In the digital age, advancements in technology are blurring the lines between tangible, physical assets and their digital or virtual counterparts. This is evident in the Economy of Things (EoT), which brings economic transactions into the Internet of Things (IoT) framework. Central to EoT is asset liquification. Let’s delve into this core concept.
Asset liquification refers to the process of converting traditionally illiquid physical assets into a digital form that can be easily traded, sold, or shared in real-time. This digital representation, often in the form of tokens or digital certificates, means that assets are no longer static or solely physical; they can be part of the digital economy, transacted with ease, or even fractionally owned.
In the Economy of Things, asset liquification plays a key role, reshaping how we interact with and leverage our assets. Here’s a closer look at different aspects:
The true potential of the Economy of Things is unlocked through asset liquification. As objects become both physical and digital entities, they play dual roles: serving their primary function and participating in a dynamic economic ecosystem. The refrigerator isn’t just a place to store food; it’s an economic agent that can order and restock itself based on optimal market prices. A car becomes a revenue-generating asset when the owner isn’t using it. Let’s illustrate the impact on the Economy of Things with a few examples:
In the Economy of Things, asset liquification transforms non-liquid assets into tradable forms, enhancing economic activities in the ecosystem. Through methods like tokenization and smart contracts, it introduces efficient and transparent economic exchanges between devices and systems.
In the digital economy, asset liquification bridges tangible assets and their digital versions. This enhances asset utility and presents both opportunities and challenges. Let’s explore the pros and cons of asset liquification in the context of the Economy of Things.
In the Economy of Things, asset liquification transforms non-liquid assets into tradable forms, enhancing economic activities in the ecosystem. Through methods like tokenization and smart contracts, it introduces efficient and transparent economic exchanges between devices and systems.
In the digital economy, asset liquification bridges tangible assets and their digital versions. This enhances asset utility and presents both opportunities and challenges. Let’s explore the pros and cons of asset liquification in the context of the Economy of Things.
As the EoT continues to evolve, the understanding and management of asset liquification will be central to unlocking its potential, as well as navigating its risks and complexities. This dynamic interplay between physical and digital worlds represents an exciting frontier, but one that must be approached with careful consideration and strategic planning.
In the Economy of Things, asset liquification transforms static assets into tradable entities in the digital realm. Its impact spans various sectors, from real estate to consumer goods, but the energy sector stands out for the wide range of asset liquification applications. Within energy, rather than seeing resources like fossil fuels or renewables as static, innovations and decentralized grids are making them tradeable commodities.
We’ll provide more information about the Transactive energy framework in a separate white paper, for this white paper we want to mention that the transformation in the energy sector aligns perfectly with the rise of Transactive Energy (TE). TE can be defined as “a system of economic and control mechanisms that allows the dynamic balance of supply and demand across the entire electrical infrastructure using value as a key operational parameter.” In essence – and this is part of the Transactive energy framework -, TE creates a marketplace where individual energy resources, from large power plants to household solar panels, can actively buy and sell energy based on real-time needs and prices.
Within the EoT framework, liquified assets actively engage in the TE system, responding to market signals. For instance, solar panels can sell excess power during high-price periods using real-time data. Similarly, electric vehicles might draw power when prices are low. The combination of EoT and TE, underpinned by asset liquification, offers a more efficient energy landscape.
Various transactive energy pilot projects have been conducted around the world to explore the feasibility, challenges, and benefits of implementing transactive energy systems. The overview below provides several real-world asset liquification examples:
These applications in the energy sector highlight the tangible benefits of asset liquification for DERs, revealing how innovative technologies can reshape traditional energy systems and markets.
Demand Response initiatives have emerged as a crucial strategy for balancing electrical demand and alleviating pressure on the energy grid, and smart devices and appliances play a vital role in supporting these programs. Let’s elaborate on a few examples:
Various US states have passed laws or regulations related to demand response programs to prevent blackouts during times of high demand.
Although demand response programs offer advantages, barriers to their universal implementation remain. A significant hurdle is establishing dependable lines of communication between utility companies and end-users. For these programs to function optimally, there must be a fast and reliable way for power providers to interact with consumers. Additionally, motivating users to cut back on electricity consumption is essential.
Another challenge is the need to inform consumers about the advantages of demand response programs. People may be reluctant to cut back on electricity use during high-demand periods if they are unaware of the possible financial and ecological gains. Additionally, many users want the ability to bypass or “override” any commands to shut off power, adding another layer of complexity to widespread adoption.
Let’s continue with examples of asset liquefaction in other sectors of the Economy of Things:
Car Sharing is revolutionizing the concept of individual car ownership by transforming it into a communal asset, facilitated by Connected Car Sharing Marketplaces such as Turo, Getaround, and Zipcar. These platforms not only make vehicle usage more efficient but also contribute to cost reduction and sustainability. Enhanced by connected technology, these services offer effortless booking, access, and payment processes, thereby increasing liquidity in the Economics of Transportation (EoT).
The advantage is that it enables efficient utilization of vehicles, reduces costs, and promotes sustainability. Connected technology ensures seamless booking, access, and payment, contributing to liquidity.
As we conclude our overview of asset liquification, let’s turn our attention to real estate, made more liquid through blockchain. Unlike more liquid assets like cars or data, real estate is often hard to quickly buy or sell. Blockchain offers a secure and transparent way to make these assets more accessible and easier to trade. Let’s explore how blockchain is changing the game in real estate and its potential impact on the Economy of Things.
These are just a few examples of how blockchain technology is being used to liquefy real estate assets. As technology continues to develop, we can expect to see even more innovative ways to use blockchain to make real estate more accessible and liquid.
In summary, asset liquification is key in the emerging Economy of Things. It turns hard-to-trade assets like cars, data, or real estate into digital forms that are easier to deal with, increasing both their liquidity and accessibility. This shift has the potential to reshape how we use and think about assets, especially when combined with technologies like blockchain.
However, this comes with challenges like security risks, regulatory issues, and technological barriers. Despite these obstacles, the benefits such as increased liquidity and efficiency make asset liquification essential in the EoT.
Going forward, understanding asset liquification is crucial for tapping into the full potential of the EoT. It offers a promising but complex avenue for economic innovation, requiring careful planning and strategy.