A new peer-to-peer network creates a machine-to-machine world without transaction fees
Imagine a future where machines are our new customers and transaction fees have been removed from the economic value chain. If that sounds like something from the world of sci-fi, the reality is that it’s not very far away. At innogy Innovation Hub, we’re already testing the next generation of the internet and blockchain to enable secure peer-to-peer transactions.
The innogy Innovation Hub is exploring a new technology called IOTA that goes far beyond one-dimensional blockchain. With a completely new architecture based on cryptographically secure machine identities and a “tangle” protocol layer for validating transactions, IOTA is a key enabler for the ‘Machine Economy’. In simple terms, it means that machines can have their own wallets and transact automatically with other machines. And as a result, new machine-centred business models are rapidly emerging.
It´s more than just another Blockchain idea
How does IOTA differ from conventional blockchain? A big factor is that instead of having blockchain “miners” acting as dedicated validators, each IOTA network participant is actively involved in the validation of transactions. A further difference is partition tolerance. While blockchain requires all users to be in synch to make a transaction, IOTA Tangle allows clusters, so that transactions can happen offline.
By adding an IOTA node, a machine will be transformed into an ‘economically independent machine’ with its ability to transact with other machines and to manage its own profit and loss statement.
IOTA tangle is in effect a real peer-to-peer network – by machines for machines. There are many benefits to this approach: decentralization, scalability and no transaction fees to name but a few.
By enabling transactions to be validated in parallel, IOTA can achieve a much higher throughput – the highest transactions per second of any distributed ledger which scales with the network. This is vitally important because in an IoT world, there will be massive volumes of nano and micro transactions and so near-zero or zero transaction fees are essential for this to be economically viable.
Providing wallets to machines has radical implications. Today, no traditional bank is willing to give a bank account to a machine. But with a digital wallet, machines can generate income from physical or data services without any middleman and use it for purchases like insurance, energy or maintenance. Just as banks use the criteria of “know your customer”, IOTA provides the assurance of “know your machine” through secure identities.
In the near future, as a consequence, we can expect that a machine will be able to pay its assembly, its maintenance, its energy and also for its liability insurance by giving data, computing power, storage or physical services to other machines. For the first time in history a device will be in a position to earn and spend money on its own. At this point a machine turns into an entity that tracks revenue and expenditure from its own activities.
The innogy Innovation Hub is now moving into a joint project partnership for prototyping and testing initial use cases with the aim of monetizing new forms of value exchange in the ‘Machine Economy’. We see IOTA driving exciting data-driven business models in energy management, supply chain management, mobility logistics telematics, health care telematics, environmental observation, security and telecommunication networks. Our first Machine Economy prototypes will be ready in Spring 2017.