To many, Decentralized Physical Infrastructure Networks (DePIN) could be a significant catalyst for reshaping how our interconnected world functions. An alternative to traditional centralized systems, DePIN works towards a future where physical infrastructure — from communication networks to energy grids — operates on principles of decentralization. This paradigm shift has the potential to bring about increased robustness, security, and novel possibilities in artificial intelligence (AI), blockchain, and the broader cryptocurrency ecosystem.
The trajectory for DePIN is impressive. As outlined in a 2024 report by Messari, the DePIN ecosystem expanded in 2023, with more than 650 projects emerging across six subsectors: compute (250), AI (200), wireless (100), sensors (50), energy (50), and services (25). According to the report, the collective market capitalization of DePINs featuring liquid tokens also surpassed $20 billion. Meanwhile, an estimated $15 million was also generated in annualized on-chain revenue.
Beyond its potential market size, DePIN represents a move towards technological decentralization, empowerment, and Web3. In this guide, we’ll explore the core features of DePIN, including its definition, functionality, and role within the cryptocurrency ecosystem.
What is DePIN?
DePIN refers to projects that use blockchain tokens to incentivize the deployment and operation of physical networks and infrastructure. Notably, this approach marks a departure from traditional centralized entities, ushering in a system that prioritizes community-driven ownership, public verifiability, incentivized structures, and a permissionless model — all critical principles of blockchain technology.
DePIN is more than just a technical framework. It signifies a shift in how we manage and interact with physical infrastructure. Community members are stakeholders and active contributors engaged through incentive mechanisms embedded in blockchain tokens.
From WiFi hotspots and security cameras to ride-sharing and food delivery, DePIN transforms everyday physical objects into community-owned entities. This decentralized model makes sure decision-making processes are distributed across the community, fostering transparency through public verifiability.
Another interesting concept is the DePIN flywheel. It illustrates how the advancement of one component can spark progress for other elements in the system, creating momentum and growth. According to Messari’s estimations, DePIN’s flywheel has the potential to contribute over $10 trillion to global GDP in the next decade and $100 trillion in the subsequent decade.
How does DePIN work?
DePIN operates via a sophisticated combination of blockchain technology and community-driven incentives. Its fundamental mechanism involves motivating participants with blockchain token rewards, creating a community-driven ecosystem with multiple use cases.
This shift goes beyond traditional business models, abandoning hierarchical structures and favoring a grassroots, community-driven approach. By applying crowdsourcing for growth, DePIN networks have the potential to scale efficiently and operate at lower costs compared to traditional infrastructure providers.
The five structural components of DePIN are:
Physical hardware: Includes physical infrastructure vital in linking DePIN networks with the physical world. Examples include hotspots, wireless networks, routers, servers, power generators, telecommunication equipment, and solar panels and batteries for energy networks.
Hardware operators: Includes individuals, communities, or businesses responsible for deploying and maintaining hardware. While tokens can incentivize hardware operators, their participation is also contingent on other factors like technical expertise and hardware cost.
Decentralized ledger technology: Blockchain, supported by smart contract logic, serves as the central hub for the token economy, providing transparency, traceability, and robust security within the network.
Decentralized token incentives: A decentralized token incentive system motivates active participation. Individuals who contribute to deploying and operating physical infrastructure, such as hosting hotspots, are rewarded with blockchain tokens. This creates a self-sustaining ecosystem where network growth thrives on the participation and incentives of its members.
End users: Operational networks enable end users to adopt crypto assets for real-world payment of services offered by DePIN.
By combining blockchain networks, smart contracts, and Internet of Things (IoT) devices, DePIN creates a robust and efficient system, redefining infrastructure asset management, maintenance, and monitoring.
Key participants in the DePIN ecosystem
Although Ethereum is commonly acknowledged as the primary chain for DePIN projects, Solana is rapidly gaining momentum. One reason for this could be that “Solana’s integrated infrastructure and performance-focused developer community is attracting DePINs at every stage of the lifecycle,” as reported by Messari. The high-performance blockchain does have the potential to enhance reach and liquidity for users through its high transaction throughput.
Helium (HNT)
In April 2023, the Helium Network made a strategic move, migrating from its standalone layer-1 blockchain to Solana to capitalize on the blockchain's scalability, lower transaction costs, and high-performance. Today, Helium is a prominent DePIN project, successfully harnessing blockchain technology for practical, real-world applications. Functioning as a decentralized LoRaWAN network, often called “The People’s Network,” Helium has been crucial in advancing IoT connectivity.
Empowering communities through user-owned hotspots, the decentralized wireless network enables the autonomous improvement of internet and cell coverage, liberating users from dependence on traditional telecom providers. Individuals who purchase and host these hotspots are rewarded with tokens in exchange for contributing nodes to the network.
Presently, Helium operates individual hotspots across more than 170 countries, offering 5G services to specific cities in the United States. In 2023, the Helium Mobile wireless phone service, built on the Helium network, was introduced, allowing users to manage mobile networks through token incentivization.
Subsequently, in December 2023, Helium Mobile revealed a cost-effective $20 per-month phone plan featuring unlimited data, talk, and text powered by community-owned 5G hotspots. In contrast to the average American spending approximately $144 monthly on cellular plans, Helium Mobile aims to enhance accessibility for all users. Subscribers who share hotspot nodes receive rewards in the form of Solana-based MOBILE tokens, which can be used to cover their phone plan expenses.
“We are tired of carriers that hide high subscription rates, roaming, and additional data fees behind free phone upgrades that lock you into years of expensive plans,” commented Amir Haleem, CEO of Nova Labs, the parent company of Helium Mobile.
Filecoin (FIL)
As of January 2024, Filecoin is the largest DePIN by market capitalization. This crypto-incentivized peer-to-peer (P2P) storage network enhances traditional data storage models, allowing individuals and businesses to rent out their unused storage space in a secure and decentralized manner.
Filecoin operates as a decentralized marketplace for data storage services, compensating storage providers with FIL tokens while users pay for the storage they need. Since its launch in 2020, Filecoin has operated similarly to established cloud storage Web2 giants like Google Cloud and Amazon Web Services, but with a crucial distinction — it provides a distributed storage solution secured by crypto-economic incentives.
By connecting those needing storage with users with spare space on their hard drives, Filecoin creates a decentralized market for storage space, offering a compelling alternative in terms of both price and decentralization compared to traditional providers. Filecoin aims to establish an inclusive marketplace for data storage to compete with established providers based on competitive pricing and a commitment to decentralization.
Render (RNDR)
As a P2P graphics processing unit (GPU) provider, Render connects individuals or entities seeking new image and animation rendering services with those holding unused GPUs. Providers receive compensation through RNDR tokens in this unique ecosystem, while users benefit from decentralized rendering services. This decentralized model guarantees efficient usage of GPU resources and creates a reward-driven and community-centric marketplace for rendering needs.
This decentralized model enhances resource efficiency and fosters a distributed network for efficient and high-performance rendering. Render’s approach challenges traditional centralized rendering solutions, embodying the core tenets of DePIN by creating an open and community-driven marketplace for computational resources.
In November 2023, Render upgraded its core infrastructure from Ethereum to Solana. The move was made to expand the project’s capabilities with potential new features such as real-time streaming and dynamic non-fungible tokens (NFTs). Render could also branch into compressed NFTs and real-time oracles — both key features of Solana — and even machine learning.
In December 2023, Render also implemented a burn and mint equilibrium (BME) model, enabling the network to consistently price services using a supply and demand equilibrium.
Forging ahead: embracing the future of DePIN
The potential of DePIN is intriguing, signaling a transformation in the deployment, operation, and use of physical infrastructure. In this era of innovation, the move toward decentralized systems could unlock many advantages, including cost-efficient crowdsourcing, community empowerment, and the promotion of decentralization.
These elements pave the way for a future where individuals and communities actively shape the technological landscape. Other noteworthy DePIN networks contributing to this space include IoTeX (IOTX), Livepeer (LPT), Theta Network (THETA), and Akash (AKT).
Many believe that DePINs are poised for further evolution 2024, driven by innovations like ZK technology, meme coin integrations, on-chain AI, and on-chain gaming, as anticipated by Messari. In fact, Messari predicts that the most significant growth for DePIN is in Asia, where the emergence of multiple top 10 DePINs is forecasted from 2024 to 2025.
However, this journey towards decentralization isn't without its challenges. Potential hurdles include regulatory uncertainties, scalability concerns, and the need for widespread adoption. Navigating these challenges will be crucial for the sustained growth and acceptance of DePIN technologies.
With innovation and transformation all around us, the positive impact already seen from DePIN points toward a future where physical infrastructure operates on decentralized principles, fostering resilience, security, and empowerment in our interconnected world. With the potential to revolutionize industries and empower individuals, DePIN could play a significant role in the future of infrastructure and the broader crypto space in 2024 and beyond.
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