Machine-Fi: A Conversation With IoTeX Co-Founder Jing Sun on Decentralizing Automation
Today’s conversation features Jing Sun, Co-Founder of IoTeX and MachineFi labs. Before co-founding IoTeX in 2017, Jing was the Managing Partner of Sparkland Capital, an early-stage venture fund.
Dean: Jing thanks so much for coming on the podcast. Take me through your background, personal and professional that you think brought you to crypto and where you are today.
Jing: Thanks so much Dean, it’s a great pleasure to be here. Thanks for having me. It has been a wild four years as an entreprenur building the blockchain infrastructure and now building the MachineFi ecosystem. Before that, actually I spent almost five years in Silicon Valley as a venture capitalist. So my whole passion is about what’s next. What’s the next big trend or big unicorn and what kind of frontier technology really can shape society and bring goodness to humanity. So actually we invested in autonomous cars, VR/AR, cybersecurity and SaaS in 2014 and 2015.
And then what brought me into crypto? It's interesting actually. Before 2014 we started to see Bitcoin mining and Bitcoin investments which was around 2012, 2013, for a lot of technologists in Silicon valley, they were super excited about this new kind of governance and decentralized bank backed cryptocurrency. But we didn't really see this as a big thing, a big [00:01:00] opportunity that would shape everything in this society until 2014 and 2015 when we saw a smart contract platform initiated by Ethereum. And when we saw the white paper of Ethereum, it kind of changed everything. It made us feel okay, it’s not just a cryptocurrency, right? Cryptocurrency is the first application [of Ethereum], but actually it's a kind of developer platform and developers can create all type of different things on top of this decentralized infrastructure, which has never been possible before. So that's the turning point. For me, it opened my eyes and I really started to research this sector. And then we started to invest. We were one of the pretty early VC firms which was really all in on Cryptocurrency and took the entire [00:02:00] kind of web-3 seriously as a major thesis.
Dean: Wow. So ou were one of the first people. At an institutional level, who started investing and considering crypto as a space that was worthy of venture capital investment. And I actually relate to that experience where the Ethereum White paper was really the aha moment where you actually saw a fairly niche, Bitcoin monetary focused technology that was really recapitulating a financial system. Interesting, but didn't scale to broader social and technical problems and ethereum really just blew the whole thing open. It made this thing generalized to every possible application. And so this is 2015. And you started investing. Do you remember what your first investment was in web three?
Jing: Yeah. So my first investment is also interesting. It's actually also a coincidence. [00:03:00] There was a one company, the founders name is Tom Dean who is an entrepreneur. And he came to us and started to talk about: Hey, actually, you know, there was a kind of cryptocurrency that we can use to crowdfund two projects which are cryptocurrencies. I still remember, the project they want to crowdfund for it’s “jam” or something like that. The name I cannot remember clearly. And for me, this is… what? Of course crowdfunding I know. But what is crowdfunding for cryptocurrency projects?
This was the first time I talked to an Entrepreneur who is doing such a thing. And now we know in crypto, the crowdfunding, which included the ICO boom back in 2017. But the first time I heard about the crowdfunding for cryptocurrencies was around 2015.
Which was interesting. [00:04:00] Seeing this entrepreneur actually become a pioneer in the entire web-3 space. And he moved these crowdfunding projects to a cryptocurrency project incubator, string labs, right? And then the first project they incubated out of this incubator? It was DFinity (The Internet Computer).
Dean: Wow.
Jing: Off course there are lots of different iterations and a lot of different structure, restructure, right? But actually those were a group of pioneering entrepreneurs trying different ways to build on top of the new kind of infrastructure. and, you know, I learned from the entrepreneurs, I learned from our portfolio company, I learned from the fund founders. Right. So to be very honest, my first investment, [00:05:00] I didn't really see this big picture. I just really loved the entrepreneurs. I loved the vision he showed. Right. So I invested in them to support them. And they opened a new kind of universe for me. And we kept continually learning, and started to invest and understand more and more.
And then we decide, hey you know, maybe the best way for us to fully engage with the industry is we invest in some of the most pioneering funds. And then we started to talk to different crypto funds. But at the time, they [crypto funds] are very rare.
And we talked to the founders of right now one of the biggest crypto funds, Polychain Capitol. At that time, they tried to convince all the LP investor what is web-3 and why they’re bullish on it. You know, the trend, what can happen. And then we decided to invest in them and start to learn from PolyChain. So it's kind of a long journey already. And then just like, you know, my journey to becoming an entrepreneur is a little bit different.
As a founder, I started to invest in different projects. But I already see the huge potential for this. You know, technology, not only the technology actually it can apply to different verticals and industries. Eventually you will see with crypto what happened with the internet or mobile internet, it created an industry.
And eventually that can change the entire kind of society. So, yeah, so, and then I met [00:07:00] the founders of IoTeX. And, you know, I invest in it myself at first, and eventually I was convinced and become a one of the co-founders. And then the rest is history.
Dean: So that's what I was going to ask you is how you made that transition from investor to entrepreneur, which is how you spent your last four or five years, being the operational leader of IoTeX. And so you actually were an investor [in IoTeX] and you liked it so much that you're like, I can't pass.
I'm gonna dive. And IoTeX at that time, in mid-2017, an IOT focused blockchain was a pretty revolutionary thing. To envision how devices, the device economy could be brought on to web three. It was really a software focused financial ecosystem at the time. And you were considering a fairly radical [00:08:00] new addition to the web-3 ecosystem. What was the opportunity that you saw at that time to take the leap into IOT?
Jing: Yeah, that's a very good question because you know, back in 2016 or 2017, kind of the development of the infrastructure in web three is so different from what you have seen now. So basically, that was the start. Right? And the most kind of pioneering entrepreneur were thinking about what are the new use cases, how this technology can be applied to different verticals? We didn’t really even reach the consensus to say, hey know which part of this de-centralized infrastructure is the most valuable?
You know, some of them, they will say it's it's about the decentralization. And some of them, you will saw maybe it's kind of just like a system. It kind of better [00:09:00] IT system to replace a centralized system. And some of them they see actually the financial system. So basically at that time there's uncertainty, people are still kind of discussing how this technology can really, be most powerful, right?
From my side because you know, I invest in all the frontier tech, I always see a perspective of how this technology can solve the existing, the current problems We already seeing as technology is moving forward.
What kind of the big problem that this technology can really be the best solution for. So from my personal kind of experience, because we already invested in a lot of the kind of IOT related or hardware machine related companies.
[00:10:00] And we definitely see the future society, the machine will be a major workforce. Which means most of the productivity probably will be driven by machines. Right. And then just like we see right now the entire infrastructure system to empower all those billions of the machines and devices, IOT devices actually are all kind of centralized. And then just like, you will have the, you know, from the fundamental level you will you will understand that that will not work. If all those kinds of machine devices will drive the entire kind of economy or productivity for the human society. And then just like, all of them will be decentralized in different places.
But actually they all kind of building on top of a centralized kind of system, which are dominated by only maybe three, four, tech giant [00:11:00] companies, right. So we see just like, there's a possibility, if we can make this, you know, fundamental infrastructure, more decentralized, more open sourced, more transparent, or give the open access to all developers. So the developer will have an easy way to get access to the beta, get access to the tools, get access to open protocols. And it's much easier for them to make innovations. So that's actually our original thought, how blockchain can shape the world, and we see a perfect match, but of course at that time, those are all kind of theoretical.
You know, we are not sure how this infrastructure should be built. How it will eventually kind of shape the industry or which part. definitely the big picture, the big vision excited me so much.
Dean: Yeah, because one thing about crypto at that time is it was essentially attacking existing entrenched industries. It was trying to create an alternative financial system to compete with the existing one, to create alternative technical web-2 infrastructure that would replace things like Google, Facebook, et cetera, potentially. But what you're talking about is actually building the infrastructure for an industry that doesn't really exist yet.
And so that gives you an advantage because you can actually build the infrastructure before you have an established behemoth that is very hard to disrupt. And so in the longterm, you're actually positioned to create from the outset de-centralized infrastructure for the machine economy. [00:13:00] And that's kind of the purpose of this show is to talk in-depth about Machine-Fi. When IoTeX is founded, fast forward four years, this vision has condensed and become articulated in what you now call machine-Fi or machine finance. Can you just describe what machine-Fi is to you? And why IoTeX has decided to launch this initiative?
Jing: Yeah, certainly. So we launched machinefi, clearly defined by the end of last year. It has been several years since we started building. And then we launched these new initiatives. So literally machine-fi, if you know DeFi other “fi’s like social-fi right? Well[00:14:00] Machine-Fi is literally financialization plus machines, right? So basically we want to build the financialization infrastructure and ecosystem on top of blockchain to financialize the data and value generated by machine devices in the real world.
Dean: So where is MachineFi right now? You just raised a $10 million fund, which is very exciting. What was your pitch to the VCs and the investors that you raised from, what did you say was the infrastructure that you said you already had and where did you say you’re going to be building towards with that money?
Jing: We have been working for not only last year, but [00:15:00] we spent the past four years building the fundamental infrastructure and the modules. So we have a long term thinking process, you know, a long-term process to figure out why machine-fi is the most important to kind of value proposition to combine the IOT with decentralized networks, aka web-3.
So basically we actually try a lot of different things in the past several years. Of course, there is a kind of decentralized network which we created, a layer-one blockchain, right? But then we keep thinking, you know, what's the best value of the blockchain to the external machines, devices, and the system. We thought maybe it's [device] security, right? Because definitely the [00:16:00] blockchain can provide better security. Or the privacy, right? The privacy will be the best for us the best value we can just like deliver to the users. Right. But then we realized actually the blockchain delivers a permissionless system to do the financialization of all type of different things and start with Defi basically. Right. So back in 2020 was the first kind of applications to natively be on the blockchain, which is decentralized financialization, right?
And then from there, it can expand to different sectors. Like NFT and GameFi.
And then just like [00:17:00] naturally you will see actually the, you know, the financialization perspective is a best kind of way to leverage on the system. And also they say the most important way in our for the whole world to have access.
And naturally this extends to the real world. And then we realized actually it's the financialization of the value and the resources, which is generated by machines. So we just mentioned in the future machines will be the major workforce and also how we organize all workers and machines to work together. Right? For example, for individuals, probably they can purchase, you know, certain type of the machines. They can set up at [00:18:00] home or they can maybe just like contribute their machine resources into a network and then they will generate revenues from their contribution.
And then the question is what type of the fundamental underlying infrastructure these machines should be built on top of. All machine networks should be building on top of that [decentralized] infrastructure. Infrastructure that is open source, permissionless where everyone can register their devices on the chain. And everyone an easily get access to the data, of course, with the permission of the owners. So actually when you think about all those kinds of possibility or the future picture, you will understand that the underlying infrastructure has to be web-3.
[00:19:00] So machine-fi is actually aligned with such a big vision. How society will move forward. We want to be the underlying infrastructure to connect all types of machines. And then make them kind of available for the web-three developers and applications. And we make it easy for all types of developers to bootstrap a machine network without putting up so much capital.
So we make it easily accessible for those individuals to access so they can participant into the machine network and contribute their machine resources. Even just with their own real-world activities and so that they will be able to get rewarded for their contributions.
So, this is kind of like a broad, you know vision [00:20:00] or possibilities when we present our machine vision and clearly a lot of the investors actually share a similar kind of vision for the future with us.
Dean: Just to recapitulate what you just said. So blockchain itself is a financialization machine, essentially. That's what it's best at natively. Creating financial markets and attaching a value to systems and things and activities that weren’t financially feasible prior to this decentralized infrastructure. And so what you're talking about is actually IoTeX created a financialization machine, a layer-one blockchain, the IoTeX blockchain that you're now using to actually financialize real world devices, some of which you've created like pebble tracker, which uses something called secure hardware to actually capture data from the physical environment. In a way that makes it [00:21:00] totally tamper proof. It's not falsifiablem that data is trustworthy at the hardware level. And so it's ready to be plugged right into a smart contract. It's a physical Oracle, essentially that can be trusted in a financial ecosystem. It's so trustworthy that it can be used for financial applications.
It can't be spoofed or faked. And you have a layer two, which is something we call true stream where you're collecting data at the hardware level and then actually sending it to decentralized applications that are using this physical data for, say like a company like healthblocks, for rewards for sharing your health data, whether for a study or for insurance benefits or whatever it is. And there's an infinite amount of applications you can think about. So that's a big, fascinating vision. I want to get a little bit more into the philosophy here.
Because if you think about it, [00:22:00] we're already using machines constantly. We're already basically cyborgs, right? When you're online, you're generating data, you know, you're kind of half machine, half human already. And when you're on your phone, you're basically a cyborg, right? You have this health data that's getting generated. You have all kinds of data, physical location. How do you plan on actually using the existing data from the devices we already have, like iPhones. Do you have a plan for bringing the devices we already use onto the IoteX ecosystem?
Jing: Definitely. That’s a good question. So, actually, just like we said, we create our own devices in partnership with other manufacturers. But this is more like a kind of proof of concept. We want to understand the entire architecture so that we can generalize the entire [00:23:00] stack. And also standardize it, make it really easy for the other devices to integrate together.
But actually just like for the bootstrap stage, definitely, we want to make it generalized so that it will work for the new devices and machines, it will also work for existing devices and machines. We talked to some of our investor who are the biggest manufacturers for mobile phone and smart devices everywhere. Right so our topic is how to bring their smart devices and users into web-3, and how to do the financialization of their existing devices.
So this is definitely what we are working on. And that's why for the next few months, you will see some of the releases Which makes that possible. Like our Machinefi portal. So I want to kind of split our tech stack into two parts.
So one part, we focus on the device onboarding. So basically our blockchain. And just like you mentioned, now we re-named it from the true-stream to web-stream, right? So webstream is actually more like a layer-2 module, it's a kind of a chain agnostic layer.
So this layer focuses on how to onboard and connect all the devices and the machines on the chain. And how to get the [00:25:00] proof of the verifiable data or resources on the chain and make it available for all web-3 developers.
Which means all the web-3 developers don’t really have to understand too much about devices. They can get all the proof they need from the oracle and then inject it into the smart contract. We make it as easy as possible from the webstream and then make that proof match with their tokenomics and smart contract.
You see all the machine devices will be on the machine-Fi portal, including the IoTeX portal and including the web stream.
But we are not limited in our [00:26:00] applications to IoTeX only. So basically all the developer they can choose different chains. We start with EVM chains, for example they can choose to create a dApp on top of polygon, for example. But they still can get the resources, the value, the proof of the verifiable data from the devices, right from the web stream.
And then the machine-Fi users, right? So you will have the devices and connect with the web stream and the machine-Fi portals. And they will be able to choose what kind of participation they have in different apps. They choose. Right. And generate a different type of rewards based on the mechanics of each of the dApps.
Dean: So what you’re saying is that you are opening up an entire new data ecosystem. And that's really exciting because what that does is it actually takes a very limited ecosystem that is basically just DeFi: financial activity, on chain activity, and you're opening it up to all kinds of real world activity. So I can actually see the next bull runbeing driven by this type of infra that IoTeX is building.
So I want to ask you about the broader vision for MachineFi. So we have a future that is very worrisome in terms of inequality, right? We see the existing web-two world being very siloed, very centralized. A lot of those returns have gone to early founders and VCs in tech. And when you think about the [00:28:00] replacement of the labor force with devices, even developers with algorithms, you're talking about a supercharging of inequality.
And how do you think about machineFi, and IoTeX obviously can't solve every problem, but how do you think about kind of dealing with inequality using this decentralized infra? Do you have a vision for how the wealth of the machine economy could be shared?
Jing: Yeah, definitely. I think web-3 in general has a very big mission and vision to make the world more fair, transparent and equal. Right. And here the MachineFi we are even kind of solving a bigger problem, which has never been tackled before.
It’s kind of future problem, but it definitely will happen. So when we already see that there's a certain trend, [00:29:00] you know, what machine will do actually, is take a very big part of the world economy in the next decades, maybe it's just in the next five to 10 years.
And then when we see this exciting future there's the next question. All that value generated by the machine economy belongs to who?. Who will really benefit from this new machine economy? To answer it right now, it's very vague. Or even under discussion. So basically, based on our current technology, transition and advancement the biggest kind of giant company, centralized institution and corporation will benefit most from that. And also just like it will hurt the current existing human labor.
For example, [00:30:00] even when I am taking an Uber, right. I’m traveling around and always taking Uber, my joy is always kind of talking to local drivers about what they doing. And actually you will see more and more those Uber drivers are conscious of this technology like autonomous car, robo taxis, make them more and more kind of nervous that, now actually Uber gives them a really flexible lifestyle and it makes them able to make a living easily in a different city. But what if those robo-taxi replace their job?
Which has it's very, very likely in the very near future. Right. And who will really kind of benefit from that?. And thenwe work on this machine-fi. You can, you can imagine, in future, we feel technology will still kind of drive the technology advancement and [00:31:00] maybe they [machines] will be the major kind of workforce.
But then we need to solve the problem is actually, who will be able to get the reward or benefit from this part, right? So when we are talking about the universal income and where this university income come from, and what's the format of it?
In our machine-fi vision, we believe, in the future, all the machines can generate lots of values and rewards and then the machine, also the users, which will be the owner of the machines, will be able to benefit from rewards. Which get out from what they do.
And even for some of the less developed countries or, you know, kind of more under kind of developed countries, but they still have the good [00:32:00] ways to utilize the solar panels, for example. Maybe they can create a solar panel there because they have good resources.
And then just like for developed countries, they can send over those solar panels to certain households. It could be their job to really set up. Deploy those devices or solar panels at their places and then contribute that power and energies into a machine network, which will be on web-3 and decentralized infrastructure.
And they in exchange they will be able to benefit from the rewards. Just as simple an example is that right could be applied to all types of different use cases, right. So that you will see that even the machine will be the most efficient way [00:33:00] to create a productivity, but still for the people, they will easily benefit from that.
So, this is actually just like the vision we see and are so excited about.
Dean: You’re talking about actually empowering a totally new social program, basically the potential for governments to come in and say: hey, instead of just sending you cash, in the form of a UBI, like somebody like Andrew Yang proposed, we can actually send you a productive asset, like a solar panel that you can contribute to the grid too. And you can manage this machine and then we can directly tie the financial compensation to that. [00:34:00] So it's a little bit more close to the human nature of wanting to actually contribute value to an economy instead of just receiving direct cash.
So it just gives another tool to policymakers, to governments. So I want to turn the conversation to what was just very topical in the news, the Google engineer. Whose name is Blake Lemoine I believe who worked at Google AI and who got fired because he told the Washington Post that the Lambda NLP software, natural language processing software that he was working on had become sentient. And he actually got fired for that statement. And I just want to ask you, if we think about a future where machines are becoming sentient, right. Where they themselves are citizens, right? How do you think about the ethics or maybe the financialization of that? Could you imagine a machine [00:35:00] having its own wallet? Voting? Participating in the economy as a consumer. Have you thought about this at all?
Jing: So I also saw this news and I'm not that surprised, right? But this is of course a different level of the technologies, more about AI or, you know, more about a more advanced kind of training to machine, if the machine eventually can become thinking right.
But from our perspective, we already see each of the machines in our machine-fi society or the web stream version of the machine economy, we see each machine just like the human beings are seen as a citizen. In the entire kind of machine universe.They will have their own kind of [00:36:00] dedicated wallet.
And they will be automatically able to contribute their resources and value. Here it is not only about the data. It’s also about for example, if this is a wireless gateway, so what they contribute is about the connectivity. So this is a computing machine and what they are contributing is the computing power or storage power, right. So actually we see kind of machine actually just like humans, they can capture the data, right. And sense the data and maybe can kind of compute the data and eventually come out with some insights that are valuable.
They have certain types of functionality, just like we mentioned, right. They can create certain kinds of resources. Those resources will be really useful if we pool them together and make them accessible on the developer side, [00:37:00] right. So we already see each of the machines are single economic units. Also they have their own kind of functionality really based on what type of machine they are, but maybe they could do a lot of the medical stuff. Maybe they could be a kind of farming machine, right that can create the productivity in a farm.
Maybe it's a kind of a weather station which can capture the weather data.. Right. So you will see each of the machines, they are just like a citizen in the machine universe. What we do is for each of the machine, basically they will have the wallet and basically they will interact with the web-3 infrastructure and based on what they [00:38:00] do, actually they will be able to get a reward directly from what they contribute. From the smart contract.
Back to your question. In future, I will say just it's possible. Eventually, you humans and machines, how we will work together. I will say if we can make the entire fundamental infrastrcutre more open, more accessible, more fair. It will be easier. If we create a centralized system to control everything, sometimes, it looks like it’s safer, but actually this is the most dangerous possibility.
Dean: [00:39:00] Interesting. So a big vision of IoTeX, a big observation maybe is that most people think of web-3 as humans interacting over screens or on the computer.
They think of web-3 is basically just coordinating humans in a different way. But what really it's about is coordinating machines. I mean, if you think about who will be the main communicators, the main users of digital infrastructure, it's going to be machines, it’s going to be algorithms. I mean, even to the degree that humans are involved, it's going to be algorithmically mediated. You can think of DAOs developing algorithms that operate on their behalf. Right? So increasingly humans are going to be relegated to the backdrop of economic activities. And hopefully retain their puppet strings, controlling everything.
That way it doesn't get too dystopian and the roles get reversed, But we're really talking about a machine [00:40:00] future, and I think that's what the general public and even people within crypto miss is that. This is not really a human-oriented technological progress space. This is machine oriented. So that is a fascinating insight that IoTeX is very much capitalizing on and building the infrastructure for so.
Jing: Yeah. I just kind of echo what you are saying, right. So actually what we see to say entire kind of web-3, this is a kind of closed-end engine, right? If you don't kind of really let this engine know what's happened in the real world, it will not know.
Right. And then what can really connect the real world into the web-3, it’s only the machine layer. Right. And even when we are talking about, web-3 cares about humans or, the financialization of human activities. But you should know, how you kind of really connect the human connectivity is a combination of machine and humans. Right. So if we can have the machines have the way to really directly connect to web-3 and then humans will be the ones who connect with devices and inject real world activity into web-3 through the machine layer.
So you will say actually it's not only kind of machine network works, but actually it's a kind of combination of machine network and the human activities. And make it even more powerful and have a much more useful information which will be [00:42:00] leveraged in the web-3 space.
Dean: So I want this to be a show that’s evergreen, that people can come back to no matter what the price is and get a lot of insight about what IoTeX is doing, the vision, the mission. But we're entering what a lot of people are calling a bear market with prices down 80% from all time highs. I just want to ask you what your level of optimism or pessimism is about the state of the space. Did we see an overexuberance, that's gonna damage the space for years to come, or is it just a natural cycle of exuberance and then pulling back and changes in the money supply? How do you view kind of the current state of the cycle and crypto?
Jing: Yeah, definitely. So [00:43:00] Dean and myself, we already went through several, a couple of cycles. So I would say for builders, bear market is always the best cycle. To really focus on building. Right. So from builders’ perspective we actually see, this is a biggest opportunity.
Luckily, we already have a much better infrastructure layer for the builders to be building useful things on. And of course you will see the recent bear market signals or the crash. And also people start to criticize the failure of the DeFi or the failure of the previous applications. But from my perspective, those are all experiments. It can also tell how early we are for the industry. 10 years in the entire humans cycle is a very very short time. We need to have some patience and also tolerance for when the new technology come out.
For me, I see some of the really optimistic signals. I just came back from consensus, I met a lot of the new builder I never met before. The real world perspective says that a lot of applications are under way.
Which means, you know, when we see a lot of experiments, which proved not to work, it will trigger innovations. It will also trigger tools. Developer infrastructure has been built on top of that. And then it will incentivize, motivate the new builders to keep building. And eventually you will find it the real useful application will come out. Right. And the machine-fi, I will say really aligned with this vision.
So what we are doing here. We will definitely leverage on this entire cycle and keep building. And our position is we will become the web-3 developer platform for the machine-fi applications.
Dean: Thank you, Jing. That was very inspiring. Thanks for coming on the podcast.
Jing: Thanks, Dean. Until next time!