Savannah Fortis: Is it possible to tokenize and decentralize the physical world, and if so, how does it work? And what projects are already on the front lines of this effort?
Hello, everyone, and welcome back to another episode of the Decentralize with Cointelegraph podcast. I'm your host, Savannah Fortis, and today we’re going to be answering all those questions and more in a special interview with Leo, the co-founder of the Peaq network, in Dubai, at the Token2049 conference.
We’re going to be diving, we’re going to be diving deeper into a corner of Web3 known as DePINs, or decentralized Physical infrastructure networks, to better understand the buzz around this revolutionary technology and its role in creating bridges between the physical and digital worlds.
In simplest terms, DePINs create a network for physical things that allows users to contribute their physical resources to a pool that essentially cuts out the middleman for physical resources. These networks are run on top of a blockchain and use tokens or cryptocurrencies for transactions, making everything transparent and accounted for. Users who then contribute their resources to the DePINs network are also rewarded with special tokens for helping out. The idea of DePINs, or even just PINs, has been around for years. However, thanks to decentralized technologies and the emergence of new networks with the capacity to scale massive infrastructure projects, this has set the industry ablaze with activity and innovation. Some industry insiders have even called DePINs one of this decade’s most important crypto investments. And at the forefront of this niche is the Peaq network, a layer-1 blockchain which features decentralized IDs with the Polkadot ecosystem, Cosmos, Solana and Binance Smart Chain and is bridged to dozens of blockchains through its integration with Wormhole.
Leonard Dorlöchter, the co-founder of the Peaq network, and his team at Peaq have been active with dozens of startups, creating innovative DePIN projects that are now being deployed all over the world.
Welcome, Leo, and thank you for joining us. We are so excited to have you today and to be here in Dubai and to witness some of the exciting things Peaq has in store for the Web3 space.
Leonard Dorlöchter: Thanks so much for having me, Savannah.
Savannah Fortis: I'd like to begin by hearing a bit more about your background and how you came into the DePIN space, and ultimately, what led up to your role as co-founder of Peaq.
Leonard Dorlöchter: Yeah, so it's been late 2016 where one of my co-founders, till he told me. So, we both moved to Berlin independently from each other and coming from Western Germany. And I studied business informatics. And then at some point, you know, we both saw we were in Berlin, and we met for coffee. And then he told me about Ethereum and the potential to run applications in a decentralized manner, and that was completely fascinating. And it was then in 2017 where we stumbled upon Iota, who were also in Berlin, who had that vision of a machine economy. And we were like, wow, machines. In Germany, there are a lot of car manufacturers, Bosch, all those devices. We're like, this is actually a meaningful application of that technology. We then try to build things with that. We then realized, OK, that the technology didn't work as promised and also wasn't as scalable yet as it would have needed to be to really build machine economy use cases. And we then decided to focus on enterprise blockchain cases with a special focus on IoT. So, between 2018 and 2021, we've built a blockchain IoT enterprise studio, where we work with Fortune 500 companies such as Audi and the Volkswagen Group on use cases such as decentralized charging. And this was effectively the first time that started in 2019, where this concept of a DePIN came up for us because Audi was saying the charging infrastructure is super fragmented, and we want private charging stations to be able to be connected to them or available to the public. So, essentially a people-powered charging network, and we've built that. However, as we all know, enterprise blockchains don't really make sense because they don't disrupt anything because they're not public and permissionless. However, in those years, we learned a lot about IoT blockchain use cases. We understood they all have more or less the same functionalities that they need on the back end. And that led us then to start building Peaq, as we know it today, in late 2021.
Savannah Fortis: So, we've heard a little bit about what DePINs are, and you mentioned how you came into them. But I'm curious if you could highlight for our listeners the difference between a DePIN with its decentralized aspect and a traditional PIN. And their benefits, and perhaps even if there are any drawbacks.
Leonard Dorlöchter: Yeah, I think to really see the difference and the advantages, telco is probably a good example. So, traditional telecommunication networks are built by big telco companies. Maybe when you walk through a city, you see those big, um, things on top of the roofs, which are 4G or 5G networks. And there's a big telco with $10 billion of budget, and rents places on top of houses and installed those massive networks. So, this is how traditional telecommunication works today and has been so far. And that makes a lot of sense.
However, what if, you know, go to the people and say, hey, you already have space living in New York? You know, you have some room space next to your window, you could place a hotspot there, a 5G hotspot, for example, and provide connectivity around you. And then you use the internet you have at home anyway as a backbone for that connectivity. So now you can incentivize private individuals to use the space they have already providing a hotspot there. And suddenly, you bootstrap a people-powered telco network. And the beauty there is that doesn't cost tens of billions because the people have already the space, right? They need to invest some money into the hardware, and everyone is responsible for the maintenance themselves. In the Telco case, they hire a big, big, um group of people that install the hardware that maintains the hardware. They need to pay a lot of money to rent the right spots in order to install them. And in the DePIN model, you can flip it around, make it people-powered, and then also enable everyone to earn from telecommunication and not just a few big companies. And yeah, I think this example is really a strong highlight of how you can bootstrap a deeper network. It's much less capital-intensive than traditional infrastructure building, and it's much fairer because everyone can participate, not just a few big companies.
Savannah Fortis: We are already building this world, as we are part of the Web3 world ourselves. And we see it coming to life behind the scenes. And, you know, Peaq is really making a huge effort in this space. And so I'm just curious, you did walk us through real-world examples of DePINs, but could you give us some more real-world examples of DePINs, and perhaps, you know, DePINs that are being used on the Peaq network?
Leonard Dorlöchter: Absolutely. Yeah. So, one use case that is a super low barrier to entry, literally just downloading an app, is Silencio. Like you can go to the App Store or Google Store and download that app and start measuring noise pollution all around the world because noise pollution is a big health issue that many people are not aware of their health, noise-sensitive individuals. And this is a data set that is really, really valuable. And with Silencio, you can simply download the app and start contributing and earn rewards for that. And you can scale that up to other data that can be generated on a smartphone, which is on Silence's roadmap. This is one really cool, easy-to-enter use case. Another one is ELOOP. They have started by tokenizing a fleet of Tesla in Vienna, where they allow their community to invest in a car sharing fleet. Thereby, the community contributes capital, and in return, every time a car-sharing session generates revenue, the community earns from that. And, of course, there is a bit more maintenance, insurance and so on involved, so there's a bit more centralization there. However, you can decentralize the revenue and the funding of those big, big machines. And, you know, if we think into the future fleets of robo taxis that are community-owned, and communities can earn from robo taxis instead of just, again, big companies earning all the money.
Savannah Fortis: Absolutely. And here on the ground in Dubai, I've had the opportunity to speak to a couple of different DePIN projects in the Peaq booth, who have been really excited to share what they're working on. And honestly, it's been exciting to hear from them and to see more real-world use cases being brought to life through DePINs. So, let's hear from a couple of them now.
XMAQUINA: So, XMAQUINA is a DePIN of autonomous tokenized robots. What we're looking at here at the booth is the first tokenized robo cafe. So, people purchasing coffee right now from this autonomous machine are earning from the revenue. Essentially, it's a machine combined with DeFi. So, users can get a share of the revenue produced by this asset right here, live at Token2049.
Savannah Fortis: And is it just coffee, or are there other things?
XMAQUINA: Yeah. So, this machine is actually also serving ice cream. There are different models, and this model can be applied to any autonomous machine. And you can think of XMAQUINA as a launch pad for all these types of smart machines and autonomous robots.
Wingbits: So, Wingbits is a decentralized flight-tracking network. And the reason we built it is that most people don't understand that the entire aviation industry runs on volunteer data, and these companies are making hundreds of millions a year while the providers in the community make nothing. And we thought this is a perfect use case for blockchain. So, what we do is we aggregate data globally, we sell it, and then we share half the revenue back with the community as a reward based on their contribution.
We were fairly new; we launched four months ago, but we actually signed our first enterprise customer last week. So, we're growing about 2,000%. So, 65 countries, 2.5 billion position updates per day. And we have, you know, some cool updates coming up with the testnet launching sometime in May and then hopefully May Q3-Q4.
Alireza Ghods: So, I'm Alireza, co-founder and CEO at NATIX. What we're building with NATIX is a decentralized geospatial data network. So, our product, which a lot of people might have heard of it, is a smartphone application. You just download the application. You put the phone on the dashboard of your car as you are driving around. The AI works on your phone to detect what the AI is trained to detect, for example, traffic congestions, potholes, collisions. And this data essentially leaves you a smartphone, and you actually earn a reward. And we use this data later on to improve maps to provide better mobility services. The smart city services like maintenance and so on.
And yeah, so we already have around 100,000 registered users all around the world, and we are using a lot of DePIN components of Peaq. For example, machine ID, we are actually integrating machine ID. So, every app user in our platform they have this unique identity on blockchain. And, this way, it's kind of step one for us to validate what they're doing, and the integrity of their data and activities, and so on. Yes.
So, you know what I think Peaq guys are doing and doing differently is they try to also, you know, bet on projects and attract projects that are specifically scalable, you know. So, I think they have two of the strongest smartphone DePINs because you can have also hardware DePINs right where you have to buy a hardware and you plug it into your car or you put it somewhere or, you know, you have, you have this upfront cost to buy the hardware. That's one way of doing it. And then we have commodity DePINs or smartphone DePINs where you can just use the existing device that you have. And I think Peaq guys are especially strong on this aspect, which is, you know, it's all about scalability, at the end of the day. I think this angle that they brought into the game, which before that, I think, you know, not many people were doing, and they started to become the home. So, I mean, what I'm trying to say with that is they, for example, we started working with them, and we said, OK, how can we make machine ID as easily integrated for smartphones, right, for iOS and Android? And this is something that we did together, and a lot of other, let's say, founders, they started to come in, and they found it so handy that they began to use Peaq. And I think this is what I see Peaq guys are doing differently, so they're a little bit ahead of the narrative, and they try to always do things differently than what the industry maybe is.
Savannah Fortis: Given that these projects are ambitious but also realistically anticipating onboarding as many users as possible, can you touch a little bit on the scalability needed to deploy such projects and how Peaq tackles that?
Leonard Dorlöchter: Basically, totally. Yeah, scalability is super, super important, right? Like there are a few things which are low transaction fees, right? It needs to be feasible, especially machine and sensor communication. There are millions and billions of transactions coming which need to be handled. And then, in terms of scalability, we chose a part of doing that in a modular way. So, with Polkadot 2.0, there are a few things coming out which are technical but agile coretime elastic scaling that allows a layer 1 like ourselves to basically scale up and down the throughput as needed. That means, theoretically, Peaq can scale and do the hundreds of thousands of transactions per second with the amazing work that the team around Gavin Wood has been doing, and those releases are coming out soon. And all of that, while being super decentralized and censorship-resistant because of the Nakamoto coefficient, it's a number that defines the decentralization of Polkadot as the highest among all the major ecosystems.
Savannah Fortis: And with such large networks full of eager users and their data, um, data security must be a large topic in the industry at large. So, what are the privacy implications users should anticipate when using DePINs, and if there are measures in place already, either with you guys or in the space in general, to prevent DePINs theft or misuse?
Leonard Dorlöchter: Absolutely. So, the beauty is you can design a DePIN in a way that, for example, there's no clear data stored in an immutable way. Everything is encrypted. So, the data, if it's stored in a decentralized way, can be fully encrypted, and only the owner of the data can actually read the data; then there are also ways to store it in a more closed system. A lot of people still do that. However, they store a hash of the data on-chain to verify its authenticity. So, there are different models, and it's being explored also currently, like what are the best? There are zero-knowledge proofs. There are things like confidential computing.
So, what is currently emerging is really a toolbox for privacy Web3, so people will be able to use DApps on blockchains in a fully privacy-preserving manner without needing to worry about the data. Even the opposite, they own and control the data and no one else. And that is beautiful. It's emerging. It's being solved.
Savannah Fortis: So, what are the regulatory hurdles that the DePIN space specifically is up against? Just generally, and then also perhaps when it comes even to the tokens that are associated with different projects and if those are subject to regulations, if users need to be wary of something, if upcoming projects need to be wary of something.
Leonard Dorlöchter: Yeah. So, I guess, as usual, the U.S. is most complicated when it comes to that. So, there are quite a few DePINs that have issues with users in the U.S. because they can't simply receive tokens as rewards. So, that is definitely the most difficult market. And I know a lot of DePINs are kind of shipping around it and trying to avoid it. Good thing is, in Europe, regulations are coming up with MICA and so on.
So, I would say the regulations we need for DePINs are pretty much also the ones we need for the rest of Web3 because we have ultimately utility tokens and we have security tokens, and those are also used within DePINs and regulated in certain ways. So, we're pretty optimistic, and of course, it always depends on the local place. We're pretty optimistic everywhere. The U.S. needs some work. However, also there, with the right partners and licenses, you can build up setups where those things become possible in a fully compliant way because the company has built up the legal setup that allows you as people to invest into DePINs and and earn from them without running the risks. So, that is being worked on. And we're having partners. We're doing that together.
Savannah Fortis: And when you look at the sector of Web3, how do you see DePINs evolving in the near future? So, I'm curious what you think will be some more catalysts for even further adoption of DePINs and if it's going to be coffee-serving robots.
Leonard Dorlöchter: Yeah, I think it's exciting. We can say crypto is finally getting real because there are, for the first time, real-world tangible use cases that make sense and that users can use and contribute that have never used a wallet before, right? Let's take Silencio as an example. So, that's how we onboard the masses. That's how we, you know, electric vehicle charging every EV driver needs that, everyone needs car sharing, taxis and so on. Those are the use cases where the real economic value is being created and where all the users are. So, I think as a space, we're now finally leaving this, you know, closed circle that we've been in for a long time where it's a lot about DeFi, for example, NFTs. And, of course, the community grows a bit, but it doesn't grow to the billions of users. And I think, or we think at Peaq, that DePINs really now has the chance to bring in billions of users that don't even realize they use a blockchain in the background. And yeah, in terms of use cases, I mean, we are here; we have that tokenized robo-cafe. That is definitely one amazing use case where anyone can own a share in a revenue-generating, autonomous robo-cafe that is taking some barista's job. But that doesn't matter because the barista can own a share in the cafe now. And yeah, earn passively.
Savannah Fortis: And, you know, I don't think we can have this conversation about the future of DePINs without mentioning AI, which has penetrated every industry around the world, including Web3, including DePINs. And even earlier in the year, we had a brief conversation on the topic during which, if I remember correctly, you even called them a power duo.
Leonard Dorlöchter: Yeah.
Savannah Fortis: So, I'm just curious if you could also elaborate a little bit more on AI's place in the DePINs world.
Leonard Dorlöchter: Absolutely, yeah. So, DePINs is a powerful tool for AI. We have AI now, very centralized and that works super well. Like, I mean, many Web2 things work super well. However, if we look into the future and we have a world that's run on AI, we might want to know how those models work, who was running them and how they've been run, right? So, for example, you can use a blockchain to run AI trustfully; that means you can verify the model, the type, and what happened. And I'm pretty certain governments are going to demand that at some point with regulation in terms of AI because otherwise, it runs somewhere behind closed doors, and we have no clue what's happening. So, that is a great use case. Or you can incentivize people to create AI models, right? There are projects that do that already. So, you can incentivize intelligence creation basically and not have that at a centralized company only, or data collection like AI needs a lot of data.
And now, with the DePINs model, you can incentivize people to collect data and contribute that to an AI model. And then, of course, GPUs, right? AI needs a lot of computing power, so you can crowdsource that computing power and run it usually much, much cheaper than a centralized service provider would charge for that. So, there are many great synergies. And yeah, it's really about incentivizing people to contribute to AI or the operations of AI, the safety of it, the governance, decentralization.
Savannah Fortis: So, as we wrap it all up, I'm eager to hear what you guys have in store, what Peaq has in store over the next couple of months, the next year, what you guys are up to, what you see in your near future.
Leonard Dorlöchter: Yeah. So, the most exciting upcoming thing is our mainnet launch. We've been building for a long time now. We've done a lot of groundwork building up all that ecosystem, made the product very mature, and now, finally launching it is amazing. And that is around the corner. And this in this quarter, yeah, in this quarter, it's already Q2. Crazy how the time flies. And yeah, community sales will also happen. That's exciting for the community. And yeah, so those are the main big things. And then, of course, we're looking forward to scaling the network in production with all the projects. And the market cycle looks promising. And yeah, it's going to be an exciting rest of the year.
Savannah Fortis: Leo, thank you so much for joining us today. It was an absolute pleasure to pick your brain on everything DePINs and how this technology could quite simply change our lives.
This has been another episode of Decentralize with Cointelegraph. Thank you so much for joining us on yet another insightful conversation uncovering the Web3 space. If you're interested in learning more about the Peaq network, check out their website or find them on social media at @PeaqNetwork.
Also, check out some of the many articles we've published here on Cointelegraph on the topic of DePINs, including a couple with some of the fascinating use cases already mentioned in this episode. Once again, thank you so much for tuning in to Decentralize with Cointelegraph. Make sure you subscribe so you never miss an episode, and we'll see you in the next one.
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