The emergence of blockchain has revolutionized several aspects of life in various industries: finance (DeFi), gaming (GameFi), content creation (NFT), etc. The world of physical infrastructure or the "real" world has long remained untouched by these innovations that challenged the monopoly of large corporations. Resisting progress proved futile, and blockchain technologies gradually began infiltrating traditional systems of life. Analysts in the crypto space have identified a new trend dubbed Decentralized Physical Infrastructure Networks, or simply DePIN. What is it, and why is it already being hailed as the most significant crypto investment of the season? Let's find out in this new piece.
DePIN: Origins
Before delving into the symbiosis of decentralized processes and traditional physical infrastructure, it's essential to understand the peculiarities of these two industries.
Physical infrastructure elements typically include:
- Electricity supply
- Telecommunication networks
- Cloud services
- Mobile networks
- Heating and air conditioning, among others
Due to the massive capital turnover and logistical intricacies, only the most resilient and large corporations managed to survive in the market. Over time, they gained enough influence to control pricing, services, and customer terms. While this monopolization provided these companies with economic resources, user demand, and power, it significantly hindered their development due to innovation constraints and lack of competition. Everything changed with the advent of blockchain technologies.
What is DePIN?
The DePIN concept involves utilizing the basic principles of blockchain and elements of decentralization to create, develop, and subsequently operate networks of physical infrastructure. Tokens serve here as the primary tool for transformation and management.
Coordination within these new communities will be carried out by the participants themselves. The governance process is similar to the principles of DAO projects, where organization members autonomously build a network that suits them best, leveraging all the benefits of informational, technological, and economic progress.
But why involve user labor? Don't they merely serve a consumer function? To answer these questions, let's consider an example. It's well-known that mobile connectivity isn't ubiquitous worldwide, and in remote areas (often even between major cities), it's simply absent. Mobile operators can't cover every inch with signal towers – the costs would be too high, but users themselves can contribute. By adequately incentivizing them, both interest and efficiency will rise, ultimately achieving results faster.
The Emergence of the DePIN Concept
The first attempts to merge decentralized digital formats with traditional real-world ones were about a decade ago. Juan Benet, the founder of Protocol Labs, created the startup Filecoin in 2014 and dubbed it a "cryptocurrency network for file storage." The main advantage of this decentralized network was the ability to store data not in the storage of a single company but on various computers worldwide.
Somewhat in summer of 2022, networks of physical infrastructure with token incentives, known as TIPIN, began to emerge. Cryptocurrency was used here to provide additional motivation for users to enhance the efficiency and improve the operation of physical systems. The tokenization of network equipment even pushed centralized structures to some acceptance of cryptocurrencies.
Among the most popular DePIN projects today are:
- Helium – wireless communication;
- Hivemapper – geolocation services;
- Render – rendering;
- Arweave – cloud services;
- Dimo – mobile technologies;
- Nunet – computational networks;
- Healthblocks – healthcare.
2024: The Year of DePIN Investments
Some think that in 2024, users' attention will be directed towards decentralized data storage, which is a part of DePIN. The analytical platform Messari named DePIN one of the top 10 trends in peer-to-peer infrastructure in 2024.
The platform's assessment also highlighted an optimistic view of the DePIN economy. It suggested that in a tech landscape characterized by inflated hype cycles, the economics of DePIN networks are straightforward to comprehend (think “Airbnb for digital storage”), and their tokens are easier to assess. Should decentralized networks eventually secure 10% of the cloud market, the implications for this sector would be significant.
Conclusion
Despite the relatively low popularity of the DePIN sector even among crypto projects, there's no shortage of capitalization here. According to Messari, the industry's capitalization today exceeds $20 billion, not including RWA and blockchain oracles.
Talk of the bright future of this new crypto concept began even before 2024, and now, investment ideas in the DePIN sphere are actively promoted in the information field. Users will have to weigh all the risks and prospects of this direction independently, but business experts still recommend paying attention to it.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Liquid Restaking Protocols: the New DeFi Primitive” and “Authorization vs. Success Rates”.
