objects in the physical world . Once tokenized 1 , the IoT devices and generated data can create marketplaces of physical and digital assets . Those assets can then be indexed , searched , and traded as other online commodities .
2.2.2 DISTRIBUTED LEDGER TECHNOLOGY ( DLT )
A distributed ledger can be described as a digital ledger of asset transaction records maintained decentralized across different locations and people . The salient characteristics of a distributed ledger — decentralization , transparency , immutability and trustworthiness — make it a good infrastructure for ( mutually ) untrusted parties conducting business without relying on any trusted intermediary like a bank or institution . More importantly , DLT has introduced an element of finite supply when physical or digital assets are tokenized , thereby transforming those assets into the “ Internet of Value ”.
2.2.3 TOKEN ECONOMICS
According to [ 2 ], token economics , otherwise called crypto economics or tokenomics , can be understood as a subset of economics that studies the economic institutions , policies , and ethics of the production , distribution , and consumption of goods and services that have been tokenized . In the context of machine economy , token incentives represent a powerful mechanism to address the cold start problem in IoT businesses and well-designed economic incentives . Token distribution models are crucial for influencing the behaviors of all the IoT ecosystem stakeholders and determining the long-term sustainability of an IoT business .
2.3 KEY SUCCESS FACTORS OF THE MACHINE ECONOMY
The previous section explained the three fundamental building blocks for realizing a machine economy-oriented system . However , building a thriving and sustainable machine economy depends on several critical success factors , detailed from both technology and business perspectives .
2.3.1 TECHNOLOGY PERSPECTIVE
• Trustworthiness of IoT systems : IoT devices and the generated data are assets in the machine economy . As a result , the industry best practices [ 3 ][ 4 ] should be applied to ensure the end-to-end trustworthiness of the IoT stack . IIC [ 3 ] defines trustworthiness as “ The degree of confidence one has that the system performs as expected . Characteristics include safety , security , privacy , reliability and resilience in the face of environmental disturbances , human errors , system faults and attack ”. Therefore , guaranteeing the trustworthiness of IoT systems requires applying industry standards to the end-to-end process from the data collection , processing and transmission , and to the life cycle management level with device onboarding , updates and decommissioning . Only with such standards , can marketplaces with valuable IoT-driven assets be achieved .
1
Asset tokenization is the process by which an issuer creates the digital representation ( a . k . a . a crypto token ) of a tangible or intangible asset on a distributed ledger .
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