This article is the speech of Dr. Xiao Feng, Chairman and General Manager of Wanxiang Blockchain, at the 4th "Zhiwu·AloT Industry Leaders Summit" held by Zhicifang·IoT Think Tank and Zhiwu AIoT Industry Research Institute. The conference held a new book launch ceremony for "Industrial Metaverse". Dr. Xiao Feng has written a preface for this book - "The Ten Major Relationships in the Industrial Metaverse". The content shared this time is an extension or a more detailed interpretation of the ten major relationships in the industrial metaverse. The following is sorted out according to the shorthand of the event, with slight deletions and modifications that do not affect the original meaning.
In the industrial metaverse, how to "liquefy" physical manufacturing, hardware, equipment, etc., that is, how to make them invisible, digital, and virtual, is a question that we need to think carefully about.
01
Product definition software
In the industrial metaverse, "software redefines everything" will become more comprehensive, detailed and in-depth.
There is a book called "The Future is Wet". "Wet" in English means water-like, soft, and invisible. On the contrary, the Industrial Revolution was hard, cold, angular, and had a strong physical architecture. In the metaverse, not only does software begin to redefine everything, but everything becomes software-based. In the future, the entire world is "wet" and is made up of software. Even physical devices and products are driven by software and constructed by code. This is the first characteristic of the "liquefaction phenomenon" in the metaverse. Product definitions are completely software-based.
02
Design and production virtualization
The second characteristic of the industrial metaverse is the complete virtualization of design and production. For example, BMW uses Omniverse, a platform for digital design simulation testing and production line layout, to completely virtually design products, perform 3D simulations, and finally virtually perform the entire process flow and line layout, and finally arrange a production line for new BMW cars in physical space.
Virtualization of design and production allows the update and iteration, design cycle to be quickly shortened from one or two years to one month or one week. You can continuously iterate your design, so that the fixed cost during the design of a new car will be reduced a lot, and the launch time of different versions of new cars will be much faster. In the past, it was necessary to make a set of car molds manually in the physical space, but now it is not necessary. In the past, it was necessary to continuously make prototypes and continuously test to find problems. It may take three to five years from the launch of a concept car to the actual finalized production. Secondly, there is a gap between concept cars and real production cars. Now all of this can be done in the virtual world, which means that the production cycle is shorter and the iteration speed is faster.
03
Programmable manufacturing and operation
The manufacturing of hardware and equipment requires a large scale to absorb fixed costs. If the batch size and quantity are not reached, the fixed costs cannot be amortized, so it is difficult to achieve personalized definition. After programmability is achieved, large-scale personalized customization can be achieved. Anyone can customize according to their own personalized needs, which will not increase more fixed costs. This allows equipment and hardware manufacturing to be like Internet software, anytime, anywhere, on demand, and portable.
04
Industrial chain agreement
What is protocolization? The Internet and blockchain are both built up by layers of protocols. Taking the Internet as an example, the bottom layer is the IP protocol, and above it are the TCP protocol, UDP protocol, HTTP protocol, and SMTP protocol. When Internet companies in any country develop Internet product applications, they follow a globally unified protocol. Everyone uses the same IP protocol, the same HTTP protocol to build their own websites, and the same SMTP protocol to build their own email systems. Only on the basis of a globally unified protocol can everyone communicate with each other.
In the era of the industrial metaverse, cooperation between industrial chains, supply chains, and upstream and downstream is gradually moving from a corporate system to a protocol system. Everyone opens up their own code and cooperation based on a unified set of protocols to drive the entire ecosystem, rather than relying on a corporate system or other methods to build a chain of cooperation. This is a very important point. The industrial metaverse will be like the Internet and blockchain, with protocols driving the cooperation and collaboration of the entire industrial chain.
05
Product value intangible
In the current hardware, equipment, and manufacturing processes, the value of software will gradually exceed the hardware value of the product. Taking electric vehicles as an example, the software value of a car is between 10,000 and 30,000 US dollars, gradually exceeding the value of hardware. The value of the service industry has also gradually exceeded the production value, and the income from the service industry has also exceeded the income from the production link.
06
Financial services embedded
Internet protocols, including IP protocol, TCP protocol, UDP protocol, HTTP protocol, SMTP protocol, etc. are all open source, free, and do not require permission. Anyone who develops Internet applications can use these protocols to develop their own Internet applications for free.
On the other hand, because open source is free, these protocol layers cannot capture value, and can only capture value through the application layer. Therefore, many business models on the Internet may result in the situation where the wool comes from the pig and the dog pays the bill. That is, basic services are free, because applications are originally built on free, open source protocols, and using these protocols does not cost money, so the basic services on these protocols can be free, and value can be captured through value-added services, additional services, and external services.
The industrial metaverse is somewhat similar to blockchain. The industrial metaverse is built on Web3 and blockchain. Value capture is within the scene, and value light settlement is embedded in the entire process. It is no longer connected to an external financial system, but the financial system and value capture are all in the protocol.
Therefore, the industrial metaverse will definitely be tokenized in the future. There must be a token to help you drive the entire business activity, ensure that it can proceed smoothly and continuously, and capture value in the process and in the scenario, just like the blockchain protocol.
The biggest difference between blockchain protocols and Internet protocols is that blockchain protocols have their own financial system and value settlement protocol. It is both an account system and a light settlement system. If you use this protocol, you have to pay for it, but if you use the HTTP protocol, you don’t have to pay for the HTTP protocol. This is a huge difference in the industrial metaverse. Its value capture and value settlement are embedded in it, not external.
Today’s traditional financial systems are all external, and require users to leave the business scenario and use the financial system and financial accounts to settle value and seek financial services.
07
Production and service integration
In the previous model, the relationship between manufacturing, hardware, and equipment ended after the transaction was completed. If you want to upgrade your consumption, you have to buy the next generation of products, and this generation of products has nothing to do with the manufacturer. But now it is different. For example, electric vehicles are becoming more and more networked and software-driven. Every software upgrade and code update will be charged. The production service process of electric vehicle manufacturers does not end after selling a car. They collect fees and capture new value every month through OTA.
Second, the products in the current industrial metaverse are almost entirely managed in the product life cycle model, which means that value can be captured throughout the product life cycle and a certain fee can be charged, including service fees, software update fees, and software upgrade fees. Therefore, production and service are integrated, and there will be no situation where a manufacturing factory does not contact or understand customers after selling products. Enterprises will know who is using their products and continue to provide services to customers, capturing value from customers.
08
Hardware device node
In the era when there was no Internet and no industrial metaverse, each piece of hardware was independent. However, because of the industrial metaverse, these hardware devices are connected to the Internet and become a node on the network. Therefore, the value of this hardware device is not only the use value generated after it is purchased by the customer, but also the network value generated after it is connected to the Internet.
Kevin Kelly observed the "fax machine effect" more than a decade or two ago, and it is very appropriate to use it to understand the nodeization of hardware devices in the metaverse.
The so-called "fax machine effect" means that you spent 2,000 yuan to buy a fax machine in the morning. You enjoy the use value of this hardware device and can send faxes. But you also join the fax machine network by purchasing this fax machine. This network has 10 million fax machines. You can send faxes to another 10 million fax machines. This is the network value. For you, this 2,000 yuan is worth using this fax machine. At the same time, you may enjoy 10 billion or 100 billion network value after joining this fax machine network. After you buy a fax machine in the morning, another 10,000 people buy fax machines in the afternoon. The 10,000 new people joining this fax machine network are valuable contributions to you because you have more possibilities to send faxes. You can send faxes to people who bought fax machines in the afternoon. Their joining is of great value to you, and your joining is also valuable to them. This is the "fax machine effect."
This effect is very appropriate to describe the value of node-based hardware devices, and this value is also brought by the industrial metaverse. The hardware you buy is not only valuable in use, but also has network effects and network value. The industrial metaverse will also produce such network effects and value.
09
Liquefaction of manufacturing
The "liquefaction" of hardware and equipment will eventually bring new things in economic and business laws. It is possible that manufacturing, equipment, and hardware will be subject to economic laws such as software and the Internet.
The economic law of Internet software has high fixed costs, but the marginal cost is almost zero. After a set of software is developed, the marginal cost of one person using it is the same as that of one million people using it. The manufacturing industry cannot achieve zero marginal cost, but it can achieve a process of decreasing marginal cost and increasing marginal effect.
The marginal cost of manufacturing an electric car cannot decrease, but the software inside it can achieve a decreasing marginal cost. For example, the marginal cost of upgrading autonomous driving from L2 to L4 is decreasing. As long as the intangible value (such as software system) in hardware and equipment is higher, the marginal cost will decrease or even reach zero while the marginal benefit will increase, which is the process of the Internet software industry.
This is the "liquefaction phenomenon" of the industrial metaverse. In 2014, IBM published a white paper on the Internet of Things, "Device Democracy", which talks about how after IoT devices are networked, especially after running on the blockchain, they can self-organize and become distributed self-organizing networks, hence the name "device democracy", and they can make many decisions on their own. The white paper describes the "liquefaction" phenomenon that occurs after devices are networked. I borrowed this term to pay tribute to the "Device Democracy" white paper.
Thank you everyone, that’s all for my sharing!
