July 6, 2021

What is the Economy of Things?

In a nutshell: The Economy of Things is a decentralized network-economy built and owned by the people and machines that use it. It’s the next generation of the Internet of Things. It’s what happens when the Internet of Things meets Web3 and AI.

In this piece, we’ll be going deep into the Economy of Things. We’ll take a look at the precursor to the Economy of Things – the Internet of Things – and why we need to leave it behind, we’ll find out why Web3 is critical to the Economy of Things, and say a couple of words about where this is all heading.

Let’s dive in.

Let’s start by defining things.

‘Things’ in the Internet of Things simply means vehicles, robots and devices connected to the internet.

In the Internet of Things, things are contextually aware and connected. They are able to send and receive information via the internet.

In the Economy of Things, these connected things monetize (earn money from) the value they create. Things become autonomous and economically independent.

When making the shift from Internet of Things to Economy of Things, ‘things’ move beyond the status of a tool, to that of an independent entity.

From ‘thing’ - to being.

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The Internet of Things

Let’s go back in time in order to figure out how we got here.

Most of the objects we’ve come to view as tools are now 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, which the Oxford Dictionary defines as:

“The interconnection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data.”

Put simply; the Internet of Things refers to things becoming contextually aware and connected. Your fridge can now tell you when you’re low on milk. Your health tracker monitors your every heartbeat, etc.

The number of things in the world is forecast to almost triple from roughly 9 billion in 2020 to over 25 billion by 2030.

That’s a lot of things.

Connected things are here, and they’re here to stay.

Why is this valuable? It’s 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.

Sounds good. So why change it? Why do we need the Economy of Things?

To answer that question, let’s have a look at how the Web has evolved.

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Web1 and Web2

The history and evolution of the internet up until this point is a long story worth telling in detail. We don’t have that kind of time in this piece, but you can read a longer piece on the topic, here.

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Web1 was open, decentralized, and no one controlled it. If you built something on top of it, it was yours, and no one could force you to change it. The key drawback with Web1 was that functionality was very, very limited.

It was that limited functionality that instigated the rise of Web2. Web2 brought about an explosion in functionality, accessibility and ease-of-use — but at a huge cost to privacy, security and control.

Web2 made it easy to exist, create, communicate and earn on the web — but not on our terms. Big Tech — Facebook, Google, Amazon, etc. — took over the web, mainly by monetizing us and our data.

You use my platform, I take your data.
You get likes, I get money.

And that’s the gist of what’s wrong with the Internet of Things.

Put simply; it’s built on Web2. It’s centralized and closed. Everything you do, you do on someone else’s watch and don’t share in the spoils. Big corporations tell you what you can and can’t do with the devices you bought and supposedly own. And all the super intimate data these connected devices collect on you, your loved ones, and your environment?

That’s theirs, too.

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What happens when the Web2 Internet of Things meets AI?

Imbued with AI, machines can take on more and more tasks and jobs. This can be a good thing, except this is happening on the Web2 Internet of Things, so this value is being concentrated into the hands of the few, not the many.

The key missing ingredient is ownership.

We – the people, the community – need to own our data, our identities, the things we use, the data and value they generate, and the digital infrastructure all of this runs on.

And this is where Web3 enters the ring.

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Web3 enters the ring

Corporate-controlled Web2 kicked off around 2005 and is still the order of the day — but a shift to Web3 is currently underway, and this is really good news for the other 99% of us. Web3 is combining the best of both Webs. The decentralized, community-governed ethos of Web1 is being fused with the advanced, modern functionality of Web2.

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Web3 allows us to build open, transparent, democratic, decentralized networks – and economies on top of these networks. It’s a peer-to-peer revolution. We’re going back to how things used to be; person-to-person. In Web3, people can own things on the internet by owning tokens, fungible and non-fungible (NFTs). Tokens give us ownership rights: the ability to own digital and physical assets, without relying on a third party to grant or confirm this. Art, photos, music, ID credentials, governance rights, or in the case of the Economy of Things — ownership rights over machines, vehicles, robots and devices, and earning rights over the value they generate.

In Web3 - ‘the blockchain-based Web’ - you can build sleek, fast and easy-to-use ‘Web2-esque’ applications on the open ‘Web1-esque’ decentralized internet with no corporations in the way. People are flocking to develop apps which communities own, to replace the corporate-owned IoT platforms that exist today.

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Smart, connected machines are here, they’re here to stay, and they’re getting smarter. Web3 makes it possible to distribute ownership of these machines to the communities that use them. It is the toolbox we need to build an economy made up of connected things – machines, vehicles, robots and devices.

An economy that works for all people and machines.

The Economy of Things.

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The Economy of Things

How was that for a dramatic introduction?

Here’s the definition of the Economy of Things you read at the start of this piece:

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The Economy of Things is a decentralized network-economy built and owned by the people and machines that use it. In the Economy of Things, connected things monetize the value they create, becoming increasingly autonomous and economically independent.

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As a next step in understanding the Economy of Things, we’re going to break that definition down and build it back up again.

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Defining the Economy of Things

To construct the definition of the Economy of Things, let’s quickly re-examine the traditional meaning of economy.

The shortest, almost accurate definition of an economy is by the Cambridge Dictionary, which defines an economy as

‘a system of trade and industry by which the wealth of a country is made and used’.

With the advent of the Economy of Things, Cambridge needs to swap out ‘country’ with ‘community’. Economies are no longer bound by borders, and neither are currencies.

The most fascinating thing about economies is that they don’t actually exist in a tangible sense. They’re abstract. Economies are social agreements and arrangements, established to enable personal and collective progress. They are malleable and exist wherever the people — and things — are.

In the 2020s and beyond, where people and things physically ‘are’ matters less and less. The Economy of Things exists wherever the internet is, as the social agreements and arrangements woven into the fabric of Web3.

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When describing and defining the Economy of Things, we’ve got to be careful not to fall into the trap of defining who and what makes up an economy by what it looks like today. The Web3 Economy of Things is a new type of economy which exists on the internet, on the blockchain – its foundation for processing transactions and ownership.

Picking up from Cambridge’s definition of an economy, a short definition of the Economy of Things could be:

‘A system of trade involving people and machines by which the wealth of a community is made and used’.

The only issue with this definition is that it’s skeuomorphic. This is what the definition of ‘Economy of Things’ would be if we built it using our current infrastructure, national government, financial institutions and Web2.

In the EoT, the value created by things can be traded instantly, across secure, open ecosystems and markets. Through this, even more value can be created as all connected things can now autonomously communicate and trade via digital marketplaces.

And so, we arrive at definition that reflects that:

The Economy of Things is a decentralized network-economy built and owned by the people and machines that use it. In the Economy of Things, connected things monetize the value they create, becoming increasingly autonomous and economically independent.

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IoT + AI + Web3 = EoT

That’s the equation to remember.

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IoT → Enables things to connect to the internet.

AI → Enables things to become autonomous.

Web3 → Enables things to become economically independent (because for as long as they’re running on Web2 platforms, they serve a corporate master).

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The Economy of Things Today

The Economy of Things is alive and kicking, and growing faster than ever. We measure growth of the Economy of Things by the number of applications being developed and the number of people and things using them.

We know that things refers to connected machines, vehicles, robots and devices. We have a decent grasp on what people are - but what are Economy of Things applications?

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Economy of Things Applications (dApps)

Since Economy of Things apps are built on Web3, we call them dApps, or decentralized applications, since they are community-owned and governed (not corporate). EoT dApps fall into two main categories;

Decentralized Physical Infrastructure Networks, or ‘DePINs’
Machine DeFi (Decentralized Finance)

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DePIN: Decentralized Physical Infrastructure Networks

Decentralized Physical Infrastructure Networks use tokens to incentivise people to crowdfund and build real-world physical infrastructure which offer goods and services to people and other machines.

DePIN can be subdivided into Physical and Digital Resource Networks, PRNs and DRNs.

Physical Resource Networks (PRNs) incentivize people to direct or deploy location-dependent hardware to offer real-world,non-fungible goods and services. Think mobility, energy or connectivity.

Digital Resource Networks (DRNs) incentivize people to direct or deploy hardware to offer fungible, digital resources. Think storage, bandwidth or compute networks.

If you’d like to get deep in DePIN, this blog post has you covered.

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Machine DeFi

Machine DeFi is Decentralized Finance (DeFi) for machines, vehicles, robots and devices.

Machine DeFi can be defined as;

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a financial system built on blockchain technology that aims to recreate and enhance traditional financial services using Web3, and extend these offerings to machines.

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In the Machine DeFi ecosystem, intermediaries like banks and financial institutions are replaced by decentralized applications (dApps) that provide financial services directly to people and machines, offering greater accessibility, transparency, and inclusivity, while enabling machines to function as independent economic actors.

You can think of Machine DeFi as the engine that keeps the Economy of Things running smoothly, much like how the financial system today, made up of banks and financial institutions, attempts to.

These are the sort of dApps that would fall into the Machine DeFi category:

Decentralized EoT Exchanges (DEXs)
Decentralized Lending and Borrowing
Stablecoins
Decentralized Derivatives
Automated Market Makers (AMMs)
Yield Farming and Liquidity Mining
Decentralized Insurance
Machine Tokenization and Asset Management

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Overview

DePIN, and more specifically, Physical Resource Networks, are at the core of the Economy of Things for a reason. Real-world focused apps providing tangible goods and services are at the core of the Economy of Things. They’re the beating heart of the economy. They’re the things.

Digital Resource Networks and Machine DeFi do play a crucial role too, of course. The Economy of Things can not be considered the Web3 EoT without them. They're the critical glue and lifeblood for a properly functioning Economy of Things.

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Infrastructure

Where does all of this run? The blockchain, of course.

Builders of DePINs and Machine DeFi dApps can choose between any number of Layer-1 blockchain. Layer-1s run on top of Layer-0s (like Polkadot), and enable Layer-2s, dApps and DePINs. Some Layer-1 are general purpose (like Solana), in that they’re not purposely designed to fit a niche, while others are built to power specific industries or fields, like peaq and the Economy of Things.

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peaq - built to power the Economy of Things

peaq is built from the ground up to be the best Layer-1 blockchain to build real world, Economy of Things applications on. peaq exists to power the Economy of Things, by enabling all the different dApps and DePINs that make it.

What makes peaq the best place in Web3 to build Economy of Things applications? It comes down to these next points:

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Network Fundamentals

peaq’s highly secure and decentralized blockchain is built to handle upwards of 10,000 transactions per second at as little as $0.00025 per transaction. This paired with peaq being built on the world’s greenest Layer-0, having access to the world’s second largest developer ecosystem (Polkadot), and supporting both ink! and Ethereum Virtual Machine smart contracts, makes peaq as strong as they come, fundamentally speaking.

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Economic Model (Tokenomics)

peaq’s economic model is specifically designed to incentivise machines, vehicles, robots, and devices, and the DePINs and dApps they run on. Every machine which connects and contributes to the network earns rewards. peaq enables machines to become self-sustaining, independant economic actors. DePINs and dApps that perform well by way of generating value, transactions and upvotes are rewarded by way of a decentralized network revenue share.

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Functions

peaq’s ready-to-use Modular DePIN Functions make building a secure, compliant dApp or DePIN possible in under a week, compared to the many months it would take otherwise. peaq’s functions include; Self-Sovereign Machine ID, Access Control, Payment, Storage, Data Indexing, and even AI Agents.

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Multi-Chain

peaq’s push for a Web3 Economy of Things is rooted in a vision for an open, decentralized ecosystem where dApps and DePINs can easily communicate and exchange information and value with as many people and machines as possible, across as many blockchains as necessary. This would result in one open, seamless Web3 brimming with innovation, value, and opportunity for all - and that’s why peaq has chosen the multi-chain approach. You can read more on that here.

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EoT Ecosystem

peaq is home to the world’s first, largest and fastest growing ecosystem dedicated to the Economy of Things. Check it out.

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EoT Grant Program

peaq’s Grant Program focuses on helping entrepreneurs building Economy of Things apps and DePINs get from where they are to where they need to be.

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For a deeper dive into why peaq is the perfect place to build, check out peaq’s build page.
To get a more detailed sense of the sort of applications that can be built on peaq, check out peaq’s use cases page.

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A look to the future

Why is the Economy of Things the future?

Why will people make the switch from Web2 Internet of Things, to Web3 Economy of Things?

We’d love to point to idealism here. To people really valuing data, privacy, and security, or to people understanding that if we continue on our current trajectory then the growing inequality in our societies will multiply to the point of collapse, or even to us waking up to how this shift will massively reduce waste, pollution, and contribute to a more regenerative, sustainable future.

But the reason the Economy of Things is the future is a lot more simple.

It’s cheaper, faster and more effective.

Let’s illustrate with an example.

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Understand the difference

A decade ago, you would look for a gas station and fill up your car.

In the Internet of Things, you may head to an electric vehicle charging station, knowing whether it has available charging spots before you go, thanks to an app which uses sensors to monitor that for you (while collecting all sorts of data on you, and charging high fees).

In the Economy of Things, your connected car takes this to the next level and pays for the charging itself, from its own wallet. It communicates with the station and conducts the transaction without any intermediaries. None of your data is siphoned off to a corporation. The charger itself belongs to a fellow driver who allowed you to use it in its idle hours for a fee, using a dApp — which you own a share in. There’s no middleman, so you pay less, and they get to earn an extra on the physical infrastructure they own.

And that’s just the beginning. Things get really interesting when all these different machines, DePINs and dApps start to interact with each other, increasingly autonomously - the byproduct of which?

All humans earn more, the more work machines do.

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Feel the difference

The electric-vehicle charging app example given above is no pipedream, it’s a DePIN on its way to changing the world, called charge.xyz.

And there are many more just like it, such as;

ELOOP, which is running a Web3 Tesla-sharing service,
NATIX, which is running community-sourced street mapping platform,
Wicrypt, a decentralized Web access network with hotspots in 30+ countries,
penomo, a monetization platform for circular battery businesses,
Brainstem, Web3 health-trackers,
Bloxmove, decentralized power and mobility.

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Dive into the Economy of Things ecosystem, check out the DePINs and dApps, and feel the Economy of Things today: https://www.peaq.network/ecosystem-page

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Market & Impact

DePIN alone is a $3.5 trillion market, according to Messari’s first sector report, which didn’t include massive industries such as Mobility or Agriculture. Meanwhile, the IoT sector is predicted to hit over $1,400 billion, or $1.4 trillion, by 2027.

That’s not even considering Machine DeFi, or the multiplier effect – i.e. what happens when all these different applications start to work in tandem, making each other more efficient.

In short, there is no doubt that this market is enormous.

But what about the impact the Economy of Things will have on you and on your planet?

peaq empowers you to build the real-world applications you want to use.

peaq empowers you to change the economy itself, democratically.

peaq empowers you to earn from our collective prosperity and innovation.

peaq empowers you to own the Economy of Things, apps, and the things that run on them.

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How will peaq change the world?

peaq can mark the transition from a zero-sum economy (I win, you lose) to a positive-sum economy (win-win) on a global scale. From a mentality of scarcity to a system of abundance. From a minority wins, majority loses to an everybody wins.

Put simply, with peaq up and running, goods and services to do with mobility, energy, connectivity, sensors, HealthTech, AgriTech, and so much more - become faster, cheaper, and more secure.

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Here’s what we envision and are building towards:

A solution to the threat of mass job automation by AI. As machines continue on their paths to becoming gods, the 100% will benefit, not just the 1%.
A lot more organizing ourselves in communities, online, and in person.
A divergence from centralized, unhinged capitalism, towards inclusive economic models with shorter feedback loops, that we actively, directly shape.
A lot less reliance on the powers that be. A lot more reliance on our community.
A regenerative sharing economy which enables us to own a piece of everything, and be happy.
Democratization of Abundance in the Age of Automation.

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If you’d like to dive deeper into peaq’s vision for the future, check out peaq’s vision video, and vision deck. In the meantime …

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