The Machine-to-Everything (M2X) Economy by Dr. Benjamin Leiding
It is the year 2045 – very few people still own a car. Instead, they can choose from a variety of transportation services provided by autonomous and self-driving vehicles, which in future will not only solve the tasks of navigation and vehicle guidance themselves but also offer independent transportation services to cover their operating expenses, i.e. maintenance costs, the cost of the next battery charge, as well as tolls and parking fees. What is unique about these cars is that they are not owned by a private individual, a company or the state – they are self-owned and act as autonomous service providers within a new ecosystem of intelligent and highly connected machines.
Similarly to today’s service providers, users negotiate transportation contracts with autonomous cars via interfaces, for example, via a smartphone app. The customer provides the current position, the target destination, the pick-up time, and specifies further requirements such as the desired vehicle size, luggage load or various comfort features. In case several competing autonomous vehicles offer the same service, market mechanisms determine which autonomous car receives the transportation contract.
Customers cost of transportation decrease since autonomous vehicles, as independent economic actors, do not have to generate a profit for their owners and instead only have to cover their operational costs. Furthermore, fewer vehicles are needed since the concept optimizes the utilization of each car. For periods, when there is no demand for transportation services, the vehicles may idle or move to a different location with a higher demand for their services. The concept is not limited to passenger transportation by car but can be extended to all means of transportation (ship, aircraft, drone), as well as to the transportation of goods.
Another scenario concerns the autonomous negotiation of road space as a scarce resource. The most sought-after routes of a road network are subject to tolls based on a dynamic price structure to ensure the most economical use possible and to prevent congestion further. Tolls are charged for the most efficient, fastest or most frequented routes within a road network based on a dynamic pricing structure to avoid congestion. Autonomous cars that still want to use the optimal routes have to pay a toll, while autonomous vehicles on the alternative routes – which are potentially less efficient – either receive an alternative premium or can use these roads free of charge. Alternatively, autonomous vehicles may trade available road space directly (peer-to-peer) with each other – e.g. car A pays car B a minimum amount of money to purchase the rights of way and be allowed to yield into the position in front of car B during a traffic jam and thus reaches its destination more quickly.
Nowadays, the technical feasibility of this scenario is undisputed. However, it is not clear how much longer we have to wait until it is implemented and available for public use – 10 years, 15 years or even longer? The increasing pervasiveness of so-called smart devices and the progressing digitalization of our daily lives are driving the development of new technical and economical business models. Thus far, economic business relations focus on transactions between humans. However, with the emergence of intelligent and autonomously acting machines, new economic dimensions are opening up, enabling not only transactions, interactions and collaborations among humans, but also among humans and machines, among machines themselves and even among machines and infrastructure components such as charging stations or traffic lights. As a result, smart machines with sensors may independently sell their data (such as temperature or air pollution) to interested parties. In the context of autonomous vehicles, automated collection of tolls, independent refuelling or charging processes and other applications may be applicable.
These concepts are known and well understood. However, their practical application requires the tamperproof, transparent and – for the end-user – comprehensible presentation of the automated decision processes. The increasing number of machines offering independent services in this environment results in new business and transaction models which require context-specific process modalities, e.g., the ability of autonomous smart devices to evaluate – in a machine-readable format – the reliability of their business partners. Furthermore, the transfer and exchange of values and services must remain traceable. In order to detect contract deviations, a comprehensive, machine-readable, and non-reputable logging of all interactions is mandatory. In the case of contract violations, either party should be able to prove such and enforce agreed-upon penalties.
The resulting economic system, which covers all transactions (e.g. payments or sold data), interactions (e.g. congestion warnings) and collaborations (e.g. collaborative transportation services) of autonomously acting smart devices with other machines, humans or infrastructure components, is referred to as the M2X Economy (Machine-to-Everything Economy). In the context of the M2X Economy I addressed the following questions in my PhD thesis:
- How to enable interactions, transactions and collaboration as well as reliable value transfer among entities of the M2X ecosystem?
- What does the M2X ecosystem look like?
- How to identify and authenticate entities in a decentralized M2X ecosystem?
Nowadays, business collaborations and transactions occur almost exclusively among humans. However, the M2X Economy requires business transactions and collaboration beyond this specifically human-focused approach. Traditionally, business transactions and further collaborations are governed by contracts either in the form of an oral or written agreement that is enforceable by law in which all involved parties voluntarily engage. Such agreements – usually represented in the form of documents – uniquely identify the participating parties, specify and define provisioned services or goods, monetary compensations, eventual penalties, as well as further constraints and requirements that vary depending on the context. Transactions rely on trust, and the contracting parties usually consider contracts as a symbol for an existing business engagement, while the enforcement of traditional contracts is either too complicated, time-consuming or impossible, certainly when crossing borders and legislation. An alternative approach to the conventional oral, or paper written contracts for transactions and collaborations are electronic smart contracts that allow to govern business transactions in an M2X-compatible manner using a computerized transaction protocol.
Over the last decade, distributed ledgers (DLTs) and blockchains majored and spread in popularity – most noticeably by providing the foundation of the cryptocurrency Bitcoin. The concept of smart contracts is generally perceived to be closely connected with the emerging popularity of DLTs and blockchains. However, the idea of smart contracts was already introduced in 1994 by Nick Szabo who defined a smart contract as “a computerized transaction protocol that executes the terms of a contract” in a self-enforcing manner, thereby minimizing the need for trusted intermediaries among transacting entities.
Blockchains enable the execution of smart contracts, thereby providing the foundation for interactions, transactions and collaborations among autonomous machines. In consequence, smart contracts eliminate the need for intermediary service providers, thereby reducing business-related costs as well as the need to trust those intermediary service providers. Smart contracts allow for the automated, globally-available orchestration and choreography of heterogeneous sociotechnical systems with a loosely coupled, peer-to-peer-like network structure. Additionally, a blockchain-based smart contract-driven platform enables fact tracking, non-repudiation, auditability and tamper-resistant storage of information among distributed participants without a central authority. Furthermore, a blockchain-based smart contract platform enables fact-tracking, non-repudiation, verifiability and tamperproof storage of information among distributed participants without a central authority. Finally, they provide a consistent view of distributed data sets, especially in systems that involve large numbers of computing nodes – in our case, the participants of the M2X ecosystem.
To answer the first research question posed above, we introduce a conceptual collaboration model for autonomous machines based on smart contracts which provide the foundation for interactions, transactions and collaboration among autonomous smart devices. While negotiations between humans are subject to certain flexibility and freedom, these processes must be structured and fully defined for autonomous machine agents. Smart contracts – or complex combinations of smart contracts – provide a pre-defined sequence of actions for handling interactions and transactions of autonomous machines.
Based on research results from Tallinn University of Technology, we conceptualized an abstract process lifecycle that offers not only human-machine transportation services but also transactions, interactions and collaborations in general, such as battery charging services between a charging station and a car, automatic billing of tolls and parking fees and many more, as they all follow the same underlying process:
- Select a suitable smart contract template from the contract repository – in our example, selecting a transportation service contract.
- Exchange information regarding the involved entities, e.g. identities of the contract parties, departure location and travel destination, departure time, number of passengers to be carried and preferred comfort level.
- Negotiations among the client, the vehicle and potentially further competing vehicles in order to agree on a price for the service as well as related conditions.
- Exchange of electronic contract documents containing the contract itself, rights and obligations as well as further control and conflict resolution mechanisms.
- Finally, the user and the self-driving vehicle meet at the departure location to start the contract enactment. Alternatively, the clients may select from a variety of pre-packaged trips, join existing trips of larger groups, or the autonomous vehicle suggests a different travel period at a lower price, etc.
Monitoring mechanisms check at all times whether any contract violations occur, e.g., the user does not show up at the meeting point; the vehicle does not approach the agreed-upon destination. Depending on the severity of the contract violation, our collaboration mechanism supports various resolution strategies that mediate between the contract parties. Failing to transport the user to the agreed-up destination results in an immediate rollback of the smart contract or invokes some kind of a mediation process that is supervised by a conflict resolution escrow service. The transportation contract terminates or expires either after the customer arrives at the final destination, or when the contract is prematurely terminated.
Theoretically, the process lifecycle mentioned above even enables highly-connected smart factories that manage themselves autonomously, independently recognize the demand and react to it adequately by purchasing matching quantities of raw materials, organize the corresponding logistics as well as raw material processing and delivery to the customer without the need for human intervention. Only the corresponding electronic smart contract templates must be provided upfront.
The issue of designing a suitable ecosystem leads us to the second question: What does the M2X ecosystem look like? Traditional IT platforms tend to deliberately forced, or functional lock-in effects that lead to the formation of self-contained data- and service silos such as Facebook, Google, or Amazon. In the context of traditional IT platforms, several Facebooks make little sense – neither from a network economic, nor from a profit, or monopoly-oriented perspective of a corporation. Similar applies to the M2X ecosystem of decentralized and autonomous smart devices where a one-stop platform is also desirable, but not a manufacturer-focused platform with deliberately forced, or functional lock-ins.
Instead, an interoperability hub/layer that implements the compatibility of different manufacturer platforms is a desirable and viable option. Only the resulting interoperability of smart devices enables the exploitation of economies of scale and increased efficiency. A blockchain-based interaction, transaction and collaboration platform as described in previous sections not only enables an interoperable platform for autonomous smart devices (e.g., vehicles) but also further reduces dependency on intermediaries. Furthermore, a blockchain-based solution enables the decentralized settlement of value-added in the form of crypto tokens; these can be created entirely without central instances or intermediaries and exchanged directly P2P. Technically, such an interaction, transaction and collaboration platform could be realized by so-called relay chains. Relay chains as Polkadot offer a communication interface (hub) over which different heterogeneous blockchain platforms can interact with each other. Thus, for example, the specific blockchain-based services of a manufacturer can also be made accessible outside their own platform. It does not only enable cross-platform interaction of autonomous smart devices described above, but also increases customer reach for manufacturers and service providers.
Besides the software interoperability, interoperability on the hardware level is indispensable as well. In the context of battery charging services for vehicles and electricity trading, in general, this concerns the line voltage, the frequency, or the compatibility of the particular connection method for the consumer: Different charger standards for various electric car manufacturers exist.
As part of my dissertation, I also addressed additional features and requirements of the M2X ecosystem. Furthermore, I present the architecture of an IT-service platform that enables multi-vendor service enactment of autonomous and self-driving vehicles. In cooperation with the US start-up Chorus Mobility (Link) , a prototype of this platform was developed and awarded the first place in the prestigious “MOBI Grand Challenge”.
In order to enable secure business collaborations, interactions and transactions within a digital economy a digital identity representation requires to establish trust, enable reputation mechanisms, perform verifiable and accountable transactions and provide reliable as well as auditable data provenance.
The amount of trust that we attribute to another entity depends on the identity of that entity, which legal system is applicable, etc. – only a few of us are willing to rent our house online to an anonymous person. Even though the issue seems to be trivial at first sight, it is more complicated than expected – after all, we cannot merely equip every machine with a paper-based ID card. Instead, we require a digital machine ID document that servers as a functional equivalent to an ID card. Besides, humans and machines must be able to identify and authenticate each other beyond doubt.
Identity management in the M2X ecosystem is a multi-stakeholder issue that involves not only its users but also OEMs, infrastructure providers, regulators and various service providers. A single central authority that governs identity management for all stakeholders is unlikely and poses the risk of a single point of failure. Moreover, identity data silos raise privacy concerns and suffer from interoperability issues, i.e., lock-in effects. Additionally, a centralized infrastructure and architecture that powers the M2X Economy is neither desirable nor facilitating the full potential of the ecosystem. Besides, an identity infrastructure that relies on a centralized certificate authority (CA) is not an option either – especially given the underlying security issues and implications. Thus, a centralized identity solution is not an option, and a decentralized and interoperable solution that fosters an open M2X ecosystem is required.
As part of my dissertation, I present the concept for a digital self-sovereign identity solution that fosters an open M2X ecosystem, which does not require a central authority. Instead, each user, whether human or machine, manages his or her identity independently and in a self-sovereign manner.
My thesis lays the foundations for the vision of the M2X ecosystem and describes its fundamental features and critical functionalities. It suggests architectural concepts that encompass an interaction-, transaction- and collaboration model for M2X applications, a business collaboration lifecycle and corresponding governance structure as well as a set of modalities for these use cases. Also, it presents a decentralized self-sovereign identity solution in combination with a validation and authentication mechanism that is suitable for the M2X ecosystem.
However, the idea of autonomous machines as common market participants opens up many further conceptual questions that still need to be examined more closely.
In the context of growing problems caused by climate change and scarcity of resources, an M2X ecosystem of autonomous transport service providers also allows for more efficient use of existing resources instead of keeping one – or even several – cars per household.
If you would like to learn more about the potential of the upcoming M2X Economy, check out my thesis online or send me a message: Link
Special thanks to my supervisors Dieter Hogrefe, Clemens H. Cap and Alex Norta!