The internet of things will shape daily life in the twenty-first century, but the things need their own way of working with money. Thanks to Bitcoin and the Blockchain, money is ready to take the next leap forward - and middlemen should be far more afraid than they are.
If you’re the lucky owner of a Tesla electric car - which will also officially launch on the roads of South Africa in 2018 with the Model 3 - then your car has a permanent internet connection and the manufacturer can update it remotely. If your Tesla has a problem it will automatically report it to the company and you will be alerted to bring it in. Soon the car will be able to drive itself there, with modern Tesla models ready for full self-driving capability.
Cars that update themselves, vending machines that report on stock levels, lightbulbs that double as wireless network points and factory equipment that feeds data back to headquarters are just some of the things that already have their own internet connections and operate without much, if any, human intervention. The things are forming their own economy and that economy needs a currency.
The problem with regular currency is that it was never invented with the internet in mind. The way we’ve done money before relied on mechanisms like gold ingots and credit cards. It also relied on networks of middlemen that profit from moving money from one place to another. All that is changing rapidly thanks to Bitcoin and the Blockchain.
Largely because of our friendly middlemen, micro-payments have been a challenge online. It has been impossible to send just a few cents, for example, using existing payment systems. The fee structure and limits of old school ledgers meant that only larger transactions made sense.
Bitcoin and similar cryptocurrencies, however, do not discriminate on the size of a transaction. You can send tiny fractions of Bitcoin and the network will handle it. The rewarding of miners who process transactions has been designed in such a way that it scales down almost as well as it scales up.
This means that machines can pay each other in real-time for the work they do. For example, a server in a data centre could have its own Bitcoin wallet. It could pay for its electricity and internet connectivity automatically and it could earn Bitcoin by providing services to other servers and devices.
In the future Uber is sure to replace human drivers in its marketplace with autonomous vehicles. These cars could each have their own wallet and be automatically paid from passengers’ wallets. They’re also more likely than not to be electric vehicles, and could pay for power at automated recharging stations.
Your house may one day generate more electricity than you need and earn money by selling extra power to the grid or other consumers. Your laptop could connect to a mesh network, sharing your internet connectivity with users nearby and being paid in Bitcoin for doing so.
A galaxy of automated micro-transactions will occur as the things around us take over and increasingly run themselves.
This will require the Bitcoin network to eventually process millions of transactions per second, and if you’ve been watching the news you might’ve fallen prey to misinformation suggesting that the Blockchain has a problem in this regard.
It doesn’t.
The network was deliberately constrained to just a few transactions per second by limiting the size of each block in a chain. Removing this limit isn’t a technical problem, but rather a philosophical one. There are many ways to do it - the most obvious of which is to simply increase the block size - but the debate has been about exactly which ‘how’ to pick and, more importantly, when to do this.
It isn’t a real problem, but it suited the naysayers to suggest that it is, some of whom work for companies trying to compete with the Blockchain, which is an open, distributed network unlike the proprietary white elephants they’re working on. It’s like trying to build a competitor to the internet itself. Good luck with that.
The Blockchain will consistently scale up to potentially millions of transactions per second or introduce systems of batching and side-chains than make any number of daily transactions possible.
The new economy will bring with it new opportunities for business. The internet of money will require a new kind of merchant and revolutionary ways of metering services and payments. Businesses in the future may have to consider these machines as their primary customers, and the owners will hardly be involved.
The things have their connectivity, and now their own currency too. And the future is bright for people who will have more time for doing other things.