Will DEP become the most valuable cryptocurrency investment?

TD;LR

Suddenly, it seems that everyone is talking about DEP, but it’s actually an old acquaintance of ours, just with a new name and a fresh start.

So, what is the reason for the popularity of DEP? Why suddenly everyone is willing to believe that it is the best investment direction of 24 years? Is it just the exaggerated promotion of sector rotation, or do we really need it so much now?

DePIN - What are they?

The full name of DePIN is Decentralized physical infrastructure, which constantly connects real-world use cases. Simply put, DePIN uses a token economic model to initiate the deployment of physical infrastructure, allowing miners or users to share their hardware, network space, or computing power, and create a large-scale network effect, unlocking the rapid development of various innovative DApps based on real-world data.

However, as we mentioned at the beginning, DePIN is an old partner with a new name, the FileCoin we are familiar with, Arweave and Helium This is one of the typical examples, and they are all long-standing old projects.

Filecoin Arweave and DEP are mainly designed storage products. In simple terms, they allow miners to contribute idle network nodes and reward corresponding tokens. Users pay for and use these network spaces for storage, forming a decentralized network disk.

Helium allows users to purchase or build hardware, insert a hotspot and join the network to provide internet services to the geographic area. In return, the hotspot collects Helium’s token HNT.

Helium has a first-mover advantage in this field and has attracted collaborations with projects such as weather tracking, air quality monitoring, and GPS integration. Additionally, individuals who contribute to the network created by connected hardware can purchase Data Credits (DC) in exchange for burned HNT. This burning process helps maintain the supply and demand equilibrium of HNT.

According to Messari, which proposed the concept of DePIN, Depin is mainly divided into four parts: server network, wireless network, sensor network, and energy network.

Image Source: MESSARI

What problem does DePIN solve

To understand the problems that DePIN wants to solve, we can actually see a glimpse from its economic model. We can think of two main groups in the network: suppliers and demanders. Suppliers provide their own network nodes, idle space or computing power, and exchange resources for tokens; demanders purchase resources or services by paying tokens, just like in the storage service of FileCoin.

What sets DePIN apart is that the ICT (information computing technology) resources it involves are extremely centralized in traditional modes, much like cloud computing and big data that we are familiar with. They are generally monopolized by large enterprises, which affect their hardware and development accordingly. The high prices make the access threshold very high, and this high cost is bound to be passed on to consumers.

In addition, the utilization rate of centralized infrastructure such as cloud computing is low. According to the Flexera 2022 report, on average, 32% of the company’s cloud budget is wasted, meaning that one-third of the resources will be idle; and these issues can be solved in the DePIN mode.

DePIN naturally avoids the problems of monopoly and centralization, efficiently integrates and calls idle resources, and collaborates with other tracks, such as DePIN + AI collaboration, to empower AI with a large number of computing and storage requirements, freeing up productivity in the Web3 field. An existing project, Akash Network, is a typical example, offering low-cost and permissionless access compared to centralized cloud infrastructure.

The increasingly popular DePIN project is not limited to storage. For example, Grass uses tokens to incentivize users to share idle and unused bandwidth, mobilize home internet connections to capture and use real network data, and build a decentralized artificial intelligence oracle. Earn passive income without compromising personal privacy.

Why do we believe in DePIN again?

Actually, many players don’t have a good impression of old friends like FileCoin. The storage track was once hot a few years ago, but the price plummeted afterwards, and many people felt resentful towards FIL’s market makers. However, aside from the actions of individual projects, why do we now believe that the old face of DEP can create miracles?

DePIN itself is “meaningful”, with a reasonable token economic model and use cases, which gives it a good fundamental. However, the previous DePIN appeared to be limited, mainly because the entire blockchain eco was very primitive, and there were not many usable networks and applications. Now, the entire network has taken shape, laying the foundation for the need to address network scalability issues through methods like L2.

Image source: Messari

Especially at the arrival of the bull market halving in 2024, sectors such as GameFi that require a large amount of computation and information are about to exert force. It is impossible to deploy all data on the chain, and more computing power is needed to support and parse the interactive behaviors that occur in the network. Moreover, DEPIN is closely linked to web2, and infrastructure is also needed to realize the idea of introducing real-time oracle and similar concepts to the blockchain.

DEP is to efficiently facilitate the flow of resources, serving as a way to ‘redistribute’ the network, whether it’s idle machines of miners, or ordinary users’ smartphones, personal computers, and even vehicles, all can be put into the channel of ‘reuse’ to benefit the entire network. It can be said that with the significant progress in the underlying architecture, now is the time for DEP to shine.

Challenges and pain points of DePIN

However, it must be admitted that just like the storage services of FIL and AR are still rarely used, DePIN still lacks sufficient appeal to motivate users to participate in construction or use the service; The token economics of DePIN, in terms of suppliers and demanders, is actually similar to most projects, still in the stage of staking-holding tokens-waiting for appreciation, without a strong driving force yet.

Secondly, DePIN actually requires a considerable understanding cost. Compared to memes or inions, which are things that can allow players to participate in the community after discussion, DePIN has a grand vision but requires long-term investment to achieve. Even if it becomes a hot topic for a while, DePIN is not easy to stimulate market sentiment unless there are some projects with major announcements or cross-circle cooperation. Most likely, it will still maintain a lukewarm state.

Finally, building DePIN requires relatively demanding talents, which also affects development and governance. Ordinary players, besides using services and buying coins, also find it difficult to find a role in it; perhaps we need a more refreshing economic model, one that everyone can understand, participate in easily, and have full confidence in, just like the narrative of the inion “Inion is printing money”.

Overall, everyone knows that DEP is necessary and useful, but how to attract more participants is also a pain point that needs to be addressed. We can believe that DEP will be a necessary force to change the landscape of web3 and even the real world, and to promote the digital economic universe.