Tech-forward Jurisdictions should encourage a Physical Internet Revolution. Tech-forward Jurisdictions should encourage a Physical Internet Revolution We saw Tesla’s first robotaxi rides roll out in Austin last week at $4.20 per ride, with mile data logged on Tesla-owned servers. It was a win for autonomy. Yet, in this model, the fleet owner captures the data exhaust, the network effects, and most of the revenue. Tesla, Waymo, and Cruise could be the big winners - but what about everyone else? robotaxi rides roll The Cybercab rollout should prompt tech-friendly jurisdictions to encourage a physical internet revolution. Decentralized physical-infrastructure networks (DePIN) that pay the people who supply real-world assets (cars, cameras, GPUs, rooftop routers) with on-chain rewards can ensure that everyone can participate in these economies. We have seen some proofs of concept: Helium did it for IoT radios, Render does it for GPUs, and Akash and Bittensor rent compute. However, DePIN faces three major challenges: Regulatory uncertainty: Securities questions, consumer-protection rules, and local licensing regulations create uncertainty. It’s sometimes difficult for founders to tell whether their reward token is an incentive, a security, or a prepaid service voucher. Trust‐but-verify security: Enterprises interested in leasing capacity, whether bandwidth or battery swaps, need a way to audit node security properly. Current open-source proofs rarely meet ISO/NIST baselines. Adoption flywheel: Without enterprise customers, the rewards crash, and without predictable rewards, hardware suppliers churn out. Regulatory uncertainty: Securities questions, consumer-protection rules, and local licensing regulations create uncertainty. It’s sometimes difficult for founders to tell whether their reward token is an incentive, a security, or a prepaid service voucher. Regulatory uncertainty: Securities questions, consumer-protection rules, and local licensing regulations create uncertainty. It’s sometimes difficult for founders to tell whether their reward token is an incentive, a security, or a prepaid service voucher. Trust‐but-verify security: Enterprises interested in leasing capacity, whether bandwidth or battery swaps, need a way to audit node security properly. Current open-source proofs rarely meet ISO/NIST baselines. Trust‐but-verify security: Enterprises interested in leasing capacity, whether bandwidth or battery swaps, need a way to audit node security properly. Current open-source proofs rarely meet ISO/NIST baselines. Adoption flywheel: Without enterprise customers, the rewards crash, and without predictable rewards, hardware suppliers churn out. Adoption flywheel: Without enterprise customers, the rewards crash, and without predictable rewards, hardware suppliers churn out. Each obstacle is aggravated by mismatched jurisdictional rules. A DePIN founder in Boulder faces a different set of money-transmitter laws than a peer in Berlin. That chaos is also an opening: tech-friendly jurisdictions can turn uncertainty into magnetism - by offering tailored sandboxes. What a DePIN Sandbox Should Look Like What a DePIN Sandbox Should Look Like In the US, states like Wyoming, Utah, and Arizona have laid the groundwork with blockchain-specific sandboxes; Dubai, Zug, and Singapore provide similar channels globally. Yet, most of these are focused on fintech, wallets, and payments. While these are an important part of the puzzle, they aren’t the only ones. DePIN needs something closer to an Internet-of-Things charter. A credible DePIN sandbox would: Issue theme-specific charters: Rather than a generic “crypto” exemption, regulators could grant “physical-network licenses” that cover token incentives, consumer safety, and hardware provisioning under a single umbrella. Issue theme-specific charters: Rather than a generic “crypto” exemption, regulators could grant “physical-network licenses” that cover token incentives, consumer safety, and hardware provisioning under a single umbrella. Publish security baselines: Borrow from NIST SP 800-207 (Zero Trust) or ISO 27001 and translate them into smart-contract-verifiable checklists. Successful node operators would prove compliance via on-chain attestations signed by accredited auditors. Publish security baselines: Borrow from NIST SP 800-207 (Zero Trust) or ISO 27001 and translate them into smart-contract-verifiable checklists. Successful node operators would prove compliance via on-chain attestations signed by accredited auditors. NIST SP 800-207 ISO 27001 Offer limited-fault regimes: Insulate early trials from punishing fines if bugs surface, provided the protocol meets disclosure and remediation timelines. (The UK’s FCA offers precedents in its Digital Sandbox.) Offer limited-fault regimes: Insulate early trials from punishing fines if bugs surface, provided the protocol meets disclosure and remediation timelines. (The UK’s FCA offers precedents in its Digital Sandbox.) Digital Sandbox Mandate open performance feeds: Require that throughput, uptime, and reward emissions stream to a public dashboard. This would allow enterprises to get real-time KPIs and regulators to get transparency. Mandate open performance feeds: Require that throughput, uptime, and reward emissions stream to a public dashboard. This would allow enterprises to get real-time KPIs and regulators to get transparency. Fast-track fiat on-ramps: The sandbox could pre-approve compliant stablecoins or bank partners so node operators can cash out in local currency without weeks of KYC friction. Fast-track fiat on-ramps: The sandbox could pre-approve compliant stablecoins or bank partners so node operators can cash out in local currency without weeks of KYC friction. To see how this would work in practice, imagine a state designating a DePIN Mobility Zone in part of a city. This would be the experience for an entrepreneur developing a fleet (of any physical asset - like bandwidth, or cameras, or delivery drones): One-stop DePIN office: located inside the state’s existing blockchain sandbox, the office issues provisional permits within 30 days. Cyber-audit voucher program: The state subsidizes the first third-party penetration test for each fleet owner, driving common security standards. Data escrow. Transactions are logged in an anonymized way, to a neutral escrow contract, so state and city planners can study public policy effects. Tax incentives for open sourcing. Any protocol that releases its hardware firmware under an approved open license earns a 5-year property tax abatement on deployed assets. Such a micro-policy would signal “bring your robots here” in the same way Wyoming signaled “incorporate your DAO here.” The result would be more business opportunities for entrepreneurs, more local jobs, maintaining autonomous fleets, and fewer network rents taken by the world’s largest companies. One-stop DePIN office: located inside the state’s existing blockchain sandbox, the office issues provisional permits within 30 days. One-stop DePIN office: located inside the state’s existing blockchain sandbox, the office issues provisional permits within 30 days. Cyber-audit voucher program: The state subsidizes the first third-party penetration test for each fleet owner, driving common security standards. Cyber-audit voucher program: The state subsidizes the first third-party penetration test for each fleet owner, driving common security standards. Data escrow. Transactions are logged in an anonymized way, to a neutral escrow contract, so state and city planners can study public policy effects. Data escrow. Transactions are logged in an anonymized way, to a neutral escrow contract, so state and city planners can study public policy effects. Tax incentives for open sourcing. Any protocol that releases its hardware firmware under an approved open license earns a 5-year property tax abatement on deployed assets. Such a micro-policy would signal “bring your robots here” in the same way Wyoming signaled “incorporate your DAO here.” The result would be more business opportunities for entrepreneurs, more local jobs, maintaining autonomous fleets, and fewer network rents taken by the world’s largest companies. Tax incentives for open sourcing. Any protocol that releases its hardware firmware under an approved open license earns a 5-year property tax abatement on deployed assets. Such a micro-policy would signal “bring your robots here” in the same way Wyoming signaled “incorporate your DAO here.” The result would be more business opportunities for entrepreneurs, more local jobs, maintaining autonomous fleets, and fewer network rents taken by the world’s largest companies. The Broader Payoff The Broader Payoff By 2030, analysts expect the machine-to-machine economy, including vehicles, drones, and sensors, will clear multiple trillions in annual revenue. If the status quo holds, 80% of that value will accrue to just a few hyperscale platforms. But if even a slice migrates to well-regulated DePINs, local communities can earn recurring cash flow from the infrastructure they host, just as solar homeowners sell energy back to the grid. Because DePIN rails are permissionless at the protocol layer and jurisdiction-specific at the regulatory layer, the first mover among governments stands to capture outsized entrepreneurial migration - just as Delaware captured C-corps and the Cayman Islands captured hedge funds. Tech-forward policymakers love to quote “innovation without permission.” DePIN sandboxes can make that slogan real, but only if they blend engineering pragmatism (security standards, data escrow) with commercial clarity (utility-token exemptions, instant fiat ramps). Tesla’s Austin robotaxis show that autonomous assets are ready to earn. Savvy jurisdictions have a once-in-a-decade chance to host the physical layer of Web3 - and to make sure the benefits of the physical internet are widely shared. - Shaan Ray Shaan Ray Shaan Ray
