It’s estimated that by 2025, there will be 100 Billion global IoT devices, sending data and transferring value in the new Machine-to-Machine reality. As everything becomes a “smart device” in the coming Economy of Things, what will be the underlying protocol that makes this all work?
I found this presentation by Terry Shane at the end of 2018. Although I’m not actively following the IOTA project, I really like the automotive future and use-cases he explained in this presentation on the Internet of Things and Distributed Ledger Technology.
Here’s a table of content of the presentation, I especially loved the data-part and the automotive example:
- Predicting the Future
- The Next Generation Distributed Ledger beyond Blockchain
- By 2025, IoT will exceed 100 Billion Connected Devices
- Data is the New Oil
- The Blockchain Bottleneck
- The Tangle was developed for the Internet of Things
- Overcoming the limitations of Blockchain
- Use-case: Autonomous Economic Agents (automotive example)
- IOTA as the Settlement Network for Transportation
- Radical Business Model Innovation
- The bIOTAspere Co-Creation Lab
Hi everyone. As you’ve heard, my name is Terry Shane. I am the CEO of Refined Data Solutions. We’re a software company, serving the commercial real-estate sector with hundreds of millions of square feet of property, managed by our software tools, but at heart, I am an inventor.
Back in the mid-90s, as you’ve heard, I got very excited about this incredible technology called the internet, that most of us take for granted today.
As I look at where we are now with, distributed ledger and what the next few years will bring, my inventors-heart quickens, I think it’s very exciting.
Given our corporate focus on real-estate sustainability and smart buildings, the Internet of Things has figured prominently in our thinking over the past couple of years. Our company has been looking at the two worlds of IoT and DLT, and we’re very excited about the possibilities offered by the tenth largest cryptocurrency; one that many of you are probably only vaguely familiar with, or you might not have heard of at all. I hate to even call it a cryptocurrency because it’s about so much more than value.
The technology that I’d like to share with you today, and why I’m so excited to be working with the IOTA Foundation, to launch a commercial IOTA accelerator here in the GTA.
Before pulling out into the fast lane, and accelerating into the future, I always think that it’s a good idea to check your rear-view mirror for blind spots.
Predicting the Future
So, I think we’re probably all agreed that we’re living in one of the most exciting times in human history. As human beings, we can’t help but try and predict the future.
Unfortunately, crystal ball gazing is a bit of a hit-and-miss affair. When I was a little boy, this is what the future looked like. I marveled at the improbability of smartwatches, flat-screen TVs, global video conferencing, and of course autonomous vehicles.
There were, of course, other visions of the future at that time. They were a little more sinister and they involved loss of privacy, social manipulation, and all-seeing all-knowing central authority, that could listen to our conversations and track our whereabouts at all times. Sound familiar?
But who in my youth could not have imagined themselves on the deck of the Starship Enterprise? And, using technology that was so unbelievable and in hindsight so very very clunky.
You see, the thing is, innovation doesn’t happen overnight. It kind of sneaks up on us, but it’s been happening all the time.
It’s important to understand that bitcoin is going to be 10 years old later this year. Yesterday’s future is upon us, but it’s a constant evolution, and we only have a better view because we’re standing on the shoulders of the giants that have come before.
First-generation technology, no matter how radical or impressive, is rarely the last man standing. Was I the only one who used Alta Vista in the room? I don’t know.
There’s always a version two, which is then followed by a version three, and if you look at any race, you’ll know that the ones who have the early lead, are rarely the ones crossing the finish line first. In the case of technology, of course, the finish line is always out there on the horizon, so the race never ends.
Now I am NOT going to suggest to you today that blockchain technology is dead or even terminally ill. I think there will be multiple survivors in the crypto shakeout that is to come, but I am suggesting that for those of you who are fixated on blockchain as the DLT solution for the Third Industrial Revolution or the fourth Industrial Revolution, or whichever revolution it is that we all agree on is coming, that it might be prudent to reevaluate your bets.
The Next Generation Distributed Ledger beyond Blockchain
You see, Bitcoin has been here since 2008 and frankly, it’s getting a bit long in the tooth, despite the numerous forks and improvements that have come along to fix the flaws that are actually baked into it by design.
Ethereum is still based on the same blockchain principles and protocols, and still based on the same Proof-of-Work, and Titans in the space, including people like Vitalik Buterin, just a couple of days ago, April 4th, are admitting that there are problems with this underlying architecture that need to be addressed before they can deliver production-ready solutions.
So, today I’d like to share with you how some of the newer innovations in cryptocurrency are likely to eat blockchains lunch. So, IOTA is a DLT technology, a DLT protocol, and has no blocks, and has no chains, and has no miners, and there are no fees.
And it only gets faster as its scales. Unlike Bitcoin, Ethereum, and most of the other solutions that you’re probably more familiar with today, it uses cryptography that will not be rendered useless by quantum computers that will be here in just five to seven years.
And, yet again, I really want to be clear, this is not a black and white conversation, where there are winners and losers. There will be multiple winners, there will be many losers, and most of them will be needed in order to create this transformed Economy of Things.
Solutions like Hyperledger and Ripple provide private networks that are permissioned platforms that may still be more attractive to banks and large institutions that aren’t comfortable with a public permissionless system.
In the future, you may well see an Ethereum smart-contract that executes the payment or a data transfer that’s actually transacted using IOTA as the settlement protocol.
By 2025, IoT will exceed 100 Billion Connected Devices
What’s not in question at any point, is that by 2025 there will be somewhere between 75 billion and a hundred billion connected devices on the internet and the Internet of Things.
These estimates are probably an underestimate of what will actually happen. That’s 10 to 12 devices for every man, woman, and child walking on the face of a planet by then. Each of these devices will have about a dozen or so sensors.
If you think about your phone today, it’s not just a phone. It’s got an accelerometer, a magnetometer, a gyroscope, GPS, barometer, proximity sensor, light sensor, sound sensor, fingerprint reader, heart rate monitor, camera, and more.
That’s one heck of a lot of data, and it’s all going to be really useful and therefore valuable to an awful lot of people.
Now, I’m sure you already know how valuable your personal data is today, to each of these corporations. Today your phone is the smart thing in the room. Soon your car, your home, your city will be too, and the amounts of data moving around the globe will be simply staggering.
Data is the New Oil
It was the Economist that penned the mean “data is the new oil,” just a year ago.
Today we might all be talking to Siri, Alexa, Cortana, and Bixby, but next year or soon afterward, they’ll be talking to each other and we’re not even going to be part of the conversation.
If data is like the new oil, the new medium of value of exchange, or protocol, is going to be used to move that value between devices.
How many of you here are willing to let these corporations own and make the decisions about all of that associated data?
The Blockchain Bottleneck
So, let’s go back a little, and look at blockchain more closely, and why it might not be up to some of the challenges it faces today and in the future.
You see, all Proof-of-Work blockchains are essentially based on achieving consensus by setting up a competition for scarce resources.
Miners compete with each other for the right to mine the next block, while users compete to have their transactions included in that next block.
Pay too little and your transaction may wait hours or days, or it may never confirm at all. Now, no matter how large they make the block in your favorite blockchain technology, or how short they make the interval between blocks; if you imagine a hundred billion devices all sending data, and let’s say just the frequency of once a minute, it doesn’t take much to understand that every single block will fill instantaneously and will be oversubscribed, leading to rising transaction fees. The systems simply cannot scale to the kind of demand that’s coming.
And if you add to that the fact that in reality, as was mentioned just earlier, Bitcoin * technology is not as distributed as you might think.
This chart is actually just from a week ago, and currently, the top four mining pools control over 60% of the Bitcoin * hash rate. So, it’s not hard to argue that blockchain is actually more centralized than the banking sector.
The interests of the miners who want the highest possible fees for each transaction, to offset the absolutely staggering costs of mining are diametrically opposed to the interests of the users who actually want to use the network.
You’ve probably seen some of these pictures or heard this, but Iceland is currently devoting more of its energy resources to blockchain mining than to residential housing. This is simply not sustainable and I don’t care which meaning of the word sustainable you’re talking about, it simply won’t continue.
* the presentation said blockchain instead of Bitcoin.
The Tangle was developed for the Internet of Things
IOTA uses completely new and fundamentally different technology to record and verify transactions and achieve consensus. It uses a mathematical construct called a Directed Acyclic Graph or DAG, and it completely removes the need for blocks, chains, and miners. Some pretty magical things happen as a result.
So, instead of a system where mining and transacting are performed by two different sets of users, leading to conflicting and opposing objectives, with IOTA every user is simultaneously a miner, but for somebody else. So in order to confirm my own transaction, I actually have to perform a very small amount of Proof-of-Work for two complete strangers that are randomly selected for me.
This creates a virtuous cycle where to meet my needs, my needs are best met by actually meeting the needs of the community, of others in the system.
Essentially, it’s the crypto equivalent of pay it forward because I only get what I want by doing good things for other people.
And what that means is that you’ve eliminated fees completely from the system. If I want to send you a dollar, you will receive a dollar. If I want to send you a cent, you receive a cent. And if I want to send data with no financial component whatsoever, pure data and no value, I can do that too, because I still have to perform the Proof-of-Work for two other transactions in the network and so I’m still building value and delivering value.
This has an immediate scaling benefit because as the number of transactions on the IOTA tangle goes up, the system actually gets faster and faster and faster until it approaches, theoretically, the speed of light.
The exact opposite is true for blockchain technologies, where the number of transactions that can be processed is actually fixed, based on the block size and the mining interval in place at any time. It’s not difficult to see, and it’s already been tested this way, efficiencies of ten to a hundred times and significantly more within the next 12 months.
Overcoming the limitations of Blockchain
Now, not only is the tangle scalable. It’s specifically designed so that the Proof-of-Work that’s required, is within the capability of most of the processes that will be in those hundred billion IoT-devices. From cars to thermostats, from dishwashers to elevators, from drones to traffic lights, from routers to shipping containers.
This means it’s a lightweight protocol that can become universal because every device and every sensor on the planet can participate in the IOTA tangle. No mining rigs are required here.
Value transfer without fees means that true micropayments will only be practical with IOTA. Just to put this in perspective: just last December, at the peak of the crypto frenzy, a single Bitcoin transaction would have cost you about $45 for one transaction, regardless of the actual value of the transaction.
Now fees have dropped quite a bit since then, but it’s still costing over $1 for a Bitcoin transaction and about 25 to 26 cents for an Etherium transaction. So, it probably won’t ever be practical to conduct a transaction for a cent, or a thousandth of a cent, using these technologies.
Because each iota transaction has to validate two other transactions, and all transactions are fee-less, IOTA makes it practical to send data without any monetary component. If you think about it, that just means 100 percent free data-transfer, anywhere on the planet. It’s quite remarkable.
There are simply so many applications of this technology, that it will change the way we think about the way the world works. There surely is the iPhone, which has changed our view of mobile computing in just 10 years.
Let’s look at some examples of how this might work.
Use-case: Autonomous Economic Agents (automotive example)
Your grandchildren are unlikely to own cars. They won’t see the point in it. It will simply be natural for them to buy mobility as a service, where an autonomous vehicle takes them from A to B, without the worries about fuel, insurance, maintenance, tolls parking, or any of those other annoyances that we associate with car ownership today.
Let’s just imagine – well, a thought exercise here – a future in which each of you owns one of these autonomous vehicles, and it just dropped you off outside the conference center here this morning.
The car is now available to perform services and transactions without you until you need it to take you back home tonight.
Now the vehicle is not just an autonomous driving machine. It’s an autonomous financial agent too, with an e-wallet that it can use to pay for services and earn revenue, instead of costing you money sitting in a parking lot all day.
Now, since our electronic vehicle doesn’t use gasoline, the government has had to work out, that it needs to replace fuel taxes, which it’s going to lose. Fuel taxes at the pump, with taxes that are part of the Road as a Service model.
So, the car is going to pay the road infrastructure directly on a per kilometer basis. So, every road will effectively become a toll road. Depending on the road type, the cost per kilometer to drive may vary. You’re going to pay more to travel on a three-lane highway than a side street, but you may also pay more to travel at rush hour than at off-peak times.
You may even pay higher fees to the car, not to another person, to the car, or the car will pay this to the infrastructure, based on how quickly the rider needs to get to their destination.
This might mean that the car will negotiate with cars in front of it that are not in a rush, who are willing to move out of the way to let you pass. You may be willing, or the car may be willing, to pay a small premium for that privilege.
Of course, you’ll pay for insurance the same way, but the insurance cost will be a fraction of what they are today because autonomous cars will be thousands of times safer than human-driven vehicles.
Now, people who need transportation will pay for the use of your vehicle, earning you money on a per-kilometer basis. They’ll pay using their own e-wallets, but again, this will be completely seamless. If you’ve ever got out of an Uber, you know you don’t actually need to reach for your wallet. You just say goodbye and leave.
IOTA as the Settlement Network for Transportation
Now your smart car will register potholes and black ice on the road surface, using sensors in the suspension and braking system, and it will sell that data back to the road infrastructure, so the city can prioritize road maintenance.
Your vehicle may even get paid, or make payments, by contracting with other vehicles traveling in the same direction, to platoon for energy savings.
I don’t know how many of you here ride a bicycle, but if you do, you’ll know how much energy you save by tucking in behind somebody in front of you. So, if our smart vehicle could save 20 percent of its energy consumption by negotiating with the car in front for the right to synchronize and tuck in really closely, the payment of a small premium for that privilege would be well worth it.
You’ve got cars negotiating with cars, with no intermediary here.
Now, a car will also sense that it’s dirty, based on weather and road data. It might buy a car wash on its journey, and if it needs to stop for a period, you might pay the parking meter for the space it occupies, or it might buy energy from an induction plate in the road surface.
Car manufacturers and transportation ministries are already doing proof of concepts with embedded charging in dedicated lanes (like we have HOV lanes today), where you would move in and out of a lane, and buy just as much energy as you need your immediate requirements.
But, remember, since our future car can store large amounts of energy that it purchases at night at low rates, it’s also a mobile power plant. It can drive to an office building or a shopping mall, where it can sell its power back to that facility at a premium, taking advantage of time-of-day arbitrage, and the higher rates that the mall or the office building is paying at that time.
That same mall might reward shoppers located inside the mall with micro energy credits or financial credits for each minute spent in a specific store.
And finally, as parts wear out, the vehicle might order and pay for replacements that will be 3d printed at a nearby service facility where it can drive itself as soon as they’re ready.
It sounds futuristic, but the prototypes are already being developed and IOTA will be the settlement-backbone that makes it all possible. In fact, IOTA is the only protocol that exists today that actually allows these scenarios to work.
And if you think this sounds like an episode of the Jetsons; this is the Volkswagen vision, revealed at the Geneva Auto Show, this March. This concept car has no steering wheel, no accelerator or brake pedal, the first production vehicle is slated for 2022 that’s just four years away. The car has 302 horsepower, a range of five to six hundred kilometers on a single charge, and will boast level five fully autonomous capabilities. It will also have artificial intelligence and a holographic user interface making it a mobile entertainment center and commuting suddenly got attractive again.
VW expects to have 15 production vehicles, based on this platform in production by 2025, so it shouldn’t come as a surprise that the Chief Digital Officer of VW, Johann Jungwirth, is on the Supervisory Board of the IOTA Foundation, overseeing the foundation’s annual and advising on collaborations between the two organizations.
You see, we’re moving beyond the Internet of Things, to the economy of things, where data and value merge. Everything is impacted and everything is going to change.
The way we think about ownership versus utility. The way we think about technology, even the margins of where we end and technology begins.
In case this all sounds a bit too scary, one of the great things about the way that IOTA works is the way it will integrate and protect your identity and personal information. Your
personal information will no longer be owned by Google or Facebook because privacy is not and should not be a currency.
Radical Business Model Innovation
In this new model, you own your data and you get paid, instead of large corporations, based on what you are willing to share and you always remain in control.
VW isn’t the only company betting on IOTA in a future smart world. Robert Bosch Venture Capital has invested heavily in this technology. It ramps up its own smart building, smart city, and smart everything initiatives, and they’re joined by other large corporations that share this initiative.
Just yesterday, Dr. Ralph Verna, who heads up Fujitsu in Europe as the chairman of the managing board of Fujitsu technology solutions joined the IOTA Foundation as its latest member and major world cities are starting to sit up and take notice.
Taipei (Taiwan), with a population of 3 million, has recently teamed up with the IOTA Foundation, with the intent of becoming one of the leading smart cities of the world. Citizens in Taipei will be issued a unique tangle-ID-card, that guarantees their digital identity.
This IOTA-based identity will be used to eliminate voter fraud, health fraud, welfare fraud, and provide more efficient and cheaper access to government services. And if Taipei is doing this, why isn’t Toronto?
The bIOTAspere Co-Creation Lab
So, just to finish up, my own company has already made this commitment. We are launching a unique lab environment this May called the bIOTAsphere. The bIOTAsphere is a Toronto-based facility, dedicated to commercializing real-world applications built on and leveraging the IOTA DLT protocol.
We have the full support of the IOTA Foundation and are working closely with them and their legal team to establish the philosophy and the governance models to match our shared vision and goals.
So really, I encourage any of you here, from government departments, politicians, corporations, financial institutions, universities, and developers, to reach out to us with real-world problems that you believe could be used or where we could use IOTA as the protocol for solving some of these things.
The bIOTAsphere will be a self-sustaining, not-for-profit ecosystem, that will create an environment based on shared visions and goals that will make the world a better place for our children, and our grandchildren.
Profit will not be its primary purpose and we’d love to explore with you what our future could look like. After all, it’s our collective future that we are designing.
So, thank you for listening.