Decentralized Physical Infrastructure Networks (DePIN)

Many people I speak to who aren’t on board with crypto say that they can’t wrap their head around its purely digital nature. The idea that currency can be created with code, and a project based on this currency can be run by an online community all across the world, is difficult for many to comprehend.

I usually point them toward Decentralized Physical Infrastructure Networks (DePIN) to help them understand how crypto and blockchain can impact the physical world.

DePIN connects cryptocurrency with physical assets to increase decentralization, resource efficiency, and community involvement in building and maintaining technology used in the real world. It’s one of the hottest crypto sectors today.

This post will define what DePIN is, how it works, the advantages and disadvantages of these networks, and examples of prominent DePIN projects.

What is DePIN?

Decentralized Physical Infrastructure Networks are redefining the way we conceive, build, and maintain networks and infrastructure in the real world. The promise of DePINs reflects those of blockchain at large - to operate physical networks in a decentralized, community-owned, and publicly-verifiable manner.

DePINs can be applied to the creation of maps, WiFi and telecom networks, computational infrastructure, and many other physical networks. Imagine a world where power grids, communication networks, and transportation systems operate through a mesh of interconnected nodes run by community members across the world. These networks can be maintained by people like you and me - without a centralized BigEvilCorp being involved - and we can all share in the success of these projects.

Key Components of DePINs

You may have heard of the Internet of Things (IoT), where physical objects such as cameras (Ring), cars (Tesla), and thermostats (Nest) are connected to the internet to facilitate data collection and sharing to improve the customer experience.

DePINs build upon IoT by integrating cryptocurrency to incentivize the broader community to help build and maintain the project.

DePINs generally require the following components to properly function:

• Hardware – Physical devices are needed to connect the digital components of DePINs to the physical world. Examples include video cameras, WiFi hotspots, and hard drive storage.

• Hardware contributors – Contributors dedicate this hardware to provide the resources that power their respective networks.

• Crypto token – Hardware contributors are paid for their services in a project-specific cryptocurrency based on predetermined parameters set by code and governance. The underlying blockchain technology ensures that all transactions are publicly verifiable and immutable. And community members can buy the token to support and benefit from the project.

• End users – End users are those who utilize the real-world infrastructure and services provided by the DePIN network. DePIN networks (or any other product) would not exist without end users!

The graphic below depicts the flywheel that occurs when these and other entities work together to build and maintain DePINs.

Pros and Cons of DePINs

Advantages of Decentralized Physical Infrastructure Networks

DePINs offer a myriad of advantages compared to their centralized counterparts.

1. Resilience and Redundancy

One of the key advantages of decentralized networks is their inherent resilience. Unlike centralized models vulnerable to single points of failure, these networks distribute functions across multiple nodes. In case of a node failure or disruption, the network reroutes tasks to operating nodes to ensure uninterrupted services.

Case in point is Amazon Web Services. So many tech companies rely on AWS for their computing power. Every now and then AWS goes down, and thousands of websites are unusable. This isn’t the case with decentralized networks.

The redundancy of DePINs enhances reliability, which is critical for vital infrastructure like communication grids and emergency services.

2. Cost and Development Efficiency

Traditional centralized infrastructure can take billions of dollars and decades to build. High capital requirements and supply chain challenges have historically allowed only large corporations to build these networks. Cable providers like Comcast and cell phone companies like AT&T took ages to develop their networks, even with a ton of financial and legislative support from the US government.

The decentralized approach can significantly reduce developmental and operational costs. By eliminating centralized intermediaries and spreading work and sharing resources across the world, these networks trim expenses and minimize resource bottlenecks in building and maintaining physical infrastructure. DePINs can be bootstrapped in months and years, not decades.

2. Scalability and Flexibility

Traditional infrastructure often struggles to accommodate sudden spikes in demand or adapt to evolving needs. Citizens of remote rural areas have been waiting many years for reliable internet access.

Decentralized networks excel in scalability and can quickly expand to meet increased demands. Their modular nature allows for seamless integration of new nodes or technologies, ensuring adaptability without massive overhauls.

4. Community Engagement and Empowerment

Decentralized networks democratize infrastructure development, allowing individuals to actively participate and benefit from their activity. Communities can contribute resources, share infrastructure, and collectively shape the progress of a network. Members truly own a piece of these networks.

Challenges and Disadvantages

Alongside their many benefits, DePINs face several technical, regulatory, and adoption challenges.

1. Regulatory Hurdles

Especially in the US, the regulatory landscape surrounding decentralized network remains nascent, complex, and unclear. Navigating diverse legal frameworks, compliance standards, and governance structures poses challenges. Ensuring adherence to regulations while maintaining the decentralized nature can be a delicate balance that any operator needs to take into account. Thanks a lot, Gary!

2. Security and Privacy Concerns

Decentralized networks, while resilient, aren't immune to security threats. Smart contract risk is real and robust security measures across numerous nodes, securing data, and safeguarding against potential breaches is a tall order.

Also, balancing the transparency and openness of blockchain with data privacy remains a challenge.

3. Technical Complexity

Implementing and maintaining decentralized infrastructure requires specialized technical expertise. It takes a unique set of skills to build, operate, and troubleshoot both physical devices and blockchain-based software systems. Additionally, a lot of education must be provided for contributors across the world to connect their hardware to the network properly and maintain this connection amid software upgrades over time.

4. Adoption Barriers

We are in the early days of DePIN, and resistance to change within established industries and systems poses an adoption barrier. Stakeholders must embrace a fundamentally different approach to infrastructure development.

Examples of Decentralized Infrastructure Networks

We’re still in the early days of DePIN but there are many projects being built across multiple use cases.

Image courtesy of Iotex

Here are a few impactful projects have already changed the global physical infrastructure landscape.

Helium

Founded ten years ago, Helium is the OG DePIN project.

Helium’s goal is to expand wireless connectivity through a decentralized network with crypto incentives. Individuals can set up Helium Hotspots (nearly 1M hotspots are live across the world), providing wireless coverage and earning Helium’s HNT cryptocurrency for validating transactions and supporting the network. Helium’s network facilitates IoT device connectivity, enabling various applications from smart cities to asset tracking.

Helium originally built its own L1 blockchain to operate its network, but liquidity and technical issues forced the team to port over to Solana. In addition to its general connectivity offerings, the network also launched a mobile phone service.

The decentralized approach to connectivity circumvents the traditional reliance on centralized internet service providers and mobile network providers, and Helium is leading the way.

Hivemapper

Hivemapper is building a decentralized Google Maps, harnessing the power of crowdsourcing to create high-resolution, up-to-date maps.

Drivers can buy a Hivemapper dashcam to generate visual data combined with their GPS geolocation to help create these maps. These drivers are rewarded with HONEY tokens for their data. End users can buy map credits to use the maps generated by this data.

As of September 2023, 5 million unique road kilometers across 90 countries have been mapped. This equates to 8% of global roads in just 8 months, an astoundingly rapid pace of global mapping.

Raven Protocol

Here’s a shoutout to Raven Protocol, run by Deep Ventures’ Sherman Lee!

Raven is a blockchain protocol that leverages idle compute power across the world to accelerate the training of artificial intelligence models.

Instead of using a centralized compute provider like AWS, “requesters” (i.e. AI developers) can use Raven to access reliable, scalable compute power at lower costs to train their AI models. “Providers” can contribute their idle compute resources to the network and earn RAVEN tokens.

In addition to supporting AI models, Raven provides compute power for Web3, gaming, and video applications.

Similar networks include Render, Akash, and Gensyn.

Other notable examples of DePIN projects include DIMO (decentralized connected vehicle platform), Arweave (decentralized permanent data storage), and Iotex (Layer 1 blockchain to build DePINs on top of).

Conclusion

DePINs bridge the gap between the crypto and real worlds to build decentralized, community-owned physical infrastructure networks. Their decentralized, crowdsourced approach leads to lower costs, better reliability, and greater scalability.

We are in the early days, but we fully expect to see many more DePIN projects built to replace their centralized counterparts.

What are your thoughts about DePIN? What did you we miss? We’d love to hear from you in the comments.

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