DePIN Explained: What Are Decentralized Physical Infrastructure Networks?by@dean
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DePIN Explained: What Are Decentralized Physical Infrastructure Networks?

by Dean PatrickApril 16th, 2024
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DePIN (short for Decentralized Physical Infrastructure Networks) extends Web 3--the decentralized internet built on blockchains, cryptocurrencies, and smart contracts--to physical infrastructure and services like energy networks and ride-sharing. Messari, an independent crypto research firm, estimates DePIN’s Total Addressable Market to be $2.2 trillion, growing to $3.5 trillion by 2028. However, DePIN's theoretical market size is the entire non-digital economy, which, according to the World Bank, is nearly $90 trillion.
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Part 1: DePIN Crypto - Humanizing Web 3.0 in the Real World

DePIN (short for Decentralized Physical Infrastructure Networks) extends Web 3--the decentralized internet built on blockchains, cryptocurrencies, and smart contracts--to physical infrastructure and services like energy networks and ride-sharing. Messari, an independent crypto research firm, estimates DePIN’s Total Addressable Market to be $2.2 trillion, growing to $3.5 trillion by 2028. However, DePIN's theoretical market size is the entire non-digital economy, which, according to the World Bank, is nearly $90 trillion.

“DePIN is for the maximally ambitious founders that want to solve the base problems of society.” – Salvador Gala, Co-Founder of Escape Velocity Ventures.

A DePIN Day in the Life

The year is 2028. Alex, a Portlander who drives for a living, starts his day by hopping into his car and activating the DRIFE app, a decentralized alternative to traditional ride-sharing platforms. As he welcomes his first passenger, they comment on the sleek Hivemapper device on his dashboard. He shares how this device not only maps the roads, creating a decentralized alternative to Google Maps but also rewards him with several hundred dollars a month.

Navigating the city streets, Alex is proud that the extra income he earns isn't just from fares but also from his DIMO AutoPI device plugged into his car's OBD port. The AutoPI connects him to a global network of drivers and cars, offering more affordable insurance options and passive income by providing invaluable car data to a vast interconnected web of vehicles. The Helium network provides the broadband for his apps, and he chuckles at the memory of past days when signal drop-offs and expensive roaming charges were the norm.

DePIN not only puts power back into the hands of people like Alex, but it also knits together a global community working collaboratively.

DePIN's Raison D'etre

DePIN isn't just a technological advance, it's a humanizing force for Web 3.0, allowing individuals like Alex, who never invested in crypto, to actively participate and benefit from decentralized infrastructure. It extends Web 3.0 to tangible sectors like energy and ride-sharing, connecting the digital and physical worlds.

DePINs work by using token rewards to incentivize great numbers of people to purchase physical devices and join them in a global network. An example is the aforementioned Helium, a DePIN disrupting telecom and wireless networks more broadly. Demand for US telecom is growing 30 percent annually. Twenty-three million Americans still lack access, and 2.9 billion people globally are offline.

In response, Helium bootstrapped a network of one million 5g and LoRaWAN Hotspots using DePIN's novel incentive model. Now, formerly locked-out customers interested in purchasing broadband access could do so at a cheaper rate than even the largest Telecom companies, who are slower at infrastructure deployment than tens of thousands of users simultaneously buying and running devices.

Below is a visual grid laying out several dozen of the most prominent DePINs and the key sectors they are disrupting. From DIMO's mobility network to GEODnet's geospatial network, DePINs are tackling society's biggest problems.

Examples of Decentralized Physical Infrastructure Networks leveraging blockchain technology to disrupt traditional industries

But launching a DePIN project is hard. Demanding founders navigate an arduous tech stack from hardware all the way up to token design.

Making DePIN Possible

To go mainstream, DePIN needed a universal language, a kind of blueprint that founders could build on to quickly deploy their applications in the physical world without sacrificing decentralization or security.

IoTeX, a leading DePIN infrastructure provider, launched W3bstream devnet, a middleware that abstracts away several layers of the DePIN stack and makes deploying a new DePIN application not much harder than creating a new dApp on Ethereum.

W3bstream securely ingests data from physical infrastructure and injects insights and actions back into the decentralized market

Part 2: DePIN Will Drive the Next Wave of Adoption

Frankly you have to think about [DePIN] as something much bigger than web-3 alone, and something that can impact the entire consumer product industry.” -- Alex Rawitz Co-founder of DIMO

Number of physical devices over time. (Source: Statista)

By 2028, the world that Alex inhabits will be populated by 25 billion smart devices. These devices aren't just data-collecting organs; they're income sources, creating passive income streams for their users. As the world wakes up to the value of data, DePIN's potential resonates with everyone. From drivers like Alex to tech CEOs, hosting DePIN devices is quickly becoming lucrative enough to change lives.

The Web3 era, initially shadowed by the speculative nature of cryptocurrency, is moving into a productive phase. People wary of the unpredictable swings of crypto find DePIN a rational and stable approach to disrupting physical infrastructure. DePIN acts as a bridge between web3 and the real world, connecting actual demand with everyday devices.

From fitness trackers to home security cameras, the devices we take for granted are becoming sources of passive income for people like Alex.

It won't take till 2028 for Alex to live in a world where his smartwatch doesn't just track his steps but rewards him for contributing to a global health data collective. Healthblocks, a company doing just that, already exists. Even today, his car doesn't have to just serve as a means for picking up and dropping off passengers but can pay him for the data it collects on each journey.

Again, this is not a distant future – it's unfolding right now. In just five years, this passive income stream could constitute a legitimate Universal Basic Data Income for millions, cementing DePIN's role as a catalyst for the next wave of digital adoption and a cornerstone of the future of work.

In short, DePIN is far less abstract than the rest of web-3; everyone can host devices that contribute to a global decentralized movement while earning passive income.

Part 3: Depin Works for All

If you want to create a maximally open ecosystem, then you need to create the primitives in the most open way. And for us, that’s public blockchains.” -- DePIN Founder

The DePIN flywheel demonstrates how token-incentivized physical networks bootstrap decentralized wireless networks to take on the centralized infrastructure industry

The DePIN Flywheel

At the heart of DePIN is the unique interplay of off-chain compute infrastructure, like w3bstream, with blockchain architecture. For Alex, this interconnectedness isn't just a technical marvel; it's a lifeline. Every day, he sees firsthand how leveraging these components allows the DePIN networks to operate at just a fraction of the cost compared to traditional companies.

The system’s genius lies in its token incentives. They act as the lifeblood, fueling both supply-side participants like Alex and demand-side users. With his car's devices connected to the network, Alex earns tokens as a reward for contributing data and infrastructure to the network. It's reminiscent of Bitcoin, where early amateur miners earned thousands of BTC every month. Alex's neighbors and friends often marvel at how he managed to subsidize the cost of his new car simply through participation in the DePIN network.

This system also means supply arises prior to demand. When it first launched, Filecoin had such a bloat of storage supply it had to significantly subsidize storage costs. But as the DePIN ecosystem grows, demand and developer activity will follow. The value of each token grows with demand, which in turn boosts the supply incentive.

This is a beautiful model for bootstrapping decentralized networks because, once launched, the token incentives are entirely blind to any social marker outside the network contributions of any given supplier. For Alex, this means his contributions are as valuable as any big tech CEO's. He's often amused at how, even though he’s just a rideshare driver, he's an equal player in this digital revolution.

In essence, DePIN weaves a tapestry where every thread, every participant, plays a crucial role. It's a world where there's no central authority dictating terms where power dynamics are shifted towards the community. And for Alex, it's a world where DePIN doesn’t just work for a few, but for all.

Part 4: The DePIN Networks

We’ve seen successful use cases of web-3 in gaming and finance, right? But I think the physical world, the DEPIN world, is giving us bigger use cases to really change people’s lives." Bianca Chen of JDL Manufacturing

Today's DePIN Landscape, Through Alex's Eyes

As Alex navigates the busy city streets, he often marvels at the physical manifestations of the DePIN movement. It's not just an abstract technological concept for him; it's a real-world transformation he witnesses daily.

DePIN has beautifully disrupted the web-2 paradigm of centralized dominance by seamlessly combining network utility with decentralized ownership. During one of his coffee breaks, Alex showed a friend the DePIN sector map on his phone. The map (displayed again below) visually represents the surge of projects pushing the boundaries of what's possible.

Spotting a Helium sticker on a cafe's window, Alex recalls how it boasts nearly half a million active hotspots. And when he drives past solar-powered homes, he thinks of React, the global decentralized energy grid.

However, among all these innovative entities, IoTeX stands out to Alex. He recently attended a DePIN seminar where IoTeX's contribution to the DePIN landscape was discussed at length. Not only has it positioned itself as a unique DePIN-specific platform, but it also has an impressive portfolio. IoTeX's Ucam and Pebble, for instance, are two DePIN hardware products that have intrigued Alex, especially considering their tens of thousands of sales.

In a DePIN ecosystem, you’re not renting access from a central intermediary; you're part of the very fabric that powers the system.

Major decentralized physical infrastructure projects

But building a DePIN project is hard, a reality even savvy users like Alex are shielded from. DePIN projects have to navigate a seven-layer tech stack (pictured below). The stack has historically been extremely costly to build. Helium, for example, raised $360 million to build its DePIN protocol. But coordinating enormous quantities of data from disparate sources with blockchain incentives is daunting even for exceptionally talented founders. Helium took nearly a decade to scale a DePIN app. But this is not a replicable path.

IoTeX supports every level of DePIN development, providing a layer-one blockchain optimized for DePIN as well as middleware and data analytics support to ensure that founders can focus on doing what they do best, building the next generation of physical infrastructure networks.

The seven-layer DePIN stack

In essence, IoTeX is a catalyst, a facilitator, making the promise of decentralized physical networks more accessible and achievable. It reduces capital cost by an order of magnitude and time to deployment from years to weeks.

Part 5: DePINs Will Integrate Into Every Part of Life

Firdosh Sheikh, the founder and CEO of DRIFE, said, “We emphasize a billion users coming into web-3 and for me, that's going to come from real-world applications that are a part of daily life.” Her statement encapsulates the vision of DePIN, a transformative technology decentralizing physical infrastructure and positioning it as an essential part of our daily lives.

Taking a closer look at the expansive DePIN landscape reveals a tapestry of projects, each weaving its unique story:

Physical storage networks: DePIN projects like Filecoin, Arweave, and Sia offer decentralized data storage solutions where data remains safe and distributed across a multitude of independent storage providers. It’s like having a digital vault made up of thousands of decentralized subvaults woven together with blockchain technology, ensuring your information is safe and stored redundantly.

The Power of Computation: Traditional computing solutions have always been central and sometimes costly. Enter decentralized heroes like Akash and Golem. They've reimagined computing, letting people worldwide pool together their computational strengths, forming a cost-effective, decentralized cloud – a stark and welcome contrast to giants like AWS.

The Guardians and Distributors of Data: Projects such as Ceramic and Tableland store and stream data within a decentralized network. These platforms ensure that the stored data remains tamper-proof, but is easily accessible by those with express permission.

Infrastructure Maestros: Among the many, IoTeX stands out, laying the foundation for the DePIN ecosystem and reducing build time and cost by at least an order of magnitude.

Sensor networks: When we think about the cities and homes of tomorrow, projects like Smartpoint come to mind with their kiosks already operational in NYC subways. Healthblocks is transforming how we approach personal well-being, while PlanetWatch keeps a vigilant eye on our air quality to empower non-profits and governments to more effectively fight air pollution.

The Wireless Vanguard: Our constant need for connectivity is being redefined by platforms like WiCrypt and Helium Mobile, rebuilding WiFi and 5G solutions in a decentralized manner. On the other end of the spectrum, Helium IoT leads with innovations in long-range communications through LoRaWAN and familiar technologies like Bluetooth.

Hybrid Connectivity: World Mobile Network showcases the synergy of combining multiple wireless technologies, ensuring we're always connected, no matter where we are.

VPN and CDN Visionaries: In an age where online privacy is paramount, platforms like Sentinel and Orchid are champions of the cause, providing decentralized VPN solutions. Meanwhile, Fleek and Media make sure content reaches us in the blink of an eye, decentralizing the way content is delivered.

Part 6: Why Decentralized Physical Infrastructure Networks Are the Future

“We believe if there's a network that can connect all [devices], we think there's easily demand for hundreds of billions if not trillions of things to become connected.” -- Garrett Kinsman, Co-founder of Nodle

Centralized and Decentralized Physical Infrastructure Networks (DePIN) represent two distinctly different approaches to building and managing infrastructures. At their core, the differences stem from control, distribution, and accessibility.

Setting Up a Centralized Physical Infrastructure Network

In a centralized structure, a single entity or a small group of entities controls the network. For instance, consider a traditional internet service provider (ISP). To set up this centralized network, the ISP would have to secure licenses, install proprietary hardware, build data centers, and manage the entire infrastructure.

This not only requires enormous capital but also creates a single point of failure. If the ISP's main data center faces issues, thousands of users could lose access.

Setting Up a Decentralized Physical Infrastructure Network

DePIN, on the other hand, operates on a decentralized model. Imagine a community-driven internet network where each household has a small device that acts both as a receiver and a relay. These devices create a mesh network, distributing data across multiple points. The barrier to entry is significantly lowered as individuals can join with minimal hardware costs and without the need for extensive regulatory approvals.

Decentralization eliminates single points of failure; if one device goes offline, the network reroutes the data through other active devices. In fact, you don't have to imagine this; Helium has already done just that.

By democratizing access and reducing setup complexities, DePIN projects ensure that infrastructure becomes more resilient, affordable, and inclusive, enabling even individuals or small groups to contribute to and benefit from the network.

Part 7: DePIN Creates a Totally New Design Space

The emergence of decentralized physical infrastructure marks not just a technological evolution but a paradigm shift in infrastructure solutions that changes the nature of physical work. DePIN's incentive model means every developer is motivated to imagine, create, redefine, and change the nature of work, unlocking passive income streams for millions of Alexs around the world.

The untapped potential is immense. With billions of smart devices and trillions of sensors globally, the data of everything — from the mundane to the critical — is becoming accessible. This wealth of information, previously locked behind proprietary walls, is now being liberated thanks to technologies like IoTeX's w3bstream, giving developers the tools to craft solutions, services, and experiences previously deemed impossible.

We're at the threshold of a new digital dawn. Ideas not yet conceived will shape the Web3 landscape, steering us into uncharted territories and redefining our digital destiny.