DePIN Will Be One of the Most Successful Crypto Investments of the Decade
The emergence of blockchain technology has transformed various industries, including finance (DeFi), gaming (GameFi), and even traditional brands like Nike and Starbucks in digital fashion and customer loyalty on the Web3 platform. However, one sector that has seen little change is physical infrastructure.
Historically, the deployment and management of physical infrastructure, such as telecom networks, cloud services, mobility networks, and power grids, have been controlled by large corporations due to their substantial capital requirements and logistical complexities. This dominance has given these corporations almost exclusive control over pricing, conditions, and services provided to end-users, resulting in a lack of competition and innovation.
Enter blockchain and Web3, which are disrupting this status quo. While DeFi, GameFi, SocialFi, and DAOs are well-known, a new use case called DePIN (Decentralized Physical Infrastructure Networks) is gaining traction with tangible real-world applications. DePIN utilizes tokens to kickstart physical infrastructure deployment, establishing a network effect that unlocks innovative real-world decentralized applications (DApps).
It represents a rising crypto trend leveraging blockchain to construct and manage real-world physical infrastructure and hardware networks in a permissionless, trustless, and programmable manner.
DePINs can be seen as the next phase of the Internet of Things (IoT) within the Web3 ecosystem, creating a decentralized IoT where individuals, device users, and businesses collectively own and monetize infrastructure. By enabling globally distributed participation, DePINs empower users to collaboratively build, maintain, and operate community-owned physical infrastructure networks without relying on a single centralized entity.
These networks incentivize participants to contribute to the supply side by employing crypto-economic protocols, ultimately delivering more cost-effective and innovative services to end-users than traditional models.
How does DePIN's name come into the picture?
In November 2022, Messari conducted a Twitter poll to name Web3's physical infrastructure, and DePIN emerged as the winner with 31.6% of the votes (136).
By December 2022, Messari identified DePIN as one of the most significant areas for crypto investment in the coming decade, underlining its growing importance in the cryptocurrency landscape.
Various DePIN projects have since emerged, like Hivemapper, a decentralized map created by users with the world's first crypto-enabled dashcam, and DIMO, a user-owned platform maximizing the value of connected devices, starting with cars. HealthBlocks leverages blockchain and token incentives to provide a secure health data sharing and coordination platform, enhancing the healthcare system's efficiency and patient-centric nature. Spheron Network is a web3 infrastructure platform providing decentralized computing and storage support.
How does DePIN work?
DePIN operates by integrating blockchain technology and crypto-economic protocols, enabling a decentralized, global collaboration among individuals to construct, manage, and operate physical networks that are trustless, permissionless, and programmatic. The key components of DePIN include:
Physical Infrastructure Network: DePIN networks require tangible infrastructure, ranging from vehicles for mobility networks and solar panels for energy networks to hotspots and routers for wireless networks. These physical components form the backbone of DePIN operations.
Off-chain Compute Infrastructure: DePIN relies on middleware that bridges the gap between the physical and blockchain realms. Real-world user activities are recorded in a reward calculator, and this data can be aggregated off-chain for various applications, such as data proofs for smart contracts and decentralized data marketplaces.
Blockchain Architecture: Each DePIN network interacts with a blockchain architecture containing smart contract logic. This blockchain network serves as a ledger, facilitating and rewarding transactions and other value exchanges among network members. For instance, users may purchase broadband access from others renting out their routers.
Token Incentives: Incentives for supply-side participants are provided through tokens, acting as subsidies for those contributing to the network. These tokens motivate individuals to build and expand the network even before it generates sustainable fees from demand-side usage.
Supply-side Participants: Anyone can join a DePIN network as a supply-side participant by deploying their physical infrastructure and connecting it to the network. For example, a homeowner could deploy a router to become a wireless network access provider.
Demand-side Usage: Once the network is established, end users can pay to access its services or consume crowd-sourced real-world data. This creates a positive feedback loop, attracting more supply-side participants and investors fostering network growth and adoption.
How DePINs Are Changing the Game for Decentralized Networks
The future of DePIN looks promising with the widespread deployment of over 40 billion smart devices and trillions of sensors globally. As the demand for decentralized infrastructure continues to rise, DePIN is positioned to be a preferred choice for individuals and companies seeking to establish their networks.
According to data from digital asset marketing intelligence firm Messari, the DePIN market has a current valuation of nearly $2.2 trillion, with a trajectory that could see it reach up to $3.5 trillion in the next four years.
The technology has facilitated developments such as the Peaq Network blockchain tokenizing a fleet of Teslas through the use of DePIN technology or Bosch’s recent efforts with the European Union to build a decentralized IoT.
Using blockchain technology and token incentives, DePIN provides a more efficient, cost-effective, and collectively owned approach to reimagining the construction of physical infrastructure networks in the future. DePINs represent an exciting frontier in blockchain technology, offering a novel way to build and manage real-world infrastructure that is equitable, efficient, and aligned with the interests of network participants. As technology advances and new use cases emerge, DePINs are expected to play an increasingly crucial role in shaping the development of our physical world.
DePIN marks a transformative change in how physical infrastructure is deployed and operated, ushering in a more streamlined, decentralized, and fair approach. This revolutionary shift can quickly expand and challenge established industries, positioning DePIN as a major influencer in the realm of infrastructure. Anticipating the proliferation of DePIN projects, we foresee substantial disruptions and innovations in constructing and maintaining physical infrastructure networks.