The total market value of DePIN has increased by more than 40% during the year, is the representative project worth paying attention to?

In the past six months, a concept called DePIN has gradually emerged. DePIN, or Decentralised Physical Infrastructure Networks, was first proposed by Messari at the end of 2022.

As an emerging concept, DePIN quickly gained market attention and showed strong momentum. Currently, the total market capitalization of the DePIN protocol has exceeded $12 billion, with a year-to-date (YTD) growth rate of 42%.

The rise of the DePIN network represents the expectation of a more decentralized and efficient future, where blockchain technology will play a key role in shaping the foundations of our physical world.

Introduction to the concept of DePIN: Use digital tokens to incentivize users to deploy hardware devices and share network resources

At its core, DePIN is an emerging technology that uses tokens to incentivize users to deploy hardware devices to provide real-world goods and services or digital resources. The concept of DePIN can be divided into two main parts: Physical Resource Networks (PRNs) and Digital Resource Networks (DRNs).

The Physical Resource Network (PRN) encourages participants to leverage geolocation-based hardware to deliver unique goods and services in the real world. These services include, but are not limited to, WIFI, 5G, VPN, energy information sharing, and geospatial data. By deploying these facilities, participants provide real value to their surroundings while also receiving token incentives.

A digital resource network (DRN) is a physical infrastructure network that provides digital resources through hardware facilities. These networks, including broadband networks, storage networks, and computing power networks, are an indispensable part of infrastructure in the digital age.

In order to operate efficiently, the structure of DePIN consists of the following four basic components:

1. Physical infrastructure: The operation of DePIN relies on a variety of physical infrastructure, including mobile networks, base stations, wireless network routers, and cloud network servers.

2. Off-chain computing infrastructure: DePIN uses off-chain computing infrastructure to connect the real world with blockchain technology. The user’s real-world activity is recorded, and the fees paid are distributed to the hardware provider. This data can be integrated and analyzed for different blockchain applications.

3. Token incentives: Participants who build a DePIN network are rewarded with tokens. This gives them the impetus before the network can generate sustainable revenue from user demand.

4. End user: Once the network is established, the end user can start paying for the services provided by DePIN.

The most important significance of DePIN is to share computing and storage resources to reduce costs and increase efficiency in the online world

DePIN uses blockchain technology to coordinate and optimize the use of data storage and computing resources, aiming to not only improve security through a decentralized approach, but also leverage the success of decentralized protocols to extend the physical infrastructure of the real world, thereby significantly reducing costs.

In the DePIN space, economic efficiency improvements, market entry barriers are lowered, and governance and security are three key challenges. First, the significant economic advantage of DePIN comes from the ability to leverage idle resources around the world, such as underutilized servers, GPUs, and CPUs. The monetization of these resources, combined with the DePIN protocol, aggregates these computing resources globally at a lower cost and makes them available to users at a lower price, means that resources such as computing power and bandwidth can be used more uniformly and efficiently.

According to Grand View Research, the global cloud computing market is huge, with a projected CAGR of 16% from 2023 to 2032, indicating a huge market potential. Akash, as an example, demonstrates the possibility of aggregating cloud computing resources through a decentralized network and making them available to developers at a low cost, which is about 80% lower than the cost of traditional centralized service providers such as AWS, Google Cloud, and Microsoft Azure.

DePIN is also working to lower the barriers to market for resource providers and new projects, attracting more suppliers by streamlining the onboarding process, as exemplified in Storj’s case. At the same time, DePIN can also be flexibly scaled across different regions, leveraging a decentralized structure to provide tailored resource solutions across different geographic and demographic communities.

In terms of governance and security, decentralized networks enable the implementation of better governance systems that enable stakeholders to participate in the decision-making process through voting and governance proposals. In addition, DePIN provides a higher level of activity and security than centralized systems. For example, centralized providers such as Google Cloud and AWS have faced service outages, and the decentralized nature of the DePIN network allows for continuous service provision even when some nodes go down.

Overall, DePIN is creating value for resource providers, project developers, and end-users by improving economic efficiency, lowering barriers to market entry, and strengthening governance and security, while also driving the industry toward a more efficient, inclusive, and secure industry.

DePIN track analysis + representative projects at a glance: from Helium and FIL to Render and Akash

The DePIN track is a special and extensive field that covers a wide range of similar or similar events. According to Messari’s DePIN Sector Map, we can understand the track more clearly from several different dimensions.

The DePIN track can be classified from two main dimensions: one is a part of the blockchain network itself, and the other is the use of blockchain technology to achieve new businesses. In blockchain networks, DePIN can optimize data storage, invocation, archiving, and the possibility of L3 scaling. For example, independent storage tiers such as FIL and Arweave have become mainstream, while projects that rent an external communication network or GPU network to improve the performance of the L3 layer can also be classified as DePIN. Another dimension is new businesses based on blockchain, such as the Internet of Things, cloud computing, energy storage, etc., through which these projects coordinate the provision and demand of hardware facilities.

In terms of equipment, the hardware devices involved in DePIN mainly include PCs, mobile phones, servers, communication signals and GPUs. At the same time, custom hardware, such as the case of Helium, while once popular, also faced challenges with market acceptance and economic viability. Helium has attempted to build a “network of networks” that is compatible with third-party networks, but the results have not yet been determined. Helium’s experience has shown that custom hardware models need to be approached carefully at a pace to avoid market imbalances.

The DePIN track can also be analyzed from the specific areas of service provided. For example, the Internet of Things and unlimited communications, GPU rendering, real-life data and image collection, etc. Projects such as Hivemapper, Spexigon, and DIMO demonstrate the use of different hardware devices to build specific services, but their common challenge is the uncertainty of demand. In the existing web2 ecosystem, many services can be replaced, and the advantage of DePIN projects is the token incentive. However, token incentives are not the whole story of web3, and the real meaning of DePIN is to connect real life with web3 through hardware facilities, so as to better integrate into people’s lives.

1. Helium: A network that becomes a network

Helium is one of the pioneers in the DePIN space and has been leading the development of DeWi (Decentralized Wireless Network) since the launch of its LoRaWAN network in July 2019. Helium’s initial goal was to create a low-power wide area network (LoRaWAN) for connectivity between Internet of Things (IoT) devices. This network was an innovative service at the time, giving Helium a first-mover advantage in the IoT space. It has also partnered with projects in areas such as weather tracking, air quality monitoring, and GPS integration.

In 2022, Helium adjusted its development goals to become a “network of networks”. This strategic shift means that Helium not only provides services for IoT itself, but also supports other DePIN projects, such as building decentralized solutions for Wi-Fi, 5G, VPNs, and more. To date, nearly 1 million hotspots have been connected to the Helium network.

However, Helium has also faced some criticism. Web3 critic Liron Shapira points out that the actual use case for Helium may be exaggerated. He believes that the majority of Helium’s revenue comes from selling hardware to new network providers, rather than through the services it provides. While the supply is increasing, the actual demand and benefits for Helium’s products don’t seem to be significant. This model can lead to an imbalance between supply and demand, raising questions about the long-term sustainability of the project.

Helium’s experience reflects a key challenge in the DePIN space: how to ensure a balance between technological innovation and market demand, and how to sustain the long-term survival and growth of the project.

2. FIL: Distributed Cloud Storage Solution

FIL, launched in 2020 as an important project in the DePIN track, aims to provide cloud storage services similar to those of Web2 giants such as Google Cloud and Amazon Web Services. However, unlike these centralized providers, FIL offers a distributed storage solution that features cryptoeconomic incentives to secure services. The mechanism of FIL is to connect users who need storage space with hard drive users who have free space, who are paid by FIL tokens.

Despite FIL excellent early days, its monthly income experienced a significant decline during the bear market. Researcher Domica believes that FIL may have been overstated in size and utility during its expansion and development in the summer of 2021. In response to this challenge, FIL launched FIL Plus, a new product that offers free storage space to verified users, which has already attracted a large number of users to turn to it.

The FIL case has triggered a deeper reflection on the DePIN track: as a Web3 network that drives the Internet of Things economy, is DePIN a centralized physical infrastructure network a new concept hype, or a new driving force for development? How to make cryptography and incentive models truly serve real-world use cases has become an urgent problem to be solved. However, compared with more mature projects such as DeFi and NFT, DePIN is still in the untapped blue ocean market. It is expected that more developers will promote the development of the DePIN track through technological innovation in the future and realize the vision of Web3 value network.

3. Render Network: Decentralized GPU Rendering Service Platform

Render Network is a revolutionary decentralized GPU rendering service platform that provides services by connecting users who need to perform rendering jobs with those who have spare GPU resources. At the heart of this platform is a token incentive mechanism designed to optimize and incentivize the GPU rendering process.

To ensure the efficiency and fairness of the service, the Render Network uses OctaneBench (OB)-based standards to measure rendering power, dividing idle GPU users into three different tiers. These tiers are differentiated based on GPU rendering speeds to ensure that each user is rewarded accordingly based on the capabilities of their hardware.

Render employs a unique Burn-and Mint Equilibrium (BME) token incentive model. In this model, users use RNDR tokens to purchase GPU rendering services, and after the task is completed, the tokens used are destroyed. At the same time, service provider rewards are distributed through newly produced tokens. This approach ensures the value of RNDR tokens throughout the economy, while adjusting the balance between supply and demand through an algorithm between burned and newly minted tokens. In addition to the criteria for task completion, comprehensive factors such as customer satisfaction are included to reward high-quality service delivery.

Render Network’s business model has evolved from a simple C2C model to a more managed and controlled B2C model. This innovative incentive mechanism not only improves the efficiency and quality of rendering services, but also brings new development opportunities to the rendering industry, activating underutilized GPU resources around the world in a decentralized way.

4. Akash Network: Users can enjoy 80% of the cost discount

Akash Network is an innovative decentralized cloud service network consisting of various cloud service providers. Its core function is to aggregate the cloud computing resources of these providers and provide developers with the cloud computing capabilities they need at a lower cost. This decentralized approach not only makes the service more efficient, but also significantly reduces costs.

Compared to traditional centralized cloud service providers such as AWS, Google Cloud, and Microsoft Azure, Akash Network provides services that allow users to enjoy about 80% cost savings. This significant cost advantage makes Akash an ideal choice for developers and small businesses, especially for those looking for high-quality, yet cost-effective cloud computing resources.

Akash Network’s decentralized model not only optimizes resource allocation, but also improves the efficiency of the entire network by allowing multiple service providers to share their underutilized computing resources. The successful implementation of this model demonstrates the potential of decentralized technology in traditional industries, especially in such a highly centralized and cost-intensive field as cloud computing.

Through observation, we have witnessed several projects such as Helium, FIL, Render Network, and Akash Network innovating in decentralized infrastructure and services. These projects not only demonstrate the application potential of blockchain technology in traditional industries, but also provide us with a glimpse into the possible direction of the digital economy in the future.

What the future of DePIN will be is still unknown, and the future development needs to be tested by the market

While the DePIN space is fraught with challenges, such as demand-supply imbalances, market acceptance, technology complexity, and sustainability issues, these projects are already pushing the industry towards a more decentralized, efficient, and economical direction. We look forward to seeing more innovators join the space, bringing more breakthrough technologies and business models to the table."

As an emerging field, the real potential and impact of DePIN remains to be tested by the market and time. However, regardless of the outcome, DePIN has proven itself as an important force in driving technological and business innovation. Not only does it offer an alternative to the existing economic model, but it also shows us the possibility of a more decentralized and democratized future.