March 24, 2025

What is Machine DeFi?

peaq

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In a nutshell: Machine DeFi is Decentralized Finance for machines. If the Machine Economy refers to the entirety of what happens in peaq’s onchain economy, then Machine DeFi is specifically focused on the decentralized financial instruments and possibilities in that economy. It’s where robots and machines meet Web3’s financial capabilities. This ranges from using machines and their generated value as collateral to launching community subsidy pools that cover the costs of maintaining Machine RWAs and beyond.

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Where DeFi gets real

If you’re in crypto, you already know what DeFi is. And if you’re not in crypto, well, it’s right there in the name — Decentralized Finance. All the financial services you’re used to or have heard of, but powered by blockchain.

You trade on decentralized exchanges against community-provided liquidity instead of market makers. You borrow from community-owned asset pools instead of banks. You wrap, stake, and bridge your tokens to your heart’s content on synthetic asset protocols. All extremely useful, for sure, but let’s be honest — it’s no longer revolutionary. Been there, done that.

There is also a case to be made that DeFi is first and foremost an inside-baseball thing, meaning it has largely stayed isolated within the Web3 space. Without a tangible link to real-world value creation, DeFi is prone to wild speculation. In some cases, this can lead to pretty disastrous consequences (especially when speculative assets are pegged to perceived value).

DeFi’s Real World Asset (RWA) segment is now gaining some traction, but it’s still far from delivering the impact a fully Web3-powered programmable economy can bring about. More often than not, these RWAs are no more than good old stocks, gold, and real estate, only brought on-chain via a centralized oracle. Again, handy, not without its purpose, a welcome development by all means — but Web3 can be so much more than Robinhood.

Thankfully, there are still those who dare to dream. Take the peaq ecosystem, for example: On-chain stocks? How about a tokenized robot serving coffee and ice-cream? Every time it makes a sale, you, as a token holder, get rewarded accordingly. The connection between the asset, the value it offers, and the yields it generates on-chain is seamless. People pay value-generating machines all the time, after all. And that makes those machines a perfect fit for a programmable Web3 economy — one directly based on the exchange of real-world value, as opposed to speculation.

What we are talking about here are Machine RWAs, which means machines — or specific rights to machines, such as a cut in the revenues they generate — represented as on-chain tokens. Doesn’t get more real-world than that.

With their real-world aspect, Machine RWAs are, in essence, still on-chain tokens. And with all due respect to sworn HODLers, tokens don’t have to sit in your wallet — you can get more creative with them. Lend them, borrow them, synthesize derivatives, you know the drill… Only this time, all of this is underpinned by the trillions of real-world dollars worth of real-world value that real-world machines running on various DePINs are projected to capture. Actual demand and supply, not speculation. Sounds cool, right?

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So what is Machine DeFi?

Machine DeFi is Decentralized Finance for machines. It refers to the financial instruments that humans, AIs and robots use to operate in a fully decentralized Machine Economy.

It encompasses all the familiar financial services from TradFi and DeFi, while also unlocking some new ones. But before we dive into that rabbit hole, let’s first take a look at how Machine DeFi pushes familiar concepts — like lending and borrowing — into new territory.

When you ask a regular bank for a loan, it bases its decision on one key question: How likely are you to repay? To answer that question, banks will evaluate everything from your spending habits to your cat’s name. In Web3, however, lenders don’t have that kind of access to your personal data and thus have to adjust for risk. In most cases, they ask you to provide collateral — a set amount of tokens that you will lose if you don’t pay the loan back. But Web3 is often volatile, and the value of collateral can shift in seconds. Here’s just one possible scenario: You provide the necessary collateral to borrow some USDC. Overnight, the market throws a tantrum, and the value of your collateral slumps below the liquidation threshold. Wave bye-bye to your tokens, they’re not coming back.

Now, mind you, Machine DeFi is no Skynet and knows as much about your life, cat, and other personal circumstances as a regular DeFi protocol. So if you were to ask for a loan on a Machine DeFi protocol, you’d still have to use your Machine RWAs as collateral. The difference is that no matter what drama the crypto space is living through today, it will hardly stop people from drinking coffee. In other words, the demand and supply logic underpinning the value of your collateral — the robot cafe token, in our example — is still there, and your collateral is safe and sound.

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Why Machine DeFi on peaq is the best of both worlds

The same principle applies to other Machine RWA tokens. People won't stop charging their electric cars because somebody famous tweeted something mean about crypto. They won’t stop driving around with their navigation apps either, for that matter. Aviation and agriculture won’t decide they no longer need weather data because another NFT collection rugged.

There’s apps on peaq for all of the use cases listed above, (as well as many others), and the value they create isn’t married to the whims of the volatile crypto space.

The idea of decentralized lending based on billions worth of real-world machines and value that remain unaffected when bears run amok is, in itself, pretty awesome. What’s even better is that it doesn’t stop at borrowing and lending. All aspects of DeFi are very much present in Machine DeFi, again, with their real-world roots as the main distinction. Synthetic assets backed by real-world hardware? Absolutely, and with their real-world provenance inherited, at least partially. Machine performance prediction markets? Sure, why not. Web3 options, futures for machine services, DePAI-focused DAOs? As much as your heart desires.

In all of those examples, the common denominator is a fundamental connection to tangible, real-world value. Machine DeFi on peaq takes all the unmatched versatility of DeFi and mixes it with concrete business KPIs and concepts — real-world supply and demand. The result is as flexible as it is resilient and stable. It’s literally the best of both worlds: Web3 and the silly old thing we call the IRL.

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Empowering communities with Machine DeFi

Another key aspect of Machine DeFi is empowering individuals and communities to create real-world change via Web3 means. This is more than just using Web3’s versatility to transform the world — it’s about flipping the equation. Here, Web3 provides for real-world machines first, rather than machines providing the underlying value for Web3 protocols. But how does that shift work, and what does it enable?

We’ve already established that you can represent machines — or the rights to machines — as onchain tokens. So let’s say we have a community that wants to set up an automated farm: A costly endeavor that takes a lot of time, effort, and upfront investment. But, on the other hand, also an endeavor that promises healthy returns. The farm’s founders can tokenize their project, whether that means tokenizing the machines themselves or the revenues they generate (this can depend on a variety of factors, including first and foremost applicable regulations). They can then offer the tokens, backed by tangible value, to the global Web3 community. The liquidity they raise through this token offering will grant them the capital they need to actually procure and set up the machinery.

In other words, Machine DeFi on peaq connects billions worth of borderless Web3 liquidity with people and communities looking to drive meaningful change. Communities around the world can set up value-generating infrastructure — parcel pick points, sensors, 5G towers, and anything else — when and where they need it, not where it makes sense for Web2 corporations. The Web3 community, for its part, will be able to earn from these initiatives, rooted in sustainable real-world supply and demand metrics.

And that’s the key aspect that separates Machine RWAs (and hence Machine DeFi) from the speculative tokens and memecoins that are overrunning the world of traditional DeFi (TraDeFi?). You can rarely assess a memecoin’s potential based on anything but speculation, but in Machine DeFi, you can consider the familiar business metrics to see if an idea makes sense. A DePIN of spaceships to be launched tomorrow in search of life on the Sun is probably not a good idea. A tokenized robo-restaurant in a high-footfall mall could very well be more tangible.

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Web3’s future is in the real world

Machine DeFi is nothing short of a paradigm shift, with sustainability and impact taking over where the spirit of pure speculation used to reign. DePINs on peaq are already putting Web3 at the core of real-world industries, from decentralized AI to smart agriculture and mobility, and the rise of Machine DeFi is the logical next step in this process. Web3’s future is in the real world — and Machine DeFi on peaq is equipping this future with all the financial tools it needs, empowering communities to drive positive impact and unlocking sound, sustainable growth for Web3 enthusiasts.

There are some big things coming to the Machine DeFi space on peaq. Stay tuned.