Blockchain in the economy of self-sustaining devices

Blockchain in the economy of self-sustaining devices

by Andrei Povarov

Blockchain, the Internet of Things and the sharing economy — how do these emerging trends relate to each other?

In fact their interconnection is much deeper than one might think.

The sharing economy is well known for removing unnecessarily expensive and overly imposing intermediaries (i.e., middlemen) from the business equation, and providing tremendous value as well as broad availability of services to customers and customers to services.

The classic examples are Uber and Airbnb, services that provide global connection and settlement platforms for users (i.e., passengers and guests) and service providers (i.e., drivers and property owners).

While these platforms are extremely useful, cost saving and engaging for both parties, they still control the money flow down to every transaction and thus, may impose their rules, gradually becoming monopolies in themselves.

Uber's $69 billion capitalization and ongoing complaints from drivers about the company's imposed pricing formulas clearly illustrate this problem.

So what does all of this have to do with blockchain?

Apparently, blockchain-based technologies can and will drive the sharing economy forward, this time in the direction of removing the sharing platforms themselves — at least as far as their financial functionality is concerned — by enabling peer-to-peer relationships and payments.

There are examples of companies already doing this. One, Arcade City, started up from just a Facebook page that was created to coordinate "Uber-avoiding" efforts in the community.

It progressed from organizing rides under driver-friendly conditions while basing settlement on the Ethereum blockchain to finally arriving recently with a crowdfunding campaign in which ARC tokens sold for more than 62,000 Ether.

But this is not the final step, and even further development directions are becoming clear. The sharing economy will more and more involve not only people but also interconnected objects (i.e., the "things" that make up the Internet-of-Things).

These will be shared. For example, in our taxi-related example, they will include cars but will no longer include drivers, as the cars will be self-driving. Here is the very first video of this experience from the Russian venture Yandex Taxi.

The Internet of Things that started with a toaster connected to the Internet back in 1989 has already gained a global presence, and by 2020, the number of connected devices is expected to rise to more than 20 billion.

More importantly than quantity, though, will be the quality of their interactions. They will be much smarter, not only on a technical side, but also in terms of transferring value and documenting such transfers without human intervention.

Cars will need to fuel themselves (or at least pay for fuel) and to settle with the riders; home refrigerators will need to place orders to merchants on behalf of their owners and pay for the items purchased. Likewise, many other unattended objects involved in complex commercial projects will need to interact and settle with each other.

With myriad interconnected, self-sustaining things tirelessly acting to provide us with services, it will no longer work to reroute them all through central servers. For this, blockchain will be the main — if not the only — alternative.

There are projects actively developing in the area. One example is automated decentralized P2P telemetry created by IBM and Samsung. ADEPT enables billions of devices to broadcast transactions between peers and perform self-maintenance.

The technology has already been tested in various scenarios — for instance, with a smart washing machine that can automatically order and pay for detergent with bitcoin or Ether when it runs out, and also can negotiate for the best deal through smart contracts.

The Internet of Things provides a powerful base for the new sharing economy, and will drive us through this global disruptive transformation. But it can only be successful with blockchain providing solid backend technology.

Andrei Povarov works on the adoption of emerging technologies for a large Switzerland-based IT company. He also leads digital management and disruptive technologies programs at the Russian Presidential Academy. Andrei holds a PhD and an MBA and has many years of experience in the IT and payments industry.

Topics: Cryptocurrency, Trends / Statistics

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