Why is DePIN an essential infrastructure for Web3?

DePIN (Decentralized Physical Infrastructure Networks) is a decentralized physical infrastructure network.

DePIN is a paradigm innovation in the deployment and maintenance of physical infrastructure. DePIN is built in a distributed manner by individuals and companies around the world for anyone to use. In return, contributors to these physical infrastructure nodes receive financial compensation and token incentives for the network they are building. By leveraging Crypto, the Internet, IoT, and blockchain technologies, DePIN enables a more efficient, decentralized, and fair way to deploy infrastructure.

DePIN is an indispensable infrastructure for Web3 in the true sense of the word

Web3 is still very fragile, although based on Layer 1 and Layer 2 has developed relatively prosperous DeFi, Games, NFT, Social, RWA and other application scenarios, these Web3 applications still rely on centralized cloud services, data centers and other Internet infrastructure.

There have been incidents in the industry where data loss of some Web3 projects has occurred due to the downtime of large cloud computing platforms, and there have also been incidents where centralized cloud service providers and node service providers are not allowed to provide services to some Web3 projects due to regulatory sanctions, and even Github code repositories and front-end official websites will be restricted from access.

Therefore, DePIN is an indispensable infrastructure for realizing Web3 in the true sense of the word. Perhaps these DePIN projects may not occupy a large market share of the total business volume, and perhaps the DePIN protocol may not have an advantage in terms of performance, but the existence of these DePIN protocols may one day ensure the normal operation of Web3 and Crypto projects and enhance their robustness.

Traditionally, the deployment and management of physical infrastructure such as wireless networks, cloud services, mobile networks, and power grids has been dominated by large centralized companies due to the high capital requirements and logistical challenges of physical infrastructure projects. In addition to the lack of competition and innovation, this phenomenon leads to a poor user experience, and it is also detrimental to the robustness of Web3.

Compared with traditional centralized physical infrastructure networks, DePIN has the following advantages:

1. Low cost of participation: Decentralized physical infrastructure networks reduce overheads and expenses by utilizing the collective resources of network participants;

2. Network robustness: Decentralized networks provide a more resilient and secure infrastructure that is not susceptible to single points of failure;

3. Open competition and innovation: DePIN eliminates the high-capital, large-scale entry barriers of traditional infrastructure networks, which is conducive to the generation of more small-scale new players.

Characteristics and classification of DePIN

The industrial logic of DePIN is very simple, and it mainly plays the following key roles:

Device providers: They provide physical device resources (such as GPU, CPU, memory, storage space, RAM, bandwidth, Wifi hotspots, etc.) to obtain token returns.

DePIN protocol: The DePIN protocol builds a distributed network, designs token incentives for distributed device providers, and allows users of the DePIN network to pay.

DePIN network users: access the DePIN protocol, use the services of the DePIN protocol and pay, compared with centralized physical infrastructure, there is a cheaper price.

In order to maintain the stable development of this cycle, it is necessary to ensure that the value of the token is relatively stable, and the token needs to have a more complete value capture of the value of the DePIN protocol.

DePIN projects can be roughly divided into the following categories: decentralized storage, decentralized computing, CDN, VPN, WiFi, 5G network, etc.

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In common, most DePINs have three basic components:

1. Physical infrastructure: DePIN needs to build and maintain physical infrastructure in the real world, and these distributed physical infrastructures work together to build a decentralized physical infrastructure network, and each device is a network node;

2. Off-chain computing infrastructure: DePIN relies on middleware that allows real-world data to be captured and analyzed, which can then be used to calculate user contributions.

3. Blockchain and Token: Blockchain acts as a tamper-proof ledger, device registry, task statistics and scheduling platform, and Token is one of the incentives for DePIN network contributors, which can also be used as the pricing currency of network services, and sometimes it is also a collateral asset for contributors to ensure the quality and quantity of services.

These components offer innovations that go far beyond what centralized infrastructure can provide, potentially bringing new dynamism and innovation to the space.

DePIN Project Case

With low start-up costs and rapid expansion capabilities, DePIN has received widespread attention in the industry. And a number of DePIN projects have emerged:

Filecoin: A Decentralized Storage Network

Filecoin is the world’s largest distributed storage network, with more than 3,800 storage providers contributing more than 17MB of storage capacity worldwide. Filecoin’s vision is to bring open, publicly provable features to the three core pillars that support the data economy (storage, compute, and content distribution).

This year also saw the launch of the Filecoin Virtual Machine, with over 1,100 smart contracts deployed on the Filecoin network so far, and over 8w wallet addresses interacting with these FVM-powered dApps.

All in all, Filecoin’s distributed storage network is already one of the most important decentralized physical infrastructures in the Web3 industry.

Render Network: Decentralized GPU Rendering Platform

Render Network is a decentralized GPU rendering platform that matches users executing rendering jobs with users with idle GPUs for distributed GPU computing in the 3D rendering and AI industries.

In the first half of 2023, Render Network matched more than 4.6 million rendering jobs at an average cost of $20, which is a slight price advantage over many centralized platforms.

In terms of the token incentive mechanism, the Render Network adopts the unit standard based on OctaneBench rendering power, and divides the participating GPUs into three levels, and the unit price of the Token incentive can be obtained according to the different levels of GPU rendering speed.

Helium: Decentralized Wireless Network Protocol

Helium is an open-source protocol that inspires people around the world to work together to build wireless networks. HNT is the native cryptocurrency of Helium Network, and HNT can be burned to generate Data Credits, which are essential for transferring device data and have a consistent dollar value. Other subnet tokens, such as IoT and MOBILE, derive their value from HNT, which can be exchanged between them. And to use that network, you have to Burn HNT.

Based on the Helium protocol, the first example case built is LongFi, a Helium IoT network built on the Helium protocol and LoRaWAN technology.

Another example is Helium Mobile, a Helium 5G network built by the Nova Labs team, designed to extend the reach of the Helium 5G network at a lower cost and continue to reward users.

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Helium has inspired people around the world to build this insanely decentralized wireless network in just three years. Since its launch, nearly 1 million hotspots have been deployed, covering more than 77,000 cities and towns in 192 countries, according to the project’s official report. The Helium 5G network is also experiencing rapid growth, with the community deploying more than 8,000 5G Radios in less than a year. Approximately 100,000 devices are already connected to the Helium network.

Livepeer: Decentralized Live Video Broadcasting Platform

Livepeer is a video infrastructure network for live and on-demand streaming. Designed to provide developers with the freedom to innovate and creators with the autonomy of the platform, the core lies in incentivizing nodes to contribute GPUs and bandwidth in real-time video encoding and distribution services through cryptoeconomic protocols.

Orchestrators run a node on the Livepeer Network, and the node can mine tokens while transcoding videos through GPUs.

Theta: Decentralized Video Streaming Network

Theta is a decentralized video streaming platform based on blockchain technology, which incentivizes individual users to share surplus computing power and bandwidth resources through tokens as cache or relay nodes for video streams, thereby improving video stream quality and video content and reducing video distribution costs.

Theta Network is a dual network consisting of two complementary subsystems, the Theta Blockchain and the Theta Edge Network. The Theta Blockchain provides payments, rewards, and smart contract functionality, while the edge network is responsible for the storage and delivery of media assets such as images and videos.

Summary

Judging from the actual development of the industry, DePIN is a track that has begun to develop gradually from the very early stage of the industry, and has expanded more in the past two years.

According to Messari research, the total addressable market size of the DePIN industry is approximately US$2.2T and could reach approximately US$3.5T by 2028. And now the FDV of all Crypto’s decentralized physical infrastructure projects is only $5B.