The future of machine economy: Q&A with IOTA Foundation co-founder Dominik Schiener and BiiLabs CEO Lman Chu

Judy Lin, DIGITIMES, Taipei

IOTA Foundation, a German blockchain NPO, announced on May 17 that it is setting aside US$2 million to set up an IOTA Ecosystem Fund to support developers. The announcement has caught much attention in the blockchain community, but not too many are aware that IOTA Foundation is also building its first Asia outpost in Taiwan.

Digitimes recently talked to IOTA Foundation co-founder Dominik Schiener and their business partner in Taiwan, BiiLabs CEO and co-founder Lman Chu about why the German NPO chose Taiwan as its springboard in Asia and their vision for the future machine economy.

Q: What role does IOTA want to play in future economy? What is your vision for that future?

Schiener (S): The way we look at the future economy, there will be a few distributive ledger technologies, two or three, maximum. But those will be focused on specific use cases or industries. I don't think there will be a ledger only for mobility, another only for energy, because the future is inter-connected.

For example, the car needs to pay the grid for electricity, so they need to have a shared protocol and virtual coin. The way to eliminate the friction of the trade is to have one ledger for the machine economy. And that is our vision, that one ledger will be used universally. But there will also be other ledger to be used by banks and central banks. We are not really focused on that area; we fundamentally focus on machine-to-machine payments.

IOT and blockchain are all about automation. They will be two very essential technology as the backbone systems around us in the future machine economy. The way we envision the future is that you don't even notice where IOTA is used. We want to automate all the processes around us and make our experiences much more seamless. For example, you get into a vehicle and pay per meter for energy as you drive. The vehicle pays the charging station and toll station autonomously. The automatic machines make the entire network much smarter, simply because they are sharing information with each other all the time: "Hey here is an accident, need to call an ambulance," or "Reroute the traffic." We are building an intelligent network around us, where there is the trust layer behind us that nobody can control it, and where there are machines coordinating each other. Automation will make our lives easier, without having to get off the car to get a stupid parking ticket.

Q: Will that require a lot of cloud computing power?

S: Much more is on edge. We are focused on how one machine can pay another machine for that computing power. For example, one car needs to pay a computing station to execute a specialized algorithm, so you pay for the computation itself. One device collects data, one device buys data, one device sells data, and another buys computation. It is really a network of different actors with different capabilities, but they all work together, like a symbiosis. The most empowering thing is you give machines a wallet. With a wallet the machine can become an autonomous economic agent. As such, a small Raspberry Pi can have the same computing power of a supercomputer, simply because it can buy this computing capability. This is how the future looks like: a machine gets the resource from another machine.

Q: How does that work? When a machine transacts with another machine, do they need to identify each other?

S: No, that's the whole point. One machine can do a micropayment to another machine. For example, a car pays the charging station. As soon as the payment stops, the energy flow stops. You don't need to sign a contract for that. This doesn't require identification for trust.

Chu (C): In the real world right now, we can only do monthly subscription for many services. That is because we still need a complicated system of multiple agents to make sure that you get the service for the money you pay. But in the future, when micropayment works on blockchain, you can pay exactly how much you use the service, by minutes or seconds. That will create many new business models.

Q: To do that, you will need good hardware too. Taiwan produces good IoT sensors and AI chips, and are training more software engineers for AI.

C: That's why they are setting up the first office in Asia here in Taiwan. Like I said, blockchain is very suitable for Taiwan, but probably not the mining machines. The opportunity lies in the big ecosystem formed by networks through the IOTA distributed ledger core on IoT devices.

Q: Tell us more scenarios of machine economy.

S and C: When it comes to IoT, we really want to solve the "trust" problem. Today IoT is owned by a few companies that are centralized. And it is a very insecure system, with a single point of failures.

And we want to solve the trust problem for data, so we can trust and verify the data from machines. We also want to bring trust into the network, so that you can execute transactions between two machines by setting the transactions themselves. That would make it much more secure. With these two properties - data security and transaction easiness - you can derive other use cases in different industries. For example, audit trails for supply chain, or chain of custody in the factory, and digital twins, are all very important use cases.

Or collecting data in a vehicle, you cannot tamper with it. Or in a financial use cases that I mentioned before, when a car has a wallet inside, it becomes an autonomous economic agent. You can start paying the infrastructure, such as the tolling stations, towing and parking stations, energy, etc. And you can also start earning money by selling excess electricity back to the grid. It is also a brilliant way to balance the grid in the future.

Another big use case is data - data security and selling of data. When a car drives on the street, it autonomously collects data: "Hey here's a parking space available," "There's a charging station," and so on, and sell the data for the use of other cars.

There is unlimited potential. That is why we say permissionless ledger is very important. We as founders can envision what the future can be like. We want to create a protocol and ecosystem that everyone can use our technology in a way just like what BiiLabs has been doing in Taiwan and Japan. In Taiwan BiiLabs works with the Taipei City Government to create Taipei Digital Citizen Card, while cooperating with National Cheng-kung University on the digital existence credentials for graduate diplomas.

Q: How many partners do you have all over the world?

S: Too many to count! We have a very strong focus on Europe, and more in the US than Asia. We also have dozens of partnerships where we work with big companies, universities, startups, research institutes, in projects that they build with us.

We already have an office here in Taiwan, hiring four engineers. Our intention is to grow the office here and hire more people, grow to 10-15 people by the end of the year. For us, Taiwan is really our entry to Asia, simply because the government has shown willingness to work with us. We are very excited about Taiwan. We are already working on multiple smart city projects in Europe and America, for example, Austin, Texas. And now we will do the same thing in Taiwan, setting up a test bed. That is very interesting, because we can have these test beds with citizens to try up new applications. And our focus is also to replicate the success stories we had in Europe, like the charging stations, smart grid system, etc, and do the same here in Asia, in general.

We have test beds here surrounding citizen applications, for example, digital identities and data sharing. While in Austin, we have test beds on smart mobility, also cooperating with the government. What we are doing now is specifying user cases, such as how IOTA can help with congestion problem, how IOTA can help car data sharing with cars and the government, and how IOTA can help improve service provision of the government, etc. And in Europe we have smart energy districts in seven cities. We plan to do the same work here in Taiwan with our mobility and energy test beds.

Q: Is BiiLab's applying blockchain on car insurance also included in your work here in Taiwan?

S: Probably in the future, but not the primary task for now.

C: BiiLabs has a different role from the IOTA Foundation. They are the creators of the IOTA Tangle technology, and are responsible for maintaining and developing the technology roadmap. As for BiiLabs, we are a startup. We explore all kinds of business model that we can develop with that technology to solve the current problems of the society together with IOTA Foundation.

The user case of car insurance which our customer uses on-board sensors to record drivers' behavior, is to provide data for evaluating the premium of car insurance policy. The customer decides to use blockchain technology for this data audit trail, because they want to ensure that nobody can tamper with the evidence. Drivers would not know there is such a record - all they have to do is obey traffic rules and drive well, and they can get better ratings and lower premiums for their policies.

Q: When blockchain becomes readily available in our daily lives, does that mean in the future everyone will need a smartphone with blockchain function?

S: I think a blockchain smartphone makes very little sense, it is more of a niche product that cater to the crypto currency club. But we'd rather see the trend as more and more smartphone manufacturers will allow digital wallets in their app stores. In time, the world will be more open for crypto currencies and digital wallets. The interaction with machine economy will be much more seamless when IOTA is used in the payment.

Q: Your vision for IOTA Tangle technology is to achieve a frictionless machine economy; however, as there are so many crypto currencies and tokens out there, there's due to be transactions between this currency and the others. How do you solve the problem?

S: We see the future very differently, because from my point of view, tokenization makes little sense. If you tokenize, for example, a token for energy, a token for this company and that company, then it will start to fragment the ecosystem again. That will make people difficult to trade with each other. The way we see the future is that there is going to be only one currency for the machine economy, because through that you reduce the friction. If we don't do that, our machines will become foreign exchange traders, constantly checking: "Hey what's the price for this coin, and what's the price for that coin?" That will introduce new layer of complexity. Like I said before, there will be two or three crypto currencies that will prevail, because most of the other ones don't make any sense, they don't have adoptions.

Q: Some big countries are considered to be the winners for AI. Do you think the machine economy will come under control of big countries, too? Or will it be different?

S: It will be very different. Crypto currencies and the blockchain were introduced to empower the people, so they can decide what happens to the money and have more opportunities for financial inclusion. Blockchain is all about empowering. The Internet brought us free flow of information, and now crypto currencies and blockchain give us free flow of assets. Financial inclusion, just like this new ecosystem, people in Africa can develop an app for you to use it in transactions. At the end of the day people own their assets, and with the transparency of blockchain, you can verify it. People now talk about the social media and fake news that divide people. Blockchain is a powerful tool that can stop people from spreading lies.

Q: Yes, since people will have digital ID in the future, it would be easy to trace that on blockchain. But can you also sell your own data? Or the information you curate?

S: That is exactly the future of data. You can have your own sovereign over your data, your identity. Besides you can decide who can see your data. You can also decide who gets access to which data. It is also important to be able to sell your data. You can decide whether you want to participate in the data market or not. This becomes a very interesting selling point for companies in the future. One company can say, "Hey our car allows you to sell data that you collect when you drive around," or the other one might say, "Our product will never collect data from users unless they decide." You can differentiate by creating different business models. So people are more empowered as a result of that.

We encourage businesses and organizations to research and explore different services and business models with us. The time to experiment is now. Otherwise you would have to pay expensive consultancies to catch up in the future.

Q: One of the major concerns with blockchain is security. How secure is IOTA?

S: IOTA is open-source and open network and battle-tested. Like Bitcoin, IOTA is battle-tested too. There is a community of very smart people all around the world testing its vulnerability trying to get rich. On the other side, we have very smart people on our team, pioneers of this entire blockchain space to improve the protocols and firewalls. We also have a big community of institutes and partners participating in our research. Through that we gain more trust.

Q: What is the major difference between IOTA and other blockchain technology?

S: We have a very different approach, and no longer based on blockchain. We are much more scalable, and we have no transaction fees and no miners. Second to that, we are a German non-profit organization, the only one NPO; the others are all for profit. We are based in Germany, work closely with the industry, so we have very strong partnerships there. Our focus is not on crypto currencies. Right now we have more than 100 employees in 23 different countries. Very decentralized.

C: BiiLabs is also like that. We have 15 employees in six cities - five in Taiwan, the other is Osaka, Japan.

Q: How do you plan to expand to other parts of Asia through Taiwan?

S: First we want to do some bigger projects here to build up success stories. We are also talking to some businesses in Japan and South Korea. But Taiwan is definitely our primary focus right now. In the future we can replicate those experiences to other countries. Asia is so big and so spread out, maybe we will expand to Singapore or Hong Kong in the future too. But we need to focus. Right now our focus is in Taiwan.

IOTA Foundation co-founder Dominik Schiener (right) and BiiLabs CEO and co-founder Lman Chu (left)

Photo: Michael Lee, Digitimes, June 2019