2024, the year of DePIN?

Author: MIIX

If you ask what is the biggest surprise in the crypto world in 2023, the answer has to be ETFs, inscriptions, and DePINs, of which DePIN belongs to the old tree that sprouts from the old tree, and Helium, which was founded in 2021, has created the biggest surprise so far.

1, the DePIN track is spreading

DePIN covers a wide range of areas, including server networks, wireless networks, sensing networks, and energy networks. According to crypto research firm Messari, the overall industry size of DePIN is currently around $2.2 trillion and is expected to grow to $3.5 trillion by 2028.

With the topic of Mobile and Honey sweeping the whole network, Fil and Storj old projects have also returned to their vision, the heat of the DePIN track has a trend of spreading, in the DePIN growth ranking, MOBILE, IOT and HNT have always performed well, and the DATA Token of Streamer Network has also performed outstandingly, with a 7-day highest increase of more than 215%. This seems to tell us that DePIN has become a hot track outlet and will occupy an extremely important position in the new cycle.

2. Solana and DePIN go both ways

The Market Cap of the DePIN ecosystem on Solana is second only to Ethereum at $2.7 billion, just one step away from Ethereum’s $3 billion. Over the past year, both Solana and DePIN have shown significant growth, taking us to see the synergy between the Solana Blockchain and the DePIN protocol.

Helium Bundle Solana Narrative

In September 2022, Helium developer Nova Labs announced the signing of a Mobile Virtual Network Operator (MVNO) agreement with telecom giant T-Mobile to launch a commercial mobile smartphone service under the Helium Mobile brand in the first quarter of 2023.

In November 2022, Nova Labs said it would offer a SIM card and a free trial to users of Solana Labs’ new Saga phone, Solana’s flagship Android device, tightly integrated with the Solana Blockchain.

In early 2023, Helium successfully completed its migration to Solana, proving the viability of building a DePIN business on Solana and sparking growth across the DePIN segment.

Under the double superposition of Solana’s empowerment and DePIN narrative, the price of $MOBILE has been rising, and in December, it achieved an intraday increase of 110%, leading the DePIN track-related generations in a single day, which comprehensively drove and helped the popularity of the DePIN track.

Solana Ecosystem Pushes DePIN

The focus of the Solana ecosystem is mainly focused on Decentralized Finance, Memecoin, and DePIN. Kuleen Nimkar, head of DePIN at the Solana Foundation, pointed out in an interview with The Block: “DePIN projects on Solana (including Helium, Render, Hivemapper, etc.) demonstrate the potential of decentralization physical infrastructure networks to take the gig economy to the next level, and Helium, as the head DePIN project of the Solana ecosystem, is also Solana 2024 One of the core strategic focus points of the year”.

Kuleen believes that contributors to the DePIN network can earn significant income by supporting the network early, and the tokens earned will then appreciate as the network grows: “This has never happened in the web2 gig economy, and early Uber drivers didn’t see the huge benefits of supporting Uber until it became a giant.”

It can be seen that Solana also hopes to cooperate more with DePIN to form a strong binding relationship similar to Decentralized Finance and Ethereum, inscription and Bitcoin, and build its own unique ecosystem. Along with the general rise of Solana’s DePIN track Token, it just helps us prove Solana’s importance to DePIN and the positive market effect it brings.

3. Strengths and obstacles coexist for a long time

Resource Sharing and Efficient Utilization

The most essential core of DePIN is resource integration, that is, users are incentivized to share resources through tokens, so that resources can flow efficiently to the demand side. Therefore, the characteristics of DePIN are also clear at a glance:

• Crowdsourced hardware – more cost-effective
• Collective ownership — aligns with the interests of users and rewards users
• Democratized access — an open and unrestricted network environment
• Decentralization — no permissionless and censorship resistance required

DePIN and traditional infrastructure, like Decentralized Finance and CeFi, somewhat weakens the role of middlemen, making resources more accessible between the supply and demand sides.

Flywheel Effect of DePIN Mode

Due to the use of Tokens, DePIN projects can benefit from a positive flywheel effect, where increased usage (demand) increases the Token price through burns or buybacks, and then provides additional incentives for contributors to continue building the network as the dollar value of the Tokens they earn increases.

As the network grew, investors became more interested and began to support the project with funds. If a project is open source or makes contributor/user data available to the public, developers can build dapps on top of the data, creating additional value in the ecosystem and thus attracting more users and contributors. The image below shows an example of how this flywheel works in today’s market.

Technology and model are not mature enough

What DePIN aims to achieve is the democratization of infrastructure, and by allowing individuals and small businesses to participate in the deployment and operation of infrastructure networks, DePIN can provide more equitable access to essential services and resources. Therefore, DePIN is an imaginative track that can both “old wine in new bottles” and completely break through the boundaries of the Rekt industry.

The core of DePIN is a complete infrastructure system built by the Token incentive system, but at present, it is more of a Miner model similar to FIL, with too many rewards in the early stage and the problem that the scale effect cannot be maintained in the later stage. We have not yet seen a Token economic model that can support the growth and maturity of the DePIN ecosystem. And most DePIN projects are focused on how to incentivize participants to buy hardware, with only a few trying to address the financialization model that drives demand.

Whether it is from the technical level, from the cost side, or from the optimization of the financial model, DePIN still has a long way to go. The author believes that the maturity of the DePIN track will require at least 10 times the growth space before it can get rid of the short-term heat and enter the road of long-term development.

4. Summary

The number of DePIN track projects is increasing, especially the recent hot trend in the market, which shows the market’s recognition of this track. However, the DePIN track is relatively new, and the absolute growth value is not very high, resulting in a relatively niche in the entire web3 market, which needs more attention and resource tilting, including more investors starting to pay attention to this direction, so that more community developers are willing to join this track and develop and deepen applications together.

In 2024, with the rotation of a new round of market cycle, DePIN will inevitably be involved, but whether it will become a big year for DePIN is more unknown. Once there is an excellent or even revolutionary financial model in the field of DePIN, all this is no longer a problem, and the DePIN flywheel will spontaneously drive to solve all the technical problems, cost problems.

However, in the long run, the increasing maturity of DePIN will inevitably require long-term investment and operational development from the market, institutions and developers to gradually penetrate into people’s lives and applications, and from complementary to parallel to replacement with existing infrastructure.