"Everything will be tokenized and connected by a blockchain one day." - Fred Ehrsam
The Internet of Things (IoT) is not just about smart homes that light up when you arrive or washing machines that text you when the cleaning cycle is done. In future, IoT will turn physical assets into participants in real-time to be available global digital marketplaces will be called as Economy of Things (EoT).
These assets will be easily indexed, searched and traded as any online commodity same as today’s music, movies and books.
"The blockchain is going to change everything more than the Internet has." - Brock Pierce
TWO COMPONENTS OF EOT
Now let’s understand the components of EoT:
1. Internet of Things (IOT)
Our things are more than things these days – most of the objects we’ve come to view as simplistic tools, like the aforementioned vehicle, now get outfitted with chips, sensors, and all sorts of other components that enable them to connect to the Internet and exchange data. Taken together, they make up the Internet of Things:
“The interconnection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data.”
The IoT is here, and it’s here to stay. It is valuable because it saves us time and energy. It automates processes in life and business and allows for certain tasks to be done faster and better than we ever could.
“The Internet Of Things has the potential to change the World, just as the Internet did. Maybe Even more so.” - Kevin Ashton
2. Distributed Ledger Technology (Blockchain)
DLT (Blockchain) is the second essential component of the Economy of Things. It is a brand-new method of storing and sharing data. When information is the basis of everything, even a small change has a big impact. And this is not a slight change.
Ledgers are the tools used to identify who owns what and what they owe to whom. Through the use of Distributed Ledger Technology (DLT), all users are responsible for maintaining and validating the ledger, rather than outside parties like banks and organizations. As a result, a decentralized data registry system with instant, transparent, and uncorruptible transactions is created.
What makes this important? The digital world is being invaded by this new method of storing, delivering, and receiving value. In terms of IoT and EoT, the implications are enormous because DLT enables three really intriguing applications:
• Decentralized Platforms & Marketplaces,
• Self-Sovereign Identity, and
• Decentralized Applications, Platforms and marketplaces
Blockchain makes it possible for people and organizations to come together to create, maintain and govern decentralized platforms and marketplaces. Think of Facebook, built and run by the company now known as Meta. A decentralized Facebook platform would be built, owned, maintained and profited from by everyone with a stake in it or an interest in it running smoothly. These marketplaces make for neutral digital environments, and their importance becomes clear.
Today’s charging station infrastructure is highly fractured between multiple service providers and replete with interoperability issues. That said, in a network where all stations rely on the same vendor-neutral and secure digital infrastructure, these problems would be non-existent.
• Self-Sovereign Identity
Self-Sovereign Identity (SSI) is a fancy way of saying a digital identity which you own and control. You might have a Facebook profile, but you don’t own it and you only control it as much as Facebook thinks you can and should. SSIs make it possible for people and for things to own and control our own digital identities and data. Think of it as a secure digital wallet holding cryptographic proofs of things like your age, citizenship and more issued and validated by trusted bodies.
With their own SSIs, machines, sensors, and vehicles will be able to own their identities and have complete choice over how their data is shared and used in the Economy of Things. It is a crucial layer of flexibility and security that enables them to only divulge the information required for any given interaction or transaction, independent of outside parties.
Going back to the charging example, the SSI would enable the vehicle to check in with the station using its own digital passport and verifying the counter-party – the charger – through its respective SSI. This makes for a smooth, privacy-oriented and secure process that includes no centralized databases, which also means there will be no massive data leaks.
Decentralized platforms and secure digital identities (SSIs) provide as a strong foundation for the supply of services, but a means of exchange, or currency, is still needed. DLT is best recognized for providing such a currency.
Cryptocurrencies (also known as tokens) come in a variety of shapes and sizes and perform various functions. The Economy of Things tokens have limitations that determine whether they are a good solution or not.
Micro-Transactions Things must sent high amounts of microtransactions between each other, to entities, and to people. The EoT will care about 0.01 cents, even if you don't care about those 1 cent and 2 cent coins.
Minimal Transaction Fees Fees are one of the main obstacles to microtransactions. Micro-transactions may not be viable due to high costs required by intermediaries for transaction facilitation.
Direct Peer-to-Peer Due to the distributed ledger used by digital currencies, there is no requirement for intermediaries to validate transactions and collect fees. Microtransactions are possible since there are no middlemen and no fees. Making direct payments is significant since it allows for instantaneous transactions.
Therefore, the entire process of charging the car—from verification to payment—is quick, secure, and totally automated. We also get to keep a little extra cash because there are no outstanding settlements and no banking institutions collecting fees to validate the transaction because the transaction was peer-to-peer.
ECONOMY OF THINGS (EOT)
The Economy of things, in contrast to the Internet of Things, refers to the devices' ability to autonomously monetize and trade the value they produce, going beyond the position of a tool to that of an economic agent when compared to Internet of where things being contextually aware and linked. It is a system of permissionless, decentralized, and borderless peer-to-peer economic connections between machines and people exercising their individual agency.
The value produced by the IoT can be traded instantly and safely through open, secure ecosystems and marketplaces in the EoT. Even more value may be produced through this process since all linked objects can now autonomously communicate, locate, and buy the goods they require through new digital markets.
When new value is derived from the Internet of Things, the Economy of Things is established. This indicates that the physical world is being liquefied by the transformation of physical assets into digital assets that may engage in brand-new disruptive digital marketplaces. The term "liquefaction" describes how the things around us are "indexed, searched, and traded as any online commodity."
EoT describes the monetization of things, where IoT Devices are able to share their Digital Assets autonomously and monetized via IoT marketplaces.
IoT describes the digitization of things and internet connectivity. IoT data which is information and measurements called Digital Assets produced by IoT Devices (Smart Objects) can be traded in IoT marketplaces.
DLT entered in the process which manage and governs the protocol how these smart devices incentivize their Digital Assets in IoT marketplaces.
In recent research titled "The Economy of Things," conducted by IBM's Institute for Business Value and Oxford Economics, the macroeconomic effects of this shift were investigated in three dimensions:
Marketplaces for assets: The majority of physical assets are rarely utilised. For instance, just 67% of commercial real estate in the US is being utilized. By making it possible for underused assets to be found, purchased, and utilised in real time, the Internet of Things can develop liquid markets for these items. IBM Model demonstrates how the introduction of new online markets with cheaper alternatives to office space may reduce leasing costs and boost industrial efficiency.
Risk management: By creating more precise representations of risk, instrumentation and digitalization can change credit and lending. In countries without a standardized system for measuring credit, such as South Africa, informal Small and Medium Sized account for just 8% of total bank lending. IBM Model demonstrates how, under these circumstances, the use of digital consumption data and the reinforcement of virtual contracts may increase credit availability and lower interest rates.
Efficiency: Connected devices' insights might result in significant efficiency benefits in non-technologically intensive businesses. IBM study demonstrates that real-time integrated sensor data may contribute to higher land productivity in sectors like agriculture, where IT represents just 1% of all capital expenditures.
As new marketplaces and services powered by the Internet of Things emerge and evolve over the next decade, it will become apparent that IoT is not just about asset utilization. It's about entirely new business models. Organizations must evaluate their role in this transformation. As with any industry transformation, profit pools will get redistributed and real-time use of data and insights will be key to profitability.
We shall soon be traveling in our own totally autonomous vehicles. These vehicles may use their secure SSIs while we are at work to generate extra income for us by acting as an autonomous, on-demand taxi and delivery service. The vehicle will just pull up to a charging station whenever it needs to be charged, authenticate, and pay, and a robotic arm will connect it to the charger. The charging station in our driveway has been selling the energy that our solar panels produced during the day to other connected machines, e-bikes, and drones. It will be ready to pick us up after work and transport us home.
However, EOT also introduces new and complex economic models, the potential for inequality, and the need for new forms of regulation.
This does not only refer to a Smart Home where the lights come on when you open the door or a Thermostat that uses AI to ‘learn’ your temperature preferences, but this also refers to a world where a web of connected IoT Devices are in communication with each other, searching for what they need and trading autonomously in new digital marketplaces forming the Economy of Things.
“Everything that can be automated will be automated.” - Robert Cannon
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