S&S #11: Owning Your Robot Overlords

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Happy Monday, Everybody…

Welcome to Seeds and Speculations, your weekly deep dive into the seed ecosystem. Let’s give you something to talk about around the Keurig today.

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Back to our regularly scheduled programming. 

Our Seed of the Week - XMaquina

Over the past few months, we’ve talked at length in S&S about the ongoing debates and theories concerning the ultimate ramifications of the coming “age of AI” – what it will look like, and what it will mean for humanity. 

We live in an amazing time. People have theorized and imagined what the world may look like when humans crack the code on automation for decades, going back over 100 years to when E.M. Forster's "The Machine Stops" described a future society in which all humans live underground, entirely dependent on a vast, omnipotent machine for all their needs.

It’s sobering to think that since the beginning of humanity’s narratives surrounding robots, we’ve imagined a scenario in which they “conquer” us, and we’re now navigating a technological landscape that many experts predict has the potential to bring that scenario to fruition. 

Whether we end up having all of our needs taken care of by robots in the near future, get taken over by a SkyNet dupe, or find the perfect equilibrium for humanity and automation to co-exist and co-benefit is yet to be realized, but one thing is certain, automation will continue to advance, and it will most certainly disrupt the world that we know. 

Rough estimates predict around 375M+ jobs will be affected by AI and automation by 2030, many of which will come from industries relying on physical human labor - driving, manufacturing, construction, agriculture, retail, etc. 

Our company of the week, XMaquina, understands this, and is working to build a solution that will both accelerate the adoption and deployment of robots and reward the human stakeholders that make it possible, providing a means to produce passive income through the coming shift brought on by mass automation. To achieve this, they’re leveraging a decentralized physical infrastructure network, or DePIN, that tokenizes autonomous robots, enabling users to own and earn from them. 

What the hell is a DePIN? 

To understand anything about XMaquina, we need to understand exactly what a DePIN is.

A Decentralized Physical Infrastructure Network is a network of blockchain protocols and decentralized applications that incentivize and enable the development, maintenance, and operation of real-world infrastructure and assets. 

Let’s make it easier to understand by giving an example. 

Uber makes its bread by leveraging a massive network of people and the assets owned by those people. They’ve provided all car owners with an opportunity to monetize both their time and their vehicle in return for the physical act of chauffeuring around another member of the “Uber community”. 

Uber is what can be called “centralized”. It’s controlled by a single group or entity, the majority owners of Uber, the corporation. That corporation ultimately benefits from the network the most. It sets prices, takes cuts of the participant's generated revenue, and ultimately decide how the platform functions. 

Centralized systems like these use fiat-based rewards or perks to lure service providers (drivers, in Uber’s case) while they ultimately maintain control over those provider’s resources. 

DePINs model this structure, but within a decentralized framework that allows resource providers to participate directly in the network, providing services for a direct cut and participation of any profits the network makes through business activities. 

For a great example, let’s take a quick look at Natix. 

Natix:

• Allows users to download a decentralized application, turning their smartphone or dashcam into a mobility data collection MACHINE. In return for the data their device produces, users earn crypto tokens in the Natix network. 

• Sells this data to mobility firms and autonomous driving companies, and will soon release plugins for other companies and networks to use the data to produce better geo-dependant applications. Any profit from these activities are distributed across the network to stakeholders based on how many tokens they own (or how much they participated).

Essentially, DePINs flip a successful, widely used model on its head. By doing this, a few clear benefits emerge: 

• Reduction in need for centralized intermediaries, which reduce operating expenses and increase efficiency 

• Decentralized networks are less vulnerable to attacks, as their is no single org or entity to target 

• Blockchain tech that DePINS are built on offer transparent, immutable records of all activity, increasing trust and accountability

• DePINS empower community members, enabling them to contribute and manage an infrastructure they benefit from 

• By leaning on community for participating and funding, DePINS lower the barrier to entry for large scale infrastructure development projects. Starting Uber took hundreds of millions of dollars, but DePINs can spin up with little to no starting capital. 

There are two primary types of DePINs: Physical Resource Networks (PRNs) and Digital Resource Networks (DRNs). 

Physical Resource Networks (PRNs) incentivize individuals to deploy or direct location-specific hardware to provide real-world, non-fungible goods and services. Examples include mobility, energy, or connectivity. For instance, when you order a taxi, your goal is to travel from point A to point B; when purchasing electricity, you need it available in your specific area; and when acquiring local weather data, the accuracy depends on its local relevance. In these scenarios, location is crucial.

Digital Resource Networks (DRNs), on the other hand, incentivize the deployment or direction of hardware to offer fungible, digital resources such as storage, bandwidth, or computing power. In these cases, the physical location of the resource is less important. For example, it doesn't matter where the data center storing your vacation photos is located, as long as the photos are securely stored and accessible. Similarly, the location of the computer running your machine learning model is irrelevant as long as the service performs effectively.

Back to XMaquina 

Xmaquina is building a PRN tokenizing autonomous robots. They’re betting that the estimates of the $21B to be generated in service revenue by industrial robotics are correct, and they’re trying to take a piece of that pie. 

As it stands, there are a couple of problems with industrial automation: 

1. It’s scary for workers (Businesses don’t care too much about that, but it’s still an issue) 

2. It takes a pretty massive amount of capital expenditures to build out an autonomous infrastructure 

Xmaquina solves both of the pain points. Their network of tokenized robotic assets will allow users to invest in pools of these machines, receiving returns on all profits generated by the connected robotic systems. On the flip side, by tokenizing their robotics, businesses building these networks gain access to new fundraising avenues and can transform their non-liquid assets into liquid digital tokens - something they can exchange for money without sacrificing or selling the machine. 

These networks can look like anything, from a fleet of autonomous vehicles operating a ride-share platform to the 20 machines that it took to build the vehicles in a manufacturing plant. 

Here’s a full breakdown of how it works: 

1. Businesses Tokenize Robotics on Xmaquina: Tokens are issued, representing a stake in the earnings of an autonomous robot fleet 

2. You Provide Liquidity to the Robot Pool: By supplying liquidity, you enable robotics firms to purchase and strategically deploy the robots into their operations, taking care of all the heavy lifting.

3. You Kick Back and Earn: For as long as you hold your robot asset tokens, you continue to get passive income from the robots’ operations.

Their platform is built on Peaq, layer-1 blockchain designed specifically DePIN and real world asset networks. They offer an SDK for developers to build DePINs on top of, selecting from a suite of modular essential capabilities like self-sovereign machine IDs, role-based access control, data verification, and swift machine payment processing.

Recently, Xmaquina piloted what this might look like irl, debuting a fully autonomous robot cafe that pays out participants in the network with every cup of coffee sold. You can read more about it here.

Speculations 

It’s entirely unclear to me how XMaquina’s structure will fit into SEC regulations for investments and ownership of a company, or if it matters at all. To me, it seems like a DePIN would radically change the relationships of corporations to stakeholders, and may not be compatible with publicly listed companies' ownership structures. If you have any insights into this or commentary, please let me know. 

With that said, DePINs do offer an interesting new alternative to crowdfunding for smaller companies, and could be a pathway to several new streams of passive income for asset owners and investors. 

If you already own a car and drive it around on a daily basis - why not let that make you money? If you already have an internet connection - why not profit from the extra bandwidth? If you think your job is going to be taken by robots, why not get a cut of the revenue it generates? 

Let me know what you think. 

Before I leave you, check out some of the other activities in the market this week. 

Weekly Recap

Between May 27th and June 2, 2024, 54 companies in North America and Europe raised seed capital. Let’s take a look at some of the biggest raisers. 

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