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01 Basic Definition of DePIN
DePIN (Decentralized Physical Infrastructure Network) is a decentralized physical infrastructure network that encourages global users to share their physical resources, such as storage space, computing power, communication bandwidth, and energy, through blockchain technology and token incentive mechanisms to build a distributed infrastructure network. This network aims to break the traditional centralized infrastructure service model and provide a more open, transparent, and decentralized solution.
The concept of DePIN was first proposed by Messari in 2022. Messari (https://messari.io/report/the-depin-sector-map) explains DePIN as a method of using blockchain technology to coordinate the physical hardware facilities of multiple individual units in a permissionless, trustless and programmable form through token incentives. DePIN can also be described as Proof of Physical Network (PoPW) or Token Incentivized Physical Infrastructure Networks (TIPIN). In simple terms, it is a network composed of countless single hardware managed by token incentives, and this network can be used to serve certain specific projects.
02 DePIN’s architecture and operating mechanism
A. Key Components
Target Resource: The specific resource that the project aims to provide to consumers. Common resource types include storage capacity and computing power.
Hardware: Necessary equipment used by Network Contributors to collect data or resources for Network operations and products. The cost, manufacturer, and use of this equipment may vary depending on the type of resource.
Incentive Mechanism: A predetermined mechanism that rewards supply-side contributors with tokens, thereby incentivizing them to contribute resources and provide reliable services. Some projects may also implement penalties to discourage malicious activity.
Supply-side contributors: Individuals or entities that provide unused or underutilized resources to the network. In return, they are typically rewarded with tokens.
Consumer: An end user who participates in the network to use the services provided by the DePIN project.
B. Operational Mechanism
*Source: Binance Research
Initial token incentives: The platform first provides token incentives to attract hardware providers to join the network. This incentive mechanism may be to encourage early participants to provide necessary hardware support in the early stages of network construction. Hardware network construction: As hardware providers join, the platform begins to build a hardware network that can meet basic service needs. This may include servers, storage devices, etc., to provide infrastructure for subsequent services.
User attraction and growth: Once the hardware network is established, the platform begins to attract users to use its services. The increase in the number of users will further attract more hardware providers to join, forming a positive cycle.
Token incentives and user payments: As the number of users increases, the platform may adjust the amount of token incentives to maintain the healthy development of the network. Users begin to pay for services, and these revenues can help the platform further attract hardware providers.
Revenue balance and platform optimization: When user payments and provider revenue reach a balance point, the platform will further optimize its tools and management platform to improve efficiency and user experience.
03 Advantages of DePIN Mode
A. Flywheel Effect
Token rewards: Token rewards are used to incentivize hardware supply-side participants to deploy infrastructure, not just in terms of construction, but also in terms of maintenance and operation, helping contributors who participate in or maintain network physical infrastructure to obtain tokens as rewards.
Supply-side growth: As more infrastructure is deployed, the supply side of the network grows, and more developers, product builders, and end users will continue to join the platform.
Continuous cost growth: As end users continue to use the network and pay for their usage, more service providers will join the system and continue to incur more costs.
The formation and optimization of the protocol token model: between network usage and token price, as usage and economic models gradually improve, the token economic system will become more complete.
B. Comparison with the traditional Web 2.0 model
Differences
Crowdsourced hardware: This approach is more cost-effective and allows the infrastructure to be more widely distributed.
Collective ownership: Aligning user incentives and rewards by distributing ownership and decision-making power among users.
Democratized access: No “walled gardens”, meaning the web is open to everyone, with no gatekeepers.
Decentralization: The network is permissionless and censorship-resistant, embodying the principles of a decentralized network.
Competitive dimension analysis:
Excellent capital output ratio: This indicates reduced capital expenditure (CapEx) and operating expenditure (OpEx).
Embedded Financial System: The network includes a frictionless peer-to-peer (P2P) payment system.
Web3 native: Take advantage of composable tools and applications across the Web3 spectrum.
Lowering barriers to entry: By lowering barriers to entry, it disrupts mature industries and increases competition and innovation.
Overall, the DePIN flywheel is a conceptual framework that illustrates how a decentralized network of physical infrastructure can grow and sustain itself through economic incentives, lowering barriers to entry, and leveraging the benefits of decentralized, blockchain-based systems.
04 DePIN’s market potential and typical cases
DePIN-related protocols are designed to challenge protocols in the multi-billion dollar legacy infrastructure industries, which can be divided into four main categories:
Server (Cloud) Network
Cloud Services Industry: Valued at $427 billion; expected to grow to $1 trillion by 2028, with a CAGR of 15.7%.
Wireless network
Telecommunications industry: valued at $1.7 trillion; expected to grow to $2.3 trillion by 2028, with a compound annual growth rate of 5.4%.
Sensor Networks
Sensor Analytics Industry: Valued at $13.5 billion; expected to grow to $30.5 billion by 2028, with a CAGR of 14.5%.
Energy Network
Virtual Power Plant (VPP) Industry: Valued at $1.2 billion; expected to grow to $6.5 billion by 2028, at a CAGR of 33%.
Smart Grid Data Industry: Valued at $44 billion; expected to grow to $140 billion by 2028, with a CAGR of 21.9%.
The total addressable market for DePIN is estimated at more than $2.2 trillion and is expected to reach $3.5 trillion by 2028. Typical applications include:
Hivemapper: This is a geospatial intelligence platform that uses blockchain technology and decentralized networks to collect, verify and share geographic data. Hivemapper builds a global, real-time updated geographic database by incentivizing users to share the data collected by their devices.
Render: Render is a decentralized rendering network that aims to provide decentralized, secure and scalable rendering services for applications that require graphics processing capabilities. It achieves efficient resource utilization by distributing rendering tasks to idle graphics processing units (GPUs) in the network.
Helium: Helium is a decentralized wireless communication network that aims to provide low-cost, wide-coverage wireless communication services for IoT devices. It builds a global, decentralized wireless communication network by incentivizing users to deploy wireless communication nodes in their locations.
Onocoy: Onocoy is a decentralized cloud computing platform that aims to provide developers with decentralized, secure and scalable cloud services. It achieves efficient resource utilization and reduces cloud service costs by utilizing idle computing resources in decentralized networks.
Geodnet: Geodnet is a decentralized geographic data network that aims to build a global, real-time updated geographic database. It incentivizes users to share geographic data collected by their devices and uses blockchain technology to ensure the authenticity and immutability of the data.
XNET: XNET is a decentralized data transmission network designed to serve applications that require high-speed, secure, and scalable data transmission. It achieves efficient data transmission and reduces transmission costs by utilizing idle bandwidth resources in decentralized networks.
Karrier One: Karrier One is a decentralized logistics platform that aims to improve the transparency and efficiency of the logistics industry through blockchain technology. It connects all parties involved, including shippers, carriers, and drivers, to achieve real-time sharing and collaborative operations of logistics information.
DIMO: DIMO is a decentralized data market that aims to provide a secure and trusted trading environment for data buyers and sellers. It ensures the transparency and immutability of data transactions by using blockchain technology, and uses smart contracts to achieve automated transaction settlement.
These projects are only part of the DePIN ecosystem. With the continuous development of blockchain technology and the continuous expansion of application scenarios, more innovative DePIN projects will emerge in the future.
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