The Machine-Payable Web: a new wave of the internet

The Machine-Payable Web is a third iteration of the internet. Initially we had the World Wide Web: this version allowed people to access text and documents and then images and video, and to link between these using hyperlinks. Following that we now have the Social Web – where individuals are able to link together through social networks using likes, retweets or pokes. The Machine-Payable Web is a third wave of the internet – made possible by the existence of bitcoin, and/or other decentralised digital currencies.

This new conceptual framework for the internet was formulated and is eloquently presented by Balaji Srinivasan, the CEO of 21.co – the best funded bitcoin start-up in the world. To understand it better I highly recommend you listen to his presentation on Youtube.

21.co enables the Machine-Payable Web by facilitating the addition of bitcoin on any device or app such that the device or app can act independently as an economic agent. A simple example is by enabling the user (or machine) running the 21.co software to earn micropayments in bitcoin for every http request, search or call for information.
There are many other examples of the Machine-Payable Web, particularly in digital currencies. For example if we take the digital currency DASH, in addition to traditional rewards for mining, users can also receive rewards for running and maintaining special servers called masternodes. The primary function of masternodes is to carry out the anonymization phase of the DASH protocol and to validate transactions almost instantly.

In order to run a masternode, a user must put up 1000 DASH (approx. US$13,000) as something akin to collateral, though unlike traditional collateral, the DASH never leaves the user’s possession. The reward depends on the number of masternodes in operation – the more nodes the lower the reward. Currently the return on running a masternode is 11.8% per annum. This is not a bad return in the context of negative interest rates on fiat fixed income assets! Of course there are some server costs and users should have some expertise in DASH – although in this particular case the technical details can be delegated to an excellent service like Node40 - requiring users to simply provide a DASH wallet and put up the 1000 DASH as collateral.

The DASH rewards system is a very simple example of the early Machine-Payable Web in operation. Beyond DASH almost every digital currency offers the opportunity to earn rewards or income by providing computing power to a particular network and by doing some basic form of machine ‘work’ through verification or validation of information exchanges between machines. Beyond digital currencies we can anticipate the possibility of micropayments emerging for almost every form of digital information service, http request, API call, cloud storage, content and social network interaction.

The important insight to take away from this article is that bitcoin and other decentralised digital currencies enable machines to pay for goods and services and to hold, receive and pay money to each other – independently of human beings. This means that machines can automatically distribute rewards, payments, dividends, coupons without reference to hierarchical human systems.

The consequences of this dramatic new power, allied to the development of artificial intelligence, seem likely to be profound and very far-reaching. In a utopian view this opens up an entirely new economy and means of financial interaction and asset ownership. The Machine-Payable Web is by definition frictionless, permission-less and democratic – in that anyone with computing power can earn digital currency without reference to human power structures. The dystopian downside may be that most human beings lose significant control over economic structures and decisions and a version of The Matrix beckons.

Nevertheless, given the increasingly bizarre structure of the current global financial system, with $14 trillion of bonds trading at negative yields, some sort of reset of the traditional system seems probable in the near future. From this reset it seems very possible that the Machine-Payable Web will emerge as a significant means of conducting economic transactions, at least in intangible goods and services. And that income flows from the Machine-Payable Web could replace traditional income flows from (mostly insolvent) issuers such as governments and financial institutions.

At a time when most people struggle to understand bitcoin itself, on the most basic level, the extensive (unintended) consequences of the existence of bitcoin and the rise of other decentralised digital currencies such as the creation of the machine payable web may take a long time to reach widespread adoption and acceptance, absent a major financial crisis. Nevertheless the Machine-Payable Web is a reality today and seems to be slowly but surely taking root as the latest manifestation of the internet.

@adc555

Note: I have not received any reward whatsoever from any of the service providers mentioned in this article.