For decades, banks and insurance companies have used the same mostly static but highly profitable and centralized business models. Also for decades, big tech companies such as Facebook, Microsoft, Amazon, Apple and Google have monopolized user data for their own benefit. However, blockchain projects could significantly challenge Big Tech’s hold on user data.
In 2015, the future of money was top of mind for financial experts at the World Economic Forum in Davos. There they began to seriously focus on the challenges presented by the rise of Bitcoin (BTC), digital and fintech assets. The world of finance began to realize that new technologies were disrupting everything in the industry, from savings and trading to cross-border and peer-to-peer payments and transactions.
Then in the summer of 2020 came the decentralized finance (DeFi) Renaissance. After a few years of extraordinary growth in this new concept, the machine economy has begun to take center stage and the question of who should own the world’s most important new commodity, data.
Thanks to the blockchain, we have DeFi, SocialFi, GameFi and a new emerging asset class: the financialization of machines (MachineFi), or the decentralized machine economy. It allows owners of the billions of internet-connected devices worldwide to monetize them and developers to create decentralized applications (DApps) that pull device data for monetization.
An obvious question is: Why? Why do devices need financialization or decentralized markets? The answer is quite obvious.
Big Tech has built trillion-dollar empires selling user data. Blockchain can change that by democratizing the data and machine economy.
Historically, machine economies have failed to gain traction due to the infrastructure and capital requirements needed to operationalize them. Blockchain changes that by providing users, businesses, and developers with an end-to-end solution to distribute, orchestrate, and monetize large numbers of smart devices as part of a unified network of machines.
There are currently more than 50 blockchain projects related to the Internet of Things (IoT). There are also several traditional tech companies — such as IBM, Azure, Samsung, Apple, Google, and Amazon — that are combining IoT and blockchain to power the booming machine economy.
Single version of the truth
So, looking back to 2021, we see it as the year blockchains got smart. Oracles introduced a new data source that provided real-world facts to make them more secure and trustworthy. An agreement on the price of Bitcoin and other crypto assets soon followed, creating a “single version of the truth” that led to the growth of an entirely new financial system. DeFi has been the basis for new concepts such as peer-to-peer lending and borrowing and yield farming, which have opened new opportunities for investors to earn passive income. Verifiable real-world data has become the proof needed for the DeFi revolution.
Everyone in the crypto space is familiar with proof of work and proof of stake, the evidence provided to the blockchain to receive a reward or authorization. If a Bitcoin miner proves they have solved a compute-intensive problem, they become eligible to be the next block producer. For Ethereum, if someone stakes a certain amount of Ether (ETH), they qualify to become an Ethereum validator.
Likewise, a “single version of the truth” from secure and unbiased machines will be proof of the work being done in the real world, creating unlimited opportunities for new business models.
proof of everything
What if “evidence” could also be generated from regular activities that people perform in their daily lives? IoT devices and machines — such as those in a smart home, wearable devices, cameras, and self-driving vehicles – have the potential to become “providers of evidence” that can use blockchain to capture the utility and value that people generate from daily activities.
Proof of presence could be determined from an asset tracker on a vehicle that transmits real-time GPS location information to a crowdsourced map. In the field of insurance, proof of health can be provided by wellness data from a wearable device, or proof of safety can be obtained from driving habits. Proof of Humanity helps verify the identity of people with biometric information.
Smart devices and machines on the blockchain will provide the ability to return ownership of data to people, allowing them to do whatever they want with their property, including monetizing it. Blockchain-based IoT projects offer greater trust, security, interoperability and scalability than their predecessors, and they generate new efficiencies and business value by leveraging the data provided by IoT devices and sensors.
Smart Appliances: The New Machine Economy
By 2030, estimates suggest that IoT projects will be worth more than $12 trillion in value worldwide. But to whom will this value belong? Will large enterprises continue to manage devices on centralized cloud platforms and be guardians of the new machine economy? We are at a pivotal moment in history. Decisions about how the machine economy evolves will have consequences – or benefits – for decades.
A decentralized backbone, purpose-built to power billions of machines on the blockchain, is what we need to democratize the machine/IoT economy industry and take it out of the realm of Big Tech. The IoT machine economy would require a combination of blockchain, secure hardware, and confidential computing to enable user-owned devices, applications, and services:
- Secure hardware captures and signs real-world data that anyone can verify and trust.
- Real-world data oracles then bring this verifiable data to the blockchain in a reliable way.
- Decentralized identity allows humans and machines to own their data as digital assets that they can earn and trade using DApps.
By combining the integrity of secure hardware with the immutability of blockchain, we can create a new end-to-end trust paradigm to help ensure the machine economy grows in a way that creates more opportunity. for users and limits the influence of a few. large corporations seeking to take control of it.
Raullen Chai is the co-founder and CEO of IoTeX. He previously worked for companies such as Google, Uber and Oracle. He holds a doctorate. from the University of Waterloo, where his research focused on the design and analysis of lightweight ciphers and IoT authentication protocols. At Google, he led many important security initiatives for its technical infrastructure, including SSL attack mitigation, privacy-preserving SSL offloading, and certificate transparency for all Google services. He was also the founding engineer of Google Cloud Load Balancer, which now serves thousands of cloud services, with over one million requests per second.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.