of a machine in delivering services to humans, other machines, or both. This index digs into three core questions:
Does the Machine Currently Provide Multiple Services?
This evaluates how versatile the machine is in today's terms. Is it a one-trick pony, or does it have an array of capabilities?
Will the Machine Likely Provide Multiple Services in the Future?
This question probes whether the machine has the potential for an expanding range of services as technology evolves.
How Adaptable is the Machine for Future Use Cases?
This question scrutinizes the machine's ability to adapt and evolve. Can it learn new tricks, or is it hardwired for specific, unchangeable functions?
The scores for these questions are combined and averaged to generate an overall Utility Index Score. However, each question might have different weightings depending on the context or the specific machine being evaluated.
The Independence Index
The Independence Index aims to determine how financially self-sustaining a machine can be in the long term. This index examines three crucial questions:
Is Financial Sustainability and Independence Achievable?
This question assesses whether the machine can generate sufficient revenue to not only sustain its operations but also possibly yield a surplus.
Can It Pay Itself Off in 5 Years?
Here, we look at the time-frame for Return on Investment (ROI). Is it realistic for the machine to recoup its initial costs within a reasonable timeframe?
Can It Operate Fully Autonomously?
This question evaluates whether the machine can run its operations without human intervention, thus lowering operating costs and increasing its financial independence.
Like the Utility Index, the scores from these questions are combined and averaged to form an overall Independence Index Score. Again, the weight for each question may vary depending on the particular machine and the goals of the evaluation.
Weighing the Indices
All 3 indices play crucial roles in assessing a machine's economic potential as a Machine RWA, but they may not hold equal weight. For example, if the focus is on long-term sustainability, more weight might be given to the Independence Index. Conversely, if immediate utility and versatility are crucial, the Utility Index might be deemed more important. In many evaluations, a weighted formula could be used to calculate the final economic potential of the machine, balancing immediate utility against long-term independence. The weights can be adjusted to tailor the evaluation to specific objectives or market conditions.
What does this mean for app/DePIN builders?
In the Decentralized Physical Infrastructure Network (DePIN) and Economy of Things (EoT) environment, app and DePIN builders are at the vanguard of a new digital frontier. Understanding the concept of Machine RWAs and their economic potential allows them to predict which machines or devices will become popular, especially in specialized DePIN and EoT niches. By collaborating closely with manufacturers, they can guide the creation of machines that not only perform tasks but are optimized for generating revenue on these networks.
Openness to machine composability adds another layer of sophistication. The peaq network incentivizes the deployment of machines to the network so that DePIN builders already have thousands of machines and users hungry to use their app when launched. Building with this in mind gives builders a big advantage over builders who have to manufacture, and sell machines to people and incentivise and educate them on how to deploy them to the network.
What does this mean for manufacturers?
Manufacturers are already familiar with the B2B and B2C models. However, with the rise of the EoT and DePIN, a new paradigm — B2Community — is emerging. In this model, manufacturers are not just building machines to serve businesses or consumers but are contributing to entire ecosystems. They can develop machines optimized for revenue generation, integrating them into various DePINs where they become economically self-sustaining. This dramatically expands their market, as they can sell not only to businesses and individual consumers but to decentralized communities as well.
A machine's flexibility to serve multiple DePINs ensures that it isn't just a tool, but a dynamic asset with multiple revenue streams.
The framework for Machine RWA economic potential is not merely an academic exercise; it has concrete applications that can redefine utility and financial autonomy in the age of intelligent machines. This framework sorts Things into different economic categories, underscoring the dynamism of assets within DePINs. Tokenization takes on a fresh significance, no longer confined to static assets but extending to dynamic ones that can generate their own revenue streams.
Through the concept of Machine Composability, these assets have the agility to serve multiple DePINs and add new streams of income dynamically. These machines edge ever closer to being autonomous and financially independent entities — ushering them from the realm of 'things' or 'assets' into a new category that might be better labeled as 'semi-beings.'