DePIN will become one of this decade’s most important crypto investments

The advent of blockchain technology has revolutionized several industries, ranging from finance (DeFi) and gaming (GameFi) to Web2 brands such as Nike for digital fashion and Starbucks for Web3 customer loyalty. One area that has remained largely unchanged, however, is physical infrastructure.

Traditionally, the deployment and management of physical infrastructure, such as telecom networks, cloud services, mobility networks and power grids, has been dominated by large companies due to their huge capital requirements and logistical challenges.

As a result, these companies have enjoyed a near monopoly on prices, terms and services offered to end users, leading to a lack of competition and innovation. That is, until blockchain and Web3 came into the picture.

Most people are familiar with DeFi, GameFi, SocialFi and Decentralized Autonomous Organizations (DAOs). DePIN, which stands for Decentralized Physical Infrastructure Networks, is a growing use case with real-world exposure. It uses tokens to bootstrap the deployment of physical infrastructure, and then creates a network effect that unlocks the new design space of real-world DApps.

DePINs are an emerging cryptotrend that leverages blockchain technology to build and operate real-world physical infrastructure and hardware networks in a permissionless, trustless and programmatic manner.

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These PINs are arguably the next evolution of the Internet of Things (IoT) for the Web3 ecosystem or a decentralized IoT where users, device users and businesses own and monetize. DePINs enable globally distributed individuals to jointly build, maintain and operate human-owned physical infrastructure networks without the need for a single centralized entity.

DePINs encourage supply-side participants to build the network by leveraging crypto-economic protocols, offering end-users more cost-effective and innovative services than traditional models.

The origins of DePIN

In November 2021, our own IoTeX became the first Web3 project to name this emerging economy, calling it MachineFi. Messari became the first to refer to it as DePIN in July 2022.

Token Incentivized Physical Infrastructure Networks – or TIPINs – appeared the same month. TIPIN describes a network that uses token incentives to motivate individuals to contribute to the deployment and operation of physical infrastructure and hardware networks, creating a more efficient and fair model for infrastructure deployment.

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Then, in August 2022, came Proof of Physical Work (PoPW), which more specifically referred to incentive structures that allow anyone without permission to contribute to a set of shared goals. Helium, for example, allows users to contribute to decentralized wireless networks with hotspots for people to connect to smart devices in a secure, affordable and energy-efficient way.

DePIN network flywheel. Source: IoTeX

Hive folders are another example. It describes itself as a decentralized map built by people using the world’s first crypto-enabled dash cam. And DIMO, a user-owned DePIN platform that allows users to maximize the value of their connected devices, starting with cars.

In addition, HealthBlocks provides a secure platform for sharing and coordinating health data by leveraging blockchain and token incentives to create a more efficient and patient-centric healthcare system.

And then there are DePIN infrastructure providers, such as IoTeX, which offer centralized infrastructure such as W3bstream, developer tools and go-to-market support to enable decentralized infrastructure network projects.

The landscape of consumer-oriented DePIN projects. Source: IoTeX

In September 2022, EdgeFi emerged as a variant of decentralized infrastructure networks focused on distributing hardware resources closer to end users at the edge of the network. In short, EdgeFi is a decentralized infrastructure network that prioritizes edge computing.

In November 2022, Messari decided it was time to name the Web3 physical infrastructure and conducted a Twitter poll where voters had to choose between PoPW, TIPIN, EdgeFi and DePIN. They left out MachineFi. DePIN won with 31.6% of the vote (136).

And in December 2022, Messari mentioned it in research for the first time, saying it would “be one of the most important areas of crypto investment for the next decade.”

How does DePIN work?

DePINs use blockchain technology and crypto-economic protocols to enable globally distributed individuals to collectively build, maintain and operate physical networks in a trustless, permissionless and programmatic manner. DePIN’s four basic components are:

  1. Physical infrastructure network: DePIN networks require physical infrastructure to function. It can be anything from vehicles for mobility networks, solar panels and batteries for energy networks, hotspots and routers for wireless networks, or servers for cloud networks.
  2. Off-chain computing infrastructure: DePIN relies on middleware that connects the physical and blockchain worlds. Real-world user activities are accounted for in the reward calculator and distribution. In addition, this data can be aggregated for on-chain use cases, such as data proofs for smart contracts and decentralized data marketplaces.
  3. Blockchain Architecture: Each DePIN network interacts with blockchain architecture containing smart contract logic. This blockchain network acts as a ledger, rewarding transactions and other exchanges of value between network members, such as buying broadband access from someone who rents out their router.
  4. Token Incentives: Participants on the offer side are encouraged to join and contribute to the network through token rewards. These tokens act as a subsidy to supply-side participants, allowing them to build out the network before it generates sustainable fees from demand-side usage.
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one. Participants on the offer page: Anyone can become a supply-side participant in a DePIN network by deploying their physical infrastructure and connecting it to the network. For example, a homeowner can deploy a router and become a wireless network access provider.

b. Use on the demand side: Once the network is established, end users can start paying to use the network’s services or consume real-world data. It creates a feedback loop that attracts more supply-side participants and investors, and drives network growth and adoption.

What is the future of DePIN?

Given that there are already over 40 billion smart devices and machines, and trillions of sensors deployed worldwide, the future of DePIN is bright. And as demand for decentralized infrastructure continues to grow, more and more individuals and businesses will look to DePIN to build their networks.

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With the ability to leverage blockchain technology and token incentives, DePIN offers a more efficient, cost-effective and collective ownership approach to rethink how we build physical infrastructure networks tomorrow.

DePINs represent an exciting new frontier in the world of blockchain technology. They offer a new way of building and operating infrastructure in the real world that is fairer, more efficient and aligned with the interests of network participants. As technology advances and new use cases emerge, we can expect DePINs to play an increasingly important role in the development of our physical world.

A paradigm shift

DePIN represents a paradigm shift in the distribution and operation of physical infrastructure. It enables a more efficient, decentralized and fair approach to infrastructure deployment.

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With the ability to scale quickly and disrupt traditional industries, DePIN has the potential to become a significant player in the infrastructure world. As more DePIN projects are developed and deployed, we expect significant disruption and innovation in how we build and maintain physical infrastructure networks.

Raullen Chai is co-founder and CEO of IoTeX. He has previously worked for companies such as Google, Uber and Oracle. He has a Ph.D. from the University of Waterloo, where his research focused on designing and analyzing lightweight ciphers and IoT authentication protocols. At Google, he led many key technical infrastructure security initiatives, including SSL attack mitigation, privacy-preserving SSL offloading, and enabling certificate transparency for all Google services. He was also the founder of Google Cloud Load Balancer, which now serves thousands of cloud services, with 1 million plus queries per second.

Andrew Law is a researcher at IoTeX, where he conducts in-depth research on the Internet of Things (IoT), blockchain and Web3 applications. He previously worked as an application engineer for EvapTech in Malaysia, and holds a Ph.D. in Industrial and Systems Engineering from Virginia Tech.

W3bstream is IoTeX’s decentralized middleware infrastructure for connecting smart devices to smart contracts. Healthblocks and DIMO are IoTeX’s DePIN ecosystem partners. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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