DePIN has reached the world providing the opportunity to create defi projects that reward actions in the physical world. What is this technology and how does DePIN work?
Theoretical studies on cryptocurrency have long predicted that the encryption tools currently implemented on blockchain will be used on the Internet and sooner or later impact the physical world. Nick Szabo noted in the late 20th century that smart contracts can automatically manage physical objects. It’s been over 25 years and the blockchain is firmly entrenched in our lives.
This is mainly due to cryptocurrencies: Bitcoin (BTC) continues to break records and is supported by significant physical infrastructure. At first glance, this confirms a real physical presence in our world.
However, the boundaries of decentralized technologies continue to expand with the arrival of solutions like DePIN.
What is DePIN and why does blockchain need it?
DePIN stands for decentralized physical infrastructure network. Blockchain participants use a public ledger and cryptocurrencies to build and maintain specific real-world infrastructure projects. Simply put, DePIN involves using the DePIN blockchain to run and sustain decentralized networks of computers that can serve a common purpose.
This allows the network to be built on horizontal, decentralized connections rather than the hierarchical approach typically seen in large infrastructure projects such as bridges or roads. Building and managing physical infrastructure networks is expensive and complex, so they have historically been the domain of large corporations or governments with capital and resources.
In contrast, DePIN encourages voluntary cooperation among participants. People can participate in DePIN networks using their own hardware or by purchasing specialized hardware for specific tasks. Options range from simple hard drives to weather stations. However, DePINs are generally based on capabilities that are available to the general public.
Max Thake, co-founder of peaq, explained to crypto.news that DePIN uses tokens to incentivize people to use connected hardware to offer services to other people:
“Let’s imagine a smartphone-centric DePIN like Roam Network. Smartphones, owned by ordinary people, are the hardware component, the data on local connection quality they collect are the products. Telecommunications companies looking to improve their services buy this data in a Web3 marketplace, which is where smart contracts come into play, allowing the exchange of value between the supply and demand side.
Max Thake, co-founder of peaq
What are the DePIN options?
There are two types of DePINs: physical resource networks (PRN) and digital resource networks (DRN).
PRNs are decentralized networks where providers provide hardware resources (such as sensors or Internet access) and these resources are tied to a specific location. Their contribution to the network depends on location, so they are not interchangeable.
DRNs are networks where providers provide resources determined by their function, not their location. Location doesn’t matter here. Examples of such resources include computing power, bandwidth, and storage.
Advantages and disadvantages of DePIN
In theory, DePIN can completely transform the way we manage and interact with physical infrastructure. Using blockchain and smart contracts, this model increases the efficiency and transparency of the systems, allowing the community to make decisions independently.
DePIN can be considered a kind of “industrial DAO”, where all participants have equal opportunities and guarantee infrastructure independence. The system is flexible and can be scaled horizontally. By successfully attracting motivated users, the creation of a decentralized physical infrastructure can be significantly accelerated.
The pricing model in DePIN crypto systems is also considered more accessible and fair, since the infrastructure assets are publicly owned and the cost of services is not determined by the company’s profits but by availability. Rewarding participants in the form of tokens allows users to receive regular passive income for the benefit of society.
However, important disadvantages must be considered:
- Vulnerability to hacks and errors.
- High volatility of the tokens.
- There is a need for technical knowledge to maintain a decentralized infrastructure.
However, with DePIN, blockchain drives real-world DePIN use cases and value exchanges, it is inherently linked to real-world supply and demand, making this segment uniquely positioned for a sustainable and healthy growth.
“People won’t stop using navigation apps, ordering food, or using the Web because Bitcoin crashed. DePIN fuses web3 with real value instead of speculation and offers you the opportunity to fulfill your promise to change the world.”
Looking to the future: What will happen to DePIN in five years?
According to Messari analysts, in 2023, the DePIN ecosystem grew to more than 650 projects and the number of nodes increased by 600,000. The researchers looked at the main trends in the development of DePIN in 2024.
Experts believe that meme tokens will contribute to the mass adoption of projects like the BONK airdrop for Solana Saga smartphone users. Analysts also see Asia as the region with the greatest potential for rapid development of decentralized infrastructure, and expect some of the sector’s most influential projects to appear here between 2024 and 2025.
The first development in the DePIN field appeared about ten years ago. During this time, the number of projects increased significantly. According to Messari experts, the market capitalization of the sector is more than $20 billion, excluding RWA and blockchain oracles.
Speaking about the future of DePIN, Thake expects it to become an industry staple along with the entire supporting stack, from DePIN data for training models to decentralized computing and Web3 federated learning marketplaces for learning agents. AI.
“Some of the most interesting implementations of the DePIN model will occur in the energy industry, especially when it comes to green energy, which requires flexible and decentralized networks, while most of the old school ones follow the centralized model. “People will soon be making money by harnessing solar energy and contributing to the electrical grid.”
However, DePIN projects are not yet popular even among cryptocurrency industry participants, let alone widespread adoption of the concept. Implementing a decentralized infrastructure may take time as DePIN faces issues that need to be resolved. However, experts are confident that this system will play a key role in shaping the future and changing the operating principles of physical infrastructure.
