DePIN, which stands for Decentralized Physical Infrastructure Networks, refers to a network system that connects and manages physical hardware devices in a decentralized manner. Although this concept was formally established in November 2022 by Messari through Twitter voting, the underlying idea and practice have existed for many years. In the two years since the unified name 'DePIN' was established, although the industry has heavily promoted it, we must admit that we have not seen many remarkable emerging projects. On the contrary, many projects have been fleeting, or even degenerated into short-term funding schemes. However, this performance does not negate the value and potential of the entire track. In fact, the concept represented by DePIN has a considerable development history.
Before the name 'DePIN' was widely accepted, this track was referred to by various different names. For example:
1. TIPIN (Token Incentivized Physical Infrastructure Networks): Token Incentivized Physical Infrastructure Networks.
2. PoPW (Proof of Physical Work): Proof of Physical Work.
3. EdgeFi: Edge Finance, emphasizing the deployment of hardware resources at the network edge.
4. MachineFi: Machine Finance, first proposed by the IoTeX project in November 2021.
These names, while each emphasizing different aspects, essentially point to the same concept: using blockchain technology and crypto-economics to build and manage the infrastructure network of the physical world. In this field, some projects have achieved significant success, with the most classic being Filecoin and Helium. Filecoin is dedicated to building a decentralized storage network, while Helium focuses on decentralized wireless networks. Both projects emerged in previous bull markets but still perform well today. The success stories of Filecoin and Helium prove that combining blockchain technology with physical infrastructure in the real world can create disruptive solutions. These projects have not only innovated technologically but have also successfully applied crypto-economics to solving real-world problems, demonstrating the feasibility and potential of the DePIN model. Through this historical perspective, we can gain a more comprehensive understanding of the concept and value of DePIN and provide important references and insights for the development of future projects.
The use of crypto-economics to deploy physical infrastructure in the real world has a long history; some typical projects can be traced back to 2013, exploring valuable contributions in communication, storage, computing, and more. Until today, this model has expanded into more fields such as AI, energy, and data collection, welcoming a phase of prosperity in the ecosystem. It can be said that DePIN represents a paradigm of decentralized applications: node economy, miner model, transforming the real world.
Compared to centralized infrastructure, DePIN has a higher unit economic effect. The smart contracts, device standardization, and economic models of DePIN replace the hardware layout, operation, and management of CePIN, leading to cost savings of 75%-90%.
Token economics is key to the expansion of node networks and the formation of network effects. When the token price rises, economic incentives lead to rapid growth in node scale.
If Web 2.0 allowed humans to interact with the internet through various input devices, Web 3.0 allows physical hardware to interact with blockchain through DePIN.
Sollong believes that the DePIN architecture presents the following five opportunities from the bottom up:
1. DePIN blockchain underlying infrastructure. The DePIN blockchain underlying infrastructure acts as the settlement layer for DePIN applications, supporting transactions and token economic model operations.
2. DePIN Middleware. DePIN middleware connects the underlying infrastructure and the upper layer applications, providing standardized interfaces and tools. This layer is a key hub of the DePIN ecosystem.
3. DePIN upper layer applications. DePIN upper layer applications are various applications built on the DePIN infrastructure and middleware layer, providing users with actual services and value. This is the frontend and landing scene of the DePIN ecosystem.
4. Derivative Opportunity: Edge AI. Edge AI is an important extension direction of the DePIN ecosystem, utilizing the DePIN network to deploy edge computing and AI applications, processing data locally and providing intelligent services.
5. Derivative Opportunity: RWA. Combining DePIN with Real World Assets (RWA) to create new financial products and services.
The realization of these ecosystems requires a carrier, which is what we call the demand side. Sollong boldly speculates about the ultimate demand side: Web3 phones and new types of shared economy.
1. Crypto phones will be the key to breaking into the consumer market.
Sollong believes that through customized mobile phones, the phones can be equipped with DePIN applications, and through airdrop incentives, rapid growth can be achieved. For the consumer end, it often requires subsidies to capture the market. Taking Helium Mobile as an example, the revenue comes from the $20 package paid by users. Since there is a need to pay partnership fees to T-mobile, when 70-80% of the download services are provided by Helium's own network, it just reaches the breakeven point. Once it exceeds the breakeven point, the project will achieve self-sustainability, and the DePIN flywheel will operate even better.
2. Build a Web3 version of the shared economy network.
Relying on Web3 mobile applications, through effective token incentives, large-scale shared economic/social networks can be achieved in the future.
We have experienced the DeFi Summer, NFT, and metaverse frenzy. Will the next wave of enthusiasm shift towards DePIN? Between 2020 and 2021, the market capitalization of DeFi grew nearly 100 times, from $1.75 billion to a peak of $172.2 billion. Assuming that in this bull market, the total market capitalization of DeFi grows 10 times, and the total market capitalization of DePIN reaches 50% of DeFi, then the total market capitalization of DePIN would reach $500 billion, with at least 20 times growth potential remaining. According to Messari's estimate, by 2028, the market capitalization of DePIN will reach $3.5 trillion, suggesting a potential growth space of 120 times.