The Agenda Podcast: Decoding Crypto

Is DePIN the true catalyst for mass adoption? (feat. XYO)

• Markus Levin • Season 1 • Episode 38

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Markus Levin of XYO joins The Agenda to explain everything about DePIN: what it is, how people can participate, why DePINs can help improve AI, and why the technology could be the future of mass adoption. This is the first interview in a series recorded in person at Consensus 2024.

*Please note that this episode was recorded on May 30, not June 30 as stated in the intro*

The Agenda is brought to you by Cointelegraph and hosted/produced by Ray Salmond and Jonathan DeYoung. Follow Cointelegraph on X (Twitter) at @Cointelegraph, Jonathan at @maddopemadic and Ray at @HorusHughes. Jonathan is also on Instagram at @maddopemadic, and he makes the music for the podcast — hear more at madic.art.

Check out Cointelegraph at cointelegraph.com.

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Timestamps:
(00:00) - Intro to The Agenda podcast and this week’s episode
(01:13) - What is DePIN, and how can you participate?
(04:02) - DePIN makes AI more trustworthy
(07:44) - Is there a DePIN bubble?
(10:50) - Do DePINs have privacy or security risks?
(11:56) - IoT vs. DePIN
(12:42) - What is the XYO token? Who can participate?
(15:58) - How XYO handles data privacy and regulations
(16:49) - Is the DePIN space oversaturated?
(17:51) - Who are XYO’s clients? Who can build on it?
(20:29) - Use cases for solutions built on XYO
(21:07) - Can DePIN bring crypto mass adoption?
(22:43) - DePINs collaborating

The views, thoughts and opinions expressed in this podcast are its participants’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph. This podcast (and any related content) is for entertainment purposes only and does not constitute financial advice, nor should it be taken as such. Everyone must do their own research and make their own decisions. The podcast’s participants may or may not own any of the assets mentioned.

[00:00:00] Jonathan DeYoung: Welcome to The Agenda. I'm your co-host, Jonathan, and we have a very special series of podcast episodes coming up for you. I'm recording this intro the week after Consensus 2024, where Ray and I spent a couple days recording live podcast interviews with interesting people who are doing interesting things. We spoke with privacy advocates, social impact projects, and more, but our first interview hones in on one of the trendier topics of the day: decentralized physical infrastructure networks, perhaps better known as DePIN. So, what exactly is DePIN? Well, that's what we sought to find out. While at Consensus, to make this educational journey a little easier, we spoke with Markus Levin, who is the co-founder of XYO, one of the earliest DePIN protocols to launch back in 2018, well before the trendy narrative of this latest cycle. Markus explained what DePIN is, how it works, how to participate in a DePIN network, and much more, including why he thinks that mass adoption is already here, right under our noses. So, here's our interview with Markus of XYO, recorded live on June 30th.

So, I guess let's start maybe more broad. What exactly is DePIN? It's very trendy, but we try to approach things from kind of an approach where anybody, regardless of your level of crypto expertise, can understand things. So, what is DePIN?

[00:01:30] Markus Levin: Yeah, DePIN is a hot thing right now in crypto. And DePIN is a decentralized physical infrastructure, which means you use the infrastructure, let's say like, an IoT device, or a mobile phone, or a sensor or your computer, to provide a benefit to a community. Let’s say a computer, you can provide a storage. And for that storage, you get incentivized, for example, with a token offset product.

[00:01:57] Jonathan DeYoung: So, how does it work if you're somebody who wants to participate in a DePIN network? Do you like install something? A device, an app on your phone, or, I guess, in the case of XYO, what is XYO focused on, and how do people participate in that network?

[00:02:11] Markus Levin: Yeah, it really depends on the underlying use case. So, in terms of storage, right, you provide your computer, and then in return, let's say, projects, or people can store data on the computer, and you get tokens in return, right? There's Helium Mobile, for example. There, you can extend the mobile network, and it's like mobile expanders. Basically, you buy those, you store them, and you expand the mobile network, and then you get tokens back for doing that. In the XYO case, we are all about data because the original DePIN, we came up with DePIN in 2018, and we started in IoT, so users built or bought IoT devices or upgraded their own IoT devices and then collect the data and shared data there. And they were incentivized as well. But we realized it's very difficult to get people into the ecosystem. And so, we have now created a mobile app. It's called Coin. It's a Coin app. You can just download the Coin app and participate in our DePIN system from your mobile phone into the app. And something magical happened. Suddenly, 80% of the users in our ecosystem are not crypto users when they join our ecosystem, but then inside the app, they don't earn XYO any more, they earn points and those points they can exchange for XYO, for BTC and ETH, and for other products. It's 56 entries and many, many things. But 95% of the people choose to redeem for XYO. So, they are non-crypto people, and we turn into crypto people, which is an amazing thing. So, we created DePIN, which is like very, very accessible basically for a lot of people. It's a way to get free access to cryptocurrency or to earn money on the side while they're driving an Uber, for example, or play some games at home and earn some money by just sharing some data.

[00:04:02] Ray Salmond: So, I saw there’s an element of XYO protocol that it says it makes AI systems more trustworthy.

[00:04:09] Markus Levin: Yes.

[00:04:09] Ray Salmond: How so?

[00:04:11] Markus Levin: We are all about verification of data. So, it's sovereignty, permanence and permanence of data. So, we can tell you where data was generated, how it was handed off from machine to machine and then where it ended up. So, a big problem with AI today is that it hallucinates, right? And that it can give you the wrong answers, right? And the problem with the hallucination is the underlying data is often wrong. The AI doesn't know which data to trust. And what we are doing is to give you certainty around that data. We say we know where the data come from, if that data is correct or not correct, right? Like, let's say, fake news and the whole fake news phenomenon. And there's different truth in America, a different truth for Republicans and Democrats, right? And what we are making sure is that we can say this is a true fact. You know, where it comes from and how it was handed off. We started out with this location data, right? That was our bread and butter. And on top of that, we'd now layer the data.

[00:05:06] Ray Salmond: Okay, I'm ignorant, so forgive me when you're working with something like ChatGPT; it operates off the data sets that it's been fed and that it has access to. And then there's some sort of learning that takes place, right? So when you talk about, um, making sure that AI systems are trustworthy and like that they're giving correct answers, how does that actually work? Is this before the input for people that are like training their AI or... I'm a bit confused.

[00:05:36] Markus Levin: Yeah, yeah. So, ChatGPT got trained on the whole internet, basically, right? It looks at every website. There's websites there which don't spell the truth, right? There might be a tweet which doesn't spell the truth.

[00:05:49] Ray Salmond: So, don't you need XYO before you input the data? So, filter all the data to then only allow what filters through to be like verifiable and true.

[00:06:00] Markus Levin: That's right. Yeah. You put XYO between the data generation and then between the training model, let's say ChatGPT; you put it right in between there. And we can tell you, you know, where's the data come from. And if you can trust it. And in a general question in like a chicken soup recipe, it might not be relevant, right? Maybe there is some problem if you're five minutes off or something. But if you think about medical data, for example, right? If you have a model where it's about medication, what is the best course of action for a patient? This kind of thing we want to make very, very, very sure, right, that you know where the data comes from, right? That it comes from the doctor's computer, that he wrote it. Maybe he's a nurse, you know, that the nurse gave her prescription drugs, whatever kinds of things, right? And then the AI that spits out the answers as the best course of action for the patients, you can make really sure that it does that. And we help to give you this certainty that the data is correct.

[00:06:55] Ray Salmond: Has XYO protocol considered doing that, like reversing the process to where what is output by the AI, ChatGPT, for example, is filtered through your system and then it can be like disclaimer like Twitter does where it says this is incorrect information and then readers can comment on it?

[00:07:14] Markus Levin: Yeah, that's tricky. It's tricky because what we are doing is we do cryptographic handshakes when the data gets handed off and the tangle basically. And then as the data gets handed off from device to device, it's, we can tell you where it originated, but then once it's fed through an LLM like ChatGPT, then on the other end, we can't tell you if there's no tangle, if there's no connection, we can't tell you if it's correct.

[00:07:41] Ray Salmond: Okay. I can visualize that, that it makes sense for me.

[00:07:44] Jonathan DeYoung: So, before we started this recording, we were talking a bit off the microphone, I guess you would say. And you were saying that XYO has been around since 2018.

[00:07:53] Markus Levin: That's right.

[00:07:54] Jonathan DeYoung: Which makes it quite the elder in the crypto world, where things typically don't last for what is that, six years.

[00:08:01] Markus Levin: Yeah.

[00:08:01] Jonathan DeYoung: Most things just disappear. And you were saying that that makes you one of the earliest DePIN projects. So, what do you think about the current hype around DePIN? Do you think that it’s almost like kind of a gold rush where everybody's trying to because the narrative is so hot? Like everyone's trying to identify themselves as being a DePIN project. These DePIN projects are spinning up. So, do you think that is there a DePIN bubble? Maybe that’s a better way to ask it, and if so, is it going to pop? And what has made XYO last so long?

[00:08:34] Markus Levin: Yeah, yeah. I think first, there's definitely no DePIN bubble. I think we are at the beginning of a DePIN curve, which will be very long. When we realized what we were doing in 2018. And the reason why we're still around is because we built a real business model, which led us to be through bear markets and hype, like 21 and then a bear market. And now we are in a bull market again, right? And we were able to do all of that. And we started in a bear market, and we were able to do all of this because of DePIN. We built something which really, really works, right where we incentivize people to do certain things in our network, like to collect their data like IoT data and offline data, like POI data, all these kind of data collections, and they get incentivized to do that, right? And then, that data gets used by Web3 companies like Chainlink and others, as well as Web2 companies which buy that data. And then the Web2 side, you know, they might pay us in USD, and we buy back XYO tokens and put it into the ecosystem. So, that's DePIN, right? That's very, very classic DePIN. And the reason other projects want to go in there is because it really works, right? We have proven that it works for the last six years, and we built even a profitable company on the side. And this profitable company, we tokenized shares with the second or third company in the U.S. to tokenize in shares. We listed them on an alternative trading system, and we are now in the tokenized real-world asset space as well, it’s the next hot thing. We are just there by accident because we just built things which work. I think it just works. For a long time, a lot of crypto projects were perceived as scams, right? Because they lived off their token treasury. And then they said, oh, we have all these ambitions. We want to change the world and do all these things. But there were always a question like, what useful products were built at crypto? And there's a ton of applications, obviously, in finance, right? Like all the DeFi, and that’s super successful, right? And NFTs and ownerships, identity, super successful, right? And then it becomes a little narrow, right? If you look at the successful projects, there are some here and there, right? But ones which have proven themselves over a long period of time, they're not that many, right? But there's DePIN, which builds these real business models, I think. And because of that, I think it's super significant.

[00:10:50] Jonathan DeYoung: Is there any security or privacy risks to the person who is helping to, like, store this data? Like you mentioned Helium earlier. There's been other ones as well where maybe you’re giving up your bandwidth or something. There was one that I was following for a little bit where there's like DDoS protection, anti-DDoS service, where if there's a DDoS, the traffic runs through your device as well instead of hitting the target. So, are there any risks for the participants when you participate in a DePIN network?

[00:11:23] Markus Levin: In most cases, there shouldn't be because the data is fragmented. So, in our case, it's fragmented. There's zero-knowledge proofs, right? So you don't know identity behind this. Then, it gets tangled and broken up. So, in the projects I am aware of, there is very low risk. There might be something that if you have installed someone's software on your computer, maybe there's a backdoor, or it can get hacked. So maybe there's risk like that, right? But the actual data that I'm aware of, there shouldn't be any risks.

[00:11:56] Ray Salmond: Sure. So, is there a difference between IoT and DePIN?

[00:11:59] Markus Levin: Yes. Yeah. IoT is Internet of Things. So, connected devices. The most powerful one is our phone. It's a mini-computer, but it's also an IoT device. But it could also be a temperature sensor or anything really connected. Like your light switch could be IoT, right? If it communicates into a cell phone, let's say. And they are intelligent in a way that you can connect with them. That's IoT. But then DePIN allows you to use the IoT to then build infrastructure to earn tokens back off that IoT. So, DePIN leverages the IoT to...

[00:12:36] Ray Salmond: Okay, it's an evolution then.

[00:12:37] Markus Levin: Yes, it is.

[00:12:38] Ray Salmond: It's the next step past IoT.

[00:12:40] Markus Levin: Yes, it is.

[00:12:41] Ray Salmond: Interesting. So, with some of these projects, various blockchain projects, the token is just purely for speculation or value accrual, whereas for others, it's actually for like data transmission or preservation or authentication, right? Within the XYO project, what's the token for? Is it a reward for like pledging your computing power and participating in the DePIN ecosystem, or does it have some alternate purpose, and markets just sprung up around it and happened to have value?

[00:13:13] Markus Levin: It's all of it. So, it's a crypto. Sometimes, it's difficult to tell, right? Because utility token doesn't give you a share in the company. So, it's sometimes difficult to tell, but it's what the community believes the token is worth, which is often part of the utility. Like if you look at Ethereum, for example, right? It's a utility, right? That how big the community is, how much it is used, how much friction you have and how hard it is to buy and sell. Just openness, right? It's the harder it is, the higher the price goes. And so, in XYO’s case, there's four components to earnings and tokens. There’s Sentinels, which are devices which collects the data, which could be your mobile phone. There's the bridges which relays that data, which could also be your mobile phone. The archivists, which store the data, the diviners crunch the data and validate it and verify it. And all these components, as they participate in our network, they earn XYO tokens. And then you can stake them in our app, for example. And that way, you earn more return of XYO tokens, as well. Or you can use XYO tokens to ask questions to the network, like if you want certain data, for example, why do you use the XYO token? So, it's gas, staking mechanism for the tokens.

[00:14:26] Ray Salmond: I'm guessing you have the question by extension of some of that, maybe.

[00:14:30] Jonathan DeYoung: I mean, well, you were talking about the token. Are U.S. users allowed to use XYO to participate in the network? Has that caused any issues? You said it's a utility token. I'm assuming that U.S. users can use XYO.

[00:14:45] Markus Levin: It's listed on Coinbase. So, you can buy it here in Texas. You know.

[00:14:49] Jonathan DeYoung: Probably not in New York.

[00:14:50] Markus Levin: Yeah, in New York, who knows? But yes, it's on Coinbase and many, many other exchanges. So, it's, you can access this and use it as you like. However, you know, the regulation is not clear as we all know, right? As to the utility tokens or any other tokens, and as nobody can say, yes, it's totally quite usable not to use as, say, it's not totally fine for Ethereum, or any other token. Ethereum, maybe not. But yes, they are available, they can use them from the U.S., and they are not restricted. Yes. We have a huge community in the U.S. You know, like when I emphasize it, it's grown so much. We have more than 7 million people contributing to our network. We have the largest DePIN by far, the largest oracle, as well. And we are growing that user base that all these people, they turn into XYO superfans, and they spread the news about us and about XYO and what we do about crypto and blockchain in general. And as that community grows, you know, the token economy will grow.

[00:15:58] Jonathan DeYoung: So, since you're dealing with data, people storing data, do you deal with like GDPR? Or like how do you navigate the complex regulatory requirements that are all different all around the world with data?

[00:16:10] Markus Levin: Yeah, we have a very expensive legal bill.

[00:16:15] Jonathan DeYoung: A very well-paid GC.

[00:16:18] Markus Levin: Yeah, but we are doing this for six years. And before, I was involved in a data company, and we had ads, and we know how data works, and in our consumer base now. So, we are very conservative in a way. You know, we started 2018 right after the ICO craze. You know, it was a crazy, crazy, crazy time, right? And that we wanted to be so transparent and so conservative on privacy and the legal side that we can build a company together. So, that's what we did, and I think we are very fortunate.

[00:16:49] Ray Salmond: So, you said XYO is one of the biggest or the largest DePIN company or project in the space I've seen recently. I'd say in the last six weeks, a lot of mergers between the AI crypto companies, like Singularity, OriginTrail, and Fetch.ai have kind of merged together to say, we're all going to work on one thing now we're going to make our native tokens go to sleep and create one new token so you can do your conversions later or your redemption. Do you think that the DePIN market is oversaturated and that you'd see the same sort of consolidation within the space?

[00:17:26] Markus Levin: That's interesting. I haven't thought about that. I don't think so. Not yet, you know, because DePIN is growing so much, and I think there might be something there. It's just platforms now where you have, can look up other DePIN projects and can look at the tokens, and it's kind of thing they're just starting, starting out, you know. Maybe you guys start a DePIN-focused podcast, you know, because...

[00:17:48] Ray Salmond: Yeah. Because we're curious.

[00:17:49] Markus Levin: So, many projects.

[00:17:50] Ray Salmond: Is XYO is it the type of thing where your clients are enterprise clients? And I'm participating because there's the compensation factor and my belief that your enterprise client relationships will boost revenue? And that's value accrual to the token? Or is this an actual like this tool? Is this something I can use? Is it a retail-focused tool?

[00:18:16] Markus Levin: It's a B2C2B mostly, so you can use it as well, you know, to get data for something. So, you can say I want to collect data. I want to have all the restaurants in my neighborhood. I want people to go there and collect the opening hours and take a picture, let's say, of all of us.

[00:18:34] Ray Salmond: And it's verified data.

[00:18:36] Markus Levin: Yeah, validated, verified. So, you can use it as a visualization as well. But most of them right now are companies who are buying the data, but it's individuals who are contributing to it.

[00:18:47] Ray Salmond: Are the companies the ones turning into the superfans, or is it the users that are like?

[00:18:52] Markus Levin: Most of them, I think. 

[00:18:54] Ray Salmond: The companies? 

[00:18:54] Markus Levin: Yeah, when we started in 2018, you know, the companies saw it like, they thought I'm like Pablo Escobar, right? Tried to do some drug deals. And what are you talking about? You know? But today, I tell them, oh, this is our data. This is how we generated. That's why it has this super high degree of certainty. You can't get this data anywhere else. And now, suddenly, companies are like, oh, amazing, blockchain. How is it doing this? We want other people. And there was an evolution with the last six years, and suddenly, the company is interesting.

[00:19:24] Jonathan DeYoung: Do these companies care that it's blockchain, or are they just motivated by the money they might save or the data integrity or whatever the case is?

[00:19:32] Markus Levin: Initially, they might not care, but then they will understand. Specifically with data, you want to understand where the data comes from, if you can trust it, and that it was collected in a compliant manner. And I think blockchain is trying to do this. And so it's, yes. Yeah, it's the first question. So, but then certainly, when they look into it, their merits.

[00:19:55] Jonathan DeYoung: And then, is XYO open? Is it, can anybody build on it? Could Ray and I say we want to build some solution and just do it ourselves?

[00:20:03] Markus Levin: Yeah. Great question. Yeah, it's totally open-source. But also, we just launched our operating system, xyOS, launched that two weeks ago, and now you can very easily build DApps and DePIN applications or talk to our network, which allows you to connect between Web2 and Web3. And it's so easy. You can use JavaScript tools and all the common engineering tools. You don't need to know Solidity or anything.

[00:20:29] Jonathan DeYoung: So, what is maybe one of the more interesting or unique or most powerful applications that's been built on XYO so far? And then what would one application be that if you were going to build something on it because you had free time, what would you build on it?

[00:20:45] Markus Levin: Yeah. So we just launched, so nothing else has been built except for our own applications, you know, which are data validation and verification type stuff. And the opportunities to build other stuff are just endless. Anything DePIN you can think of where you want to incentivize someone to collect something and build on it.

[00:21:07] Jonathan DeYoung: So, I guess the last question I'll ask is that everybody's looking for that killer app, right, that's going to make blockchain, Web3 mainstream. Maybe it's AI, maybe it's gaming, maybe it's just store of value on Bitcoin, Bitcoin ETF, whatever it is. Do you think that DePIN has the potential to be like the thing, if there is such thing as one such thing, but has the potential to be that, like, big mover and shaker that brings mass adoption that we've all been waiting for?

[00:21:40] Markus Levin: We built it. 80% of our users are non-crypto people. 95% of them convert to crypto people. We onboarded more than 7 million people. They spend more than three hours a day on average inside the app, while we have a 4.5-star rating in both play stores. That means they love it, right? So, we built it, and we advise other different projects. They now build similar apps and do similar things, right? We want blockchain to be everywhere, to be everywhere. I think you guys have the same goal, and DePIN can really make that happen. And we have...

[00:22:12] Jonathan DeYoung: So, what you're almost saying is that mass adoption is already here. People just aren't looking in the right place for it.

[00:22:19] Markus Levin: Yes. Yeah, yeah, yeah. And there's, you need more education. But our app, you know, like my grandma can use, you know. And but a MetaMask wallet my grandma can't. It's a little like we try to make it easier as well. And that's what it's for, right? You want to increase the addressable market, right, to basically bring everybody in. And DePIN has the potential to do that, that we have proven that it's possible.

[00:22:42] Jonathan DeYoung: Another thing you were mentioning before we started recording was this idea of different DePIN networks like collaborating together. Can you elaborate on what that looks like, what that means, and how that works?

[00:22:54] Markus Levin: Yeah. If, for example, we invested in a DePIN called Natix, where the first semester, I think, it's part of our XYO ecosystem fund. We have a $20 million ecosystem fund where we have other DePINs or oracles or projects we like, help them out. We advise them to get started. So, like these are the ecosystem fund. And so, we collaborate with them, for example, to help them build a product. And it's very closely modeled in ours. And then there might be a time where their functionality shows up in our product or just as a partnership.

[00:23:28] Jonathan DeYoung: Yeah. Well then, thank you so much for joining us. It's been a pleasure talking with you. And do you want to just shout out where people can learn more about XYO and participate if they want to?

[00:23:38] Markus Levin: Yeah. Just follow us on Twitter or go to xyo.network and check everything out.

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