DePIN: How blockchain is changing real infrastructure projects
Blockchain technology has long proven its ability to change financial systems, and now it is making significant strides towards being implemented in real-world infrastructure. The DePIN concept is a vivid example of such changes. DePIN uses blockchain and decentralization principles to build, maintain, and manage physical infrastructure through tokenized incentives for network participants.
This concept allows real physical resources (such as storage networks, energy systems, or telecommunications) to be combined with blockchain capabilities, offering greater efficiency, accessibility, and transparency. By rewarding users with tokens, DePIN incentivizes them not only to participate, but also to develop existing infrastructure.
In this article, we will look at how DePIN works and what prospects this concept opens up for the cryptocurrency ecosystem and the real economy.
What is DePIN
DePIN is a concept that stands for Decentralized Physical Infrastructure. It is a blockchain approach that encourages user-providers to share their resources (such as storage space, wireless networks, broadband, cloud computing capabilities, etc.) through token rewards to jointly build and maintain network infrastructure.
The DePIN concept first appeared at the end of 2022. The name for the concept came up during a public naming contest for web3 physical infrastructure organized by Messari. After that, Messari adopted the concept in its annual and special reports, thus making it a unified name for the concept.
The DePIN concept is the application of blockchain technology (and decentralization principles) to the creation, maintenance, development, and operation of physical infrastructure networks. The infrastructure is managed by the community, and active participants (and providers) receive tokens for their participation and for their contributions to the maintenance and decentralization of the network.
The first idea of such an infrastructure appeared about 10 years ago, and it was supposed to become the foundation for the implementation of blockchain in real infrastructure. Filecoin developers were the first to actively promote the DePIN concept, which put them on the list of “pioneers.”
The principle of the concept is the desire to maximize the accumulation and efficient distribution of provider resources among users. Thanks to the reward system, providers are incentivized to improve their services to optimize their computing power. At the same time, the participation of ordinary users is supported by a lower fee for the use of capacities compared to services provided by businesses.
How DePIN works
DePIN involves the decentralization of network management using blockchain technologies. In most cases, a combination of blockchain technologies and the Internet of Things (IoT) is used.
The blockchain acts as a transparent and secure registry in which transactions are recorded and through which data is exchanged in the network. It helps to maintain transparency and trust among users by providing everyone with access to immutable records of all transactions. Meanwhile, the Internet of Things consists of interconnected devices that collect and exchange data in real time. Within the DePIN system, all IoT devices communicate with each other and with the blockchain database. This communication supports autonomous and operational interaction within the physical network infrastructure.
DePIN uses the blockchain to separate authority between networks, and this is what allows DePIN to be used in a variety of scenarios and areas. Applications include, but are not limited to, energy, storage, transportation, real estate, telecommunications, and supply chain.
For example, in the energy sector, decentralized nodes can enable users to trade energy on a P2P basis, and all interactions between them will be recorded on the blockchain. Smart contracts will automate all transactions, increasing energy efficiency. Users will also have the opportunity to receive rewards in the form of tokens as an incentive to encourage them to work on the development of the network.
Advantages of DePIN
Compared to traditional physical infrastructure networks, DePIN has the following advantages:
DePIN reduces the cost of maintaining physical infrastructure and the cost of maintaining many employees. It lowers the threshold for entry into the industry by providing rewards in the form of tokens, which encourages network participants to share their personal network resources. It is also worth mentioning that the speed of launching DePIN networks (which connects existing equipment to the network) is much faster than traditional infrastructure creation, which provides a competitive advantage for global expansion without barriers.
领英推荐
Networks based on the DePIN template rely on thousands of independent nodes to operate, which increases network stability and reduces the risk of data loss due to technical failures or hacker attacks.
DePIN allows all participants, regardless of their location, to participate in building physical infrastructure that meets their needs. On the other hand, in traditional projects, infrastructure is often built on the basis of centralized templates that define the rules and conditions of your use.
DePIN classification
According to the Messari taxonomy, the DePIN sector can be divided into two main categories: physical resource networks and digital resource networks. Physical resource networks include wireless networks, geographic spatial networks, mobile networks, and energy networks. Digital resource networks include computing, storage and bandwidth networks.
Physical Resource Networks are deployed, depending on the location, of hardware equipment using incentives to provide cryptographic network services that are indispensable and costly. Their main advantage is a significant reduction in capital investment and operating costs.
Digital Resource Networks encourage users to improve and deploy hardware by using incentives to provide replaceable digital resources. The peculiarity of such a network is that it focuses on the reuse of existing idle resources (without the need to purchase new hardware). The purpose of digital resources is to provide solutions for small and medium-sized data centers and enterprises to utilize the large amount of idle resources.
DePIN in the context of cryptocurrencies in general
Today, DePIN is an emerging sector. Its potential is unlimited, as its use is not limited to one sector, but can be used in industries such as energy, telecommunications, data storage and other related industries.
While the real world economy is estimated to be worth hundreds of trillions of dollars, Messari in its analysis estimated the total addressable market for the DePIN sector at approximately USD 2.2 trillion (and according to their forecasts, its value could soon reach USD 3.5 trillion). Even with this estimate, the value of DePIN exceeds the total market value of the entire existing cryptocurrency market. The fully diluted value of current decentralized physical infrastructure projects so far is about $5 billion USD. The goal of DePIN projects is to solve some of the world's most fundamental problems using blockchain technology, existing Internet capabilities, and token incentives.
Forecast for the future of DePIN
DePIN's future forecast Regulatory hurdles, technical scalability and interoperability issues are the main obstacles to widespread adoption. In addition, a set of robust security measures and user-friendly interfaces are required to integrate blockchain technology with physical systems.
In 2023, the DePIN ecosystem expanded to about 650 projects (according to Messari analysts). During the same period, infrastructure projects also increased the number of nodes by about 600,000 units.
According to experts, meme tokens will facilitate the massive implementation of DePIN projects. Analysts also consider Asia to be the region with the greatest potential for the rapid development and implementation of decentralized infrastructure projects. They expect that some of the strongest projects in the sector will be created here over the next year.
Despite all the obstacles, the future of DePIN looks promising. Technologies are constantly being updated and developed, introducing innovations in many sectors. DePIN projects are likely to overcome existing obstacles and open up new opportunities for decentralized physical infrastructure. By enabling users and communities to build their own infrastructure and resources, DePIN has the potential to change the way we interact with the physical world.