What is DePIN: 4 Projects To Keep An Eye On
Imagine a world where our physical infrastructure, from power grids to transportation networks, isn’t controlled by a single entity. Blockchain, the technology behind cryptocurrencies, is taking a leap from the digital world to revolutionize the real world with DePINs.
In this article, we dive into what DePINs are, how they work, as well as the top DePIN projects you might want to put on your alert list.
What is DePIN?
DePINs stand for Decentralized Physical Infrastructure Networks, and are essentially like giant, collaborative toolboxes. People contribute physical resources like electric cars, solar panels, or even data storage servers, and are rewarded with tokens — a kind of digital currency specific to the DePIN.
Here’s the cool part: there’s no central boss or entity governing the whole set up. Smart contracts, fancy computer programs that automate agreements, handle everything within the DePIN, ensuring fairness and transparency.
A DePIN could power a neighborhood with solar energy from individual homes, create a network of self-driving delivery drones, provide data storage and WiFi connectivity–all without a central controlling entity.
How is this possible? One critical element of DePIN is that it uses cryptocurrency to build, power and maintain its operations.
The big vision behind DePIN: It enables and motivates citizens to take ownership and enhance the public infrastructure they use. In the face of unreliable institutions and ineffective bureaucrats, DePIN promises to redistribute wealth and authority to citizens and communities.
How does DePIN Work?
DePINs might sound complex, but they rely on a clever combination of existing technologies. Here’s a breakdown of the key players:
- Smart Contracts — the automated rulebook: Imagine a vending machine that dispenses a soda only if you insert the exact amount. Smart contracts work in a similar way, but for DePINs. These are self-executing programs stored on the blockchain that automatically enforce agreements between participants. For example, a smart contract could ensure that someone who contributes solar energy to the grid receives the appropriate amount of tokens in return. Smart contracts remove the need for intermediaries, making DePINs more efficient and transparent.
- The Internet of Things (IoT) — connecting the physical world: DePINs wouldn’t be possible without the Internet of Things (IoT). These are everyday objects with built-in internet connections, constantly feeding data back to the network. In a DePIN, IoT devices could be anything from a solar panel monitoring its energy output to a self-driving car reporting its location. This real-time data is crucial for DePINs to function effectively and ensures everyone has access to the latest information.
- Tokenomics — the engine that drives participation: As briefly mentioned in the earlier section, DePIN runs on crypto. Every DePIN has its own digital currency — a token. These tokens incentivize participation in the network. For instance, someone who shares their extra storage space on a DePIN could be rewarded with tokens. These tokens can then be used to pay for services within the DePIN or even be traded on cryptocurrency exchanges for real money. The way tokens are distributed, used, and valued within a DePIN is called “tokenomics.” Designing a robust tokenomic system is essential for attracting participants and ensuring the long-term health of a DePIN.
Think of it this way: Smart contracts are the rules of the game, the IoT devices are the players on the field, and tokens are the rewards they compete for. All three elements work together to create a self-sustaining ecosystem within a DePIN.
Some of the possibilities include:
- Powering our homes with sunshine: Forget relying on a single energy company. DePINs could create a network of homes with solar panels. Not only that, excess energy from your roof could be shared with your neighbors, and everyone would be rewarded with tokens for contributing to the grid. This would incentivize renewable energy use and empower communities to manage their own power.
- Mapping the world, one phone at a time: Lost in a natural jungle or concrete jungle? DePINs could create a crowdsourced mapping service. Everyone with a smartphone could contribute data about their surroundings, building a constantly updated map of the world. Imagine hikers adding trails, or delivery drivers reporting road closures — all rewarded with tokens for their contribution.
- Shared rides on autopilot: Here’s one for those of us who frequently get frustrated with Uber’s surge pricing systems. DePINs could create a network of self-driving electric vehicles on their own. Just hail one through an app, and a nearby car will whisk you away. These vehicles could even be owned by a collective, with profits distributed among token holders.
- Trusted supply chains: Ever wonder where your clothes came from, or if the organic label on that orange is actually legit? DePINs could revolutionize supply chain management. Products could be tracked in real-time as they move from factories to warehouses to stores, with all data securely stored on the blockchain. This would ensure transparency and eliminate opportunities for fraud.
Growth and Development in DePIN
According to a comprehensive industry report by Messari, the DePIN ecosystem has grown to over 650 projects in 2023 spanning computing, AI, wireless, sensors, energy and services, with a total market cap exceeding $20 billion. These projects, in turn, have generated ~$15 million in annualized on-chain revenue.
Top DePIN Projects
Four of the most prolific DePIN projects include:
- Arweave: Focuses on permanent, decentralized data storage. Imagine a digital archive where information is stored forever, securely and publicly accessible. Arweave uses a unique economic model to incentivize users to store data and ensure long-term network stability.
- Filecoin: Another player in the decentralized storage game, Filecoin offers a marketplace where users can rent out unused storage space on their computers. Think of it like a giant, secure Dropbox powered by a global network of computers.
- Helium: Takes DePINs a step outside the digital world. Helium creates networks for internet-connected devices by leveraging a network of hotspots built into everyday devices. These hotspots could be anything from a home router to a special antenna. Helium token holders are rewarded for providing this network coverage.
- Render: Caters to the creative crowd by providing a decentralized network for rendering computer graphics. 3D artists and studios can leverage Render’s global network of computing power to render complex animations and effects, all powered by a network of token holders contributing their processing power.
Notably, DePIN revenues have proved to be the most resilient–in the past bear market, DePIN revenues experienced a drop of 20–60% from their peak values, as compared to the steeper 70–90% decline faced by the broader crypto market. This strongly implies that the value in the DePIN sector is driven more by utility instead of speculation.
Underpinning much of DePIN is Solana, whose low-cost, high-performance blockchain has attracted a robust developer community eager to leverage the existing tools and resources built on Solana to launch and scale their applications.
Benefits and Challenges of DePINs
For all the advancement and growth of DePINs, the existing infrastructure isn’t going to disappear overnight. Widespread adoption of DePINs will require a shift in mindset and significant investment. Incentives will be needed to encourage people to participate in DePINs over traditional systems. Overcoming the inertia of existing infrastructure might be the biggest hurdle DePINs face.
Add to this the fact that regulations are still catching up–clear guidelines are needed to ensure fair competition, protect consumer rights, and define the roles of participants within a DePIN. Governments and industry leaders will need to work together to establish a regulatory framework that fosters DePIN development.
However, every disruptive technology has its zero to one journey to make, and so does DePIN. For decades, infrastructure ownership has been concentrated in the hands of a few. DePINs can change that. By allowing individuals to contribute resources and earn tokens, DePINs open the door for wider participation in infrastructure ownership. This could lead to more democratic decision-making and a fairer distribution of benefits.
