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What is DePIN?

Image of a network with hardware devices as the nodes

  • Decentralized Physical Infrastructure Networks are blockchain-powered networks made up of connected physical hardware.
  • The dePIN space is growing, with applications in WiFi networking, digital storage, video rendering and more.
  • DePIN networks operate with three main components: hardware, blockchain oracles (middleware), and the blockchain network.
  • The key advantages of DePIN include horizontal scalability, decentralized community control, fair pricing, cost-efficiency, and more.

Megacorporations such as Amazon, Microsoft, and Google hold a monopoly over some of the essential infrastructure services. For example, Amazon’s AWS represents 31% of the global cloud infrastructure. But it doesn’t have to be this way.

Imagine a world where infrastructure services such as cloud storage or telecommunications aren’t run by massive corporations but by decentralized networks powered by blockchain technology. This world is not far off, thanks to the rise of DePIN (Decentralized Physical Infrastructure Networks).

In this article, we’ll explain what DePIN is, how it works, and why it matters for the foreseeable future.

What Is DePIN in Crypto?

Decentralized Physical Infrastructure Networks (DePIN) are networks of physical infrastructure (think cloud storage, telecommunications, decentralized wireless networks) that are powered by blockchain.

How does that work? DePIN enables users to contribute their hardware or resources to a decentralized network, and receive rewards for doing so in the form of the nerwork’s native utility token. Activity on the network is tracked by an underlying blockchain, which ensures users pay for the service, and the network providers get paid.

The DePIN model shifts control from centralized corporations to a community of participants. This democratizes infrastructure services and promotes fairer, more transparent, and efficient systems. 

Understanding Decentralized Physical Infrastructure Networks (DePIN)

DePIN platforms utilize blockchain technology to create decentralized networks where users own the infrastructure and the blockchain keeps the system functioning. On these networks, the blockchain serves as the foundational layer for governance, payments, and tracking contributions. 

Unlike traditional service platforms, which are owned and operated by a single entity, DePINs are run by a distributed community of users who can join or leave at will.

The Role of Tokens in DePIN Networks

Tokens in a DePIN network serve a couple of different purposes:

  • Payments: They act as the primary means of exchange for services provided within the network. For example, HNT tokens on the Helium network give users access to wireless connectivity.
  • Governance: Token holders can vote on key governance decisions related to the network’s operations, such as updates or changes in pricing structures.
  • Incentives: Tokens reward users who provide physical infrastructure or participate in governance.

Key Differences from Traditional Service Platforms

  1. Ownership: In a DePIN, users own and operate the physical infrastructure while in traditional service platforms, a single company is in control.
  2. Transparency: Blockchain technology provides transparency, allowing users to verify transactions and governance decisions.
  3. Incentives: Users get financial incentives to participate and maintain the network through tokens, making them active stakeholders in its success.
  4. Censorship: a DePIN network can’t be taken down or censored, nor can it block a particular user, because the whole system is distributed; there is no singkle point of failure.

How Does DePIN Work?

While DePIN networks can vary depending on the service they provide, they all share three core components: 

  • Hardware
  • Blockchain oracle (middleware)
  • Blockchain network

We’ll use the example of Helium, a decentralized wireless network, to explain how these elements work together.

Hardware

The hardware in a DePIN is the physical infrastructure that supports the network. For instance, in Helium, users deploy small wireless hotspots that allow nearby devices to connect to the internet. This decentralized hardware network replaces traditional telecom towers. Users who provide these hardware resources are rewarded with Helium tokens (HNT).

Oracle Middleware

Oracles act as intermediaries between the blockchain and the real world, ensuring that the data from the hardware devices is accurately reflected on the blockchain. They validate the information, such as how much data is being transmitted through a Helium hotspot, and report it to the blockchain.

Blockchain Network

The blockchain is the backbone of DePIN platforms, facilitating secure transactions, governance, and tracking contributions. In the case of Helium, the blockchain ensures that data transmission through the hotspots is verified and rewards are distributed accurately. Finally, the use of blockchain technology guarantees transparency, security, and decentralization across the network.

5 DePIN Platforms 

While DePIN networks are a relatively new concept, several platforms have already emerged as leaders in the space. These five projects have made strides in providing decentralized infrastructure services.

1. Helium (HNT) – Decentralized Wireless Network

Launched in July 2019, Helium is a decentralized wireless network that aims to create a global infrastructure for IoT (Internet of Things) devices. Users deploy hotspots that act as low-power wireless nodes for nearby devices, contributing to the overall network. The project was founded by Amir Haleem, Shawn Fanning, and Sean Carey.

Helium has over 356,000 active hotspots worldwide, making it one of the largest DePIN networks. Lastly, the platform uses the native token, HNT, to reward users for providing wireless coverage.

2. Filecoin (FIL) – Decentralized Storage Network

Filecoin is a decentralized storage network. The project launched in August 2017, gathering more than $200 million in less than an hour after its ICO. The Filecoin network mainnet launched in 2020. Developed by Protocol Labs, Filecoin allows users to rent out unused hard drive space to those who need it. This creates a peer-to-peer marketplace for data storage, reducing the need for centralized cloud services.

Filecoin’s native token, FIL, has use cases such as payments and rewards. Moreover, thanks to its innovative Proof-of-Replication consensus mechanism Filecoin has become one of the most prominent decentralized storage networks.

3. Render Network (RNDR) – Decentralized Cloud Rendering Service

Render Network was originally launched on the Ethereum network in 2017. It allows users to contribute unused GPU power for rendering high-quality graphics and visual effects. The platform was developed by the Render Network Foundation and is especially popular in industries such as gaming, movies, and virtual reality.

After a community vote in 2023, Render switched from Ethereum to Solana. As a result, the native token received a rebrand from RNDR to RENDER. The token incentivizes participants, allowing them to earn by offering their GPU power. 

Render is becoming a critical player in the decentralized cloud computing space, providing a cheaper and faster alternative to traditional rendering services.

4. Akash Network (AKT) – Decentralized Cloud Computing

Akash Network, launched in September 2020, is a decentralized cloud computing platform that allows users to rent out unused computing power. Developed by Overclock Labs, its mission is to make cloud computing more affordable and accessible by decentralizing the infrastructure. 

The Akash Network uses AKT tokens to facilitate payments and governance on the platform. With an increasing demand for decentralized cloud services, Akash has gained traction among developers looking for alternatives to traditional providers like Amazon Web Services (AWS).

5. HiveMapper (HONEY) – Decentralized Mapping

Developed by Hivemapper Inc., the HiveMapper network launched in November 2022. Hivemapper incentivizes users to contribute dashcam footage to create decentralized maps. In other words, users equip their vehicles with HiveMapper dashcams, and as they drive, they collect data to help build a global map. 

The native token, HONEY, rewards contributors. HiveMapper is an example of how DePINs can disrupt traditional services like Google Maps by distributing the responsibility of map creation to individual users.

Advantages of Decentralized Physical Infrastructure Networks (DePIN)?

DePIN networks offer several advantages over traditional infrastructure providers. These benefits stem from their decentralized nature and token-based economies.

Horizontal Scalability

DePINs scale horizontally by adding more users and hardware to the network rather than relying on large, centralized infrastructure. This allows networks like Helium and Filecoin to grow organically and handle more demand over time.

Community Control – Decentralization

Users have more control over the network and make key decisions collectively through decentralized governance models. This is in contrast with traditional infrastructure providers, where a single centralized authority makes the decisions.

Fair Pricing

DePINs offer dynamic pricing based on market demand and supply, leading to fairer prices for services like storage, wireless coverage, and computing power.

Cost-efficient Operation

Decentralized networks reduce overhead costs by relying on distributed user hardware instead of expensive centralized infrastructure.

Permissionless

Anyone can participate in dePIN networks, whether by contributing hardware or utilizing services. Consequently, this inclusivity democratizes infrastructure services.

Incentivization

Users receive financial incentives to contribute resources to the network, creating a self-sustaining ecosystem where participants benefit directly from their contributions.

Challenges of DePIN 

Despite their advantages, DePIN networks face several challenges. These are especially notable in the early stages of development.

Adoption Stage and Impact on Revenue

Many DePIN networks are still in the early stages of adoption, which can make it difficult to generate significant revenue. As more users join, the network effect strengthens, but the early growth phase can be slow.

Technological Complications

Setting up and maintaining hardware for a DePIN network can require technical knowledge. Consequently, this may limit widespread participation. In addition, maintaining network uptime and security remains a constant challenge.

Cost of Running Private Facilities

Users are providing the hardware and the costs of purchasing and running infrastructure can be high. For example, balancing initial setup costs with potential rewards can be challenging for those joining DePIN networks.

Profitability

While DePIN offers token-based incentives, the profitability of participating can fluctuate based on market demand and token value. As a result, this can deter users from participating during periods of low network activity or token price drops.

Closing Thoughts

DePIN networks change how we view and interact with critical infrastructure services. By leveraging blockchain technology, DePINs offer a decentralized, community-driven approach that benefits users and participants through token-based incentives and governance. 

Although still in their early stages, DePIN networks have the potential to disrupt traditional infrastructure services and redefine how we access and contribute to the digital world.

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