MachineFi, is the financialization of machines, or, more precisely: internet-connected devices. So far, we only knew about “DeFi” Decentralized Finance and “GameFi” Game Finance, even Helium has a decentralized market for device connectivity.
However, why do devices need financialization or decentralized markets? When Amazon’s internal cash register rings in the sale of internet-connected devices like Alexas or Apple Watches, it marks the beginning—not the end—of the financial contract between buyer and seller. This is why tech companies are willing to sell devices at, or even below, cost. In other words, the financialization of internet-connected devices already exists in a rudimentary way.
So MachineFi takes the riches generated by device-financialization from big-tech and decentralizes it to actual users, which is what web 3.0 is all about: changing the financial model of the internet (and now devices) from platform advertising to user ownership (often through the broad distribution of a token). Example: At a congressional hearing on crytpocurrency, “Bitfury” CEO Brian Brooks, explains the blockchain and how it plays an integral role in Web 3.0.
Now let’s dive into how MachineFi works, by analogy, with the U.S. mortgage market.
The value generated by the “internet of things” from now until 2030, according to McKinsey, will be $12.6 trillion. And while this isn’t a one-to-one comparison, the primary US mortgage market was just under $17 trillion as of early 2021. Which gives a sense of the opportunity. In other words: Machines could become as important to household wealth as homeownership. This is a radical claim. But one that seems plausible given the rate of automation. The problem is, without MachineFi, this wealth will accrue to the balance sheets of a few powerful tech giants. The average person risks being shunted outside the economic arena in the face of automation. MachineFi is about addressing this inequality—giving everyone the financial tools to participate in our economic future.
MachineFi and U.S. Mortgages
The modern mortgage was introduced in the United States in the early 1930s when less than half of Americans owned a home. After the introduction of the mortgage, the rate jumped to 65 percent and has stayed roughly steady ever since. As the rate of ownership rose, the value of the average home rose with it (in 2000 dollars) from $30,600 in 1940 to $119,600 in 2000. The point here is that financial innovation was a cause not an effect of this boon to household wealth. But not all financial innovation is created equal (not all financial innovation results in equitable distributions, obviously). With 2007-2008 financial crisis, Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities spun out of control as mortgages were chopped up and tranched into piles of financial abstraction dynamite that blew once housing prices started to fall. In this analogy, MachineFi is to the mortgage what big tech is to the CDO. MachineFi, which is done right, will cause the proliferation of device innovation and distribution of wealth to households. This is why it needs to be taken under consideration, right before (and during) the economy engages in this seismic shift to automation.
Why MachineFi Matters?
MachineFi’s main objective is to transition traditional IoT and machine verticals into MachineFi decentralized applications (Dapps) that will enable millions of users to participate in the machine economy with billions of smart devices. The world has witnessed the boom of smart devices and automated machines, including smart home devices and smart cars. However, few have noticed inter-machine communication is significantly increasing. According to a McKinsey report, the Internet of Things (IoT) could unlock a global economic value of up to $12.6 trillion by 2030. Techjury estimates that over 125 billion devices will be connected to the Internet by the start of the next decade, powering that machine economy and make world better place to live.
Resources:
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