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At MX3 CS we aspire to build and deploy decentralised blockchain applications (dApps) for heavy industrial machinery and robots. For this reason, we are always looking for new technologies that can help us meet our objectives. In this blog post we explore if autonomous machines will need cryptocurrency to function.
Most people today use digital wallets like PayPal and new banking apps like Revolut and CashApp to send and receive money via traditional banking rails. However, adoption of BTC and ETH is rapdily increasing and it looks like cryptocurrency aka crypto and central bank digital currencies aka CBDC will eventually replace the current antiquated financial system altogether. When it happens, the entire system will become way more efficient, and that’s a very good thing. Currently around 5% ($4T) of global GDP goes straight to rent-seeking financial institutions, which is why they deserve to be disintermediated.
So the way money works needs urgent reform that will not only benefit the millions of unbanked, but also the wider economy and humanity as a whole. So in addition to hamanity, who or what else will benefit?
I predict machines will become one of the greatest benefactors of crypto and it will spark an entirely new “Machine Economy”. This is because machines will use crypto to transact in unimaginable ways that we humans will find utterly perplexing and extraordinary. For example, machines may want to purchase tiny fragments of data on a per millisecond basis. For obvious reasons, this cannot be done with fiat currency, but it can theoretically be done with crypto. For example, the smallest denomination of a BTC is one Satoshi which is a one hundred millionth of a bitcoin. One day a global network of machines will conduct trillions of micro-transactions in the blink of a human eye! Put simply, money that was developed by humans for humans is not fit for this purpose. First-generation cryptos like BTC and ETH will be adopted by the financial sector and they will eventually replace gold and state-issued currencies. I predict Ethereum will continue to be the home of DeFi. However, machines will need new blockchain protocols and different forms of crypto that have been developed specifically for machines to machine commerce.
Machine optimised wallets and cryptos will enable autonomous frictionless payments to be undertaken by everything from driverless mining trucks to off-shore inspection drones. They will use this new form of machine money to pay for everything they need to function — from energy and data to gateway access and processing power. They will earn an income by offering their services to humans and other machines.
As previously mentioned, the Bitcoin and Ethereum blockchains are not suitable for low-value very high-volume machine-to-machine (M2M) transactions — and may not be sufficiently secure. Let me explain. The Industrial Internet of Things (IOT) is connecting mission-critical physical assets like aircraft, trains, and even nuclear power stations. If a human wallet is hacked people might lose money, but the ramifications of a mission-critical asset suffering a cyber attack is far more serious.
There is one distributed ledger platform (not a blockchain) that has been optimised for connected machines and that is IOTA. It uses something they refer to as the Tangle, which is not a blockchain but a directed acyclic graph (DAG). It does a similar job but does not incur fees. There are real-world examples of autonomous electric vehicles using MIOTA (IOTA’s native token) to pay for electricity via specially adapted smart meters. Not only is it said to be highly scalable and secure, but also quantum-resistant (secure against quantum computer attack).
Another protocol that I think could be a good fit for the Machine Economy is Cardano. My reason for being bullish is that I know the community is actively engaging with developers and entrepreneurs in sectors beyond finance. I also like that the Cardano community has taken a slow and methodical academic approach to development. Their values and ethos are anchored around peer review and formal verification. Much of their core technology was built using functional programming languages, which makes it ideal for mission-critical applications. For those of you who are not technical, this means that the deployment of bad code is far more unlikely or even mathematically impossible. Non-functional languages are much quicker and easier to work with, but you only need to look at all the recent horror stories in the ethereum-powered DeFi space to know how erroneous code can lead to some pretty painful outcomes. However, when smart contracts are hacked people lose money, but physical industrial assets? That’s why I believe the machine economy needs an entirely new kind of highly scalable and robust blockchain protocol.
Before ending this post, I just wanted to add the following. Although I am rooting for IOTA I have some concerns. Apparently, their DAG network could be taken over by an attacker gaining control of just 33% of the hashing power on the network. In order to avoid this happening the IOTA Foundation has introduced a special node called the Coordinator. For the project to be successful the Coordinator will need to be removed otherwise the platform will fail to become fully decentralised.
Finally, there is talk of the IOTA and Cardano communities working together to build a bridge between their networks, so watch this increasingly important space…
