Understanding Decentralized Physical Infrastructure (DePIN)

As decentralised technologies like Web3, blockchain, etc. evolve, the concept of decentralised physical infrastructure networks (DePIN) is gradually gaining ground.?

In 2019, the Helium Network launch gave a huge and significant landmark in the utilisation of DePIN. With Helium, users could install physical hotspots and offer IoT devices wifi coverage while receiving cryptocurrency as rewards, which was among the first use cases of decentralised physical infrastructure (DePIN) in the real world, particularly in the field of telecommunications.?

The term "decentralised physical infrastructure" (DePIN) refers to the idea of managing and coordinating physical resources and assets through the use of decentralised technology, particularly distributed ledgers, blockchain, and smart contracts. This paradigm is in contrast to conventional, centralised infrastructure systems, in which physical assets are under the control of one or a few corporations.

Having looked at the grammar around DePIN, let's try to understand this concept as a child. Imagine that you and your friends decided to have a picnic. Instead of one person being responsible for everything, one person could bring apples, another person snacks, bananas, etc., but then, if one person wants a banana, you can exchange it for a snack, apple, etc., then each person is responsible for what the brought and decides also its utilisation. So in relation to the concept of DePIN, let's look at these bullet points.

• Rather than having a single person responsible for the picnic, many people own small portions of a larger entity.
• Sharing policies are determined by intelligent computers to ensure that each person gets an equal share and eliminate the need for supervisory intervention or monopoly.
• As a reward for sharing something like an apple or banana, you receive a unique coin or token.

Technical Considerations of Architecting DePIN.

Scalability, security, and efficiency are important considerations while building a DePIN, and several technological and architectural aspects must be considered. Here are a few highlights:?

1. Choice of Blockchain: the choice of blockchain is very essential; going for a private or permissioned blockchain can offer more advantages, as they provide greater control and efficiency, but may also reduce the ability to go fully decentralised, whereas private blockchains like Ethereum offer better transparency, but then scaling the solutions becomes a challenge. Also, giving consideration to layer 2 solutions can bridge the issues of scalability and gas fees, especially in scenarios that require larger and more frequent transactions.?
2. Choice of Consensus Mechanism: choosing the right Consensus is very crucial in building a DePIN solution. Proof of Work, for instance, is less ideal because of its high energy requirements, hardware cost, and the challenge of scalability. Proof of stake, on the other hand, is more suited and can provide better security in terms of finance. In a situation where participants are required to provide physical services, Helium has demonstrated that the Proof of Coverage consensus is more ideal, as the consensus-building process guarantees that rewards go solely to those who contribute significantly to the infrastructure.
3. Tokenomics: designing a long-term sustainable and balanced reward system for participants is very crucial, and in order to retain decentralisation, the reward system must strike a balance between early adopters and latecomers. More consideration has to be given to check if the system needs a governance token or the need to stake some tokens by participants.?
4. Interoperability: It might be necessary for DePIN infrastructures to function across several blockchains. Enabling smooth interactions between several decentralised ecosystems requires interoperability solutions, like bridges or cross-chain communication protocols.
5. User Experience: Since DePIN structures are usually complex, making the user experience user-friendly is highly recommended. For non-technical users, integrating decentralised identity (DID) and wallet management solutions will streamline the process as they may need to manage many assets across several DePIN systems.

Benefits of DePIN

• DePIN networks lack a single point of failure, which makes them more resistant to attacks and failures.
• DePIN systems save infrastructure deployment and management costs by doing away with middlemen and centralised agencies.
• Since DePIN systems are usually based on open protocols, they can communicate with other decentralised networks and services. This eliminates the need for proprietary solutions and allows users to build on top of current infrastructure and combine multiple services.
• DePIN networks facilitate international cooperation in the pursuit of common objectives, including resource sharing, connectivity, and climate change mitigation. Since they are decentralised, anyone with the necessary tools can join the network and help build a worldwide system.
• In contrast to traditional techniques, which call for significant investment and regulatory approval, DePIN allows for considerably faster scaling and deployment because it depends on participants to construct and manage infrastructure in a decentralised manner.

Some use cases of DePIN

1. Water resource management: DePIN can be used to prevent water shortages and increase distribution efficiency; it makes it easier to manage and distribute water resources in a decentralised manner.
2. Decentralised Data Marketplaces: Decentralised marketplace for data sharing and monetisation where people keep ownership of their data and get paid for giving it to researchers or enterprises, platforms like Ocean Protocol are proving that this is viable.?
3. Decentralised Content Delivery Networks (CDNs): Decentralised content distribution and video delivery lowers the cost of centralised CDNs while enhancing media streaming's availability and scalability.
4. Decentralised Real Estate Market Place: enabling small investors to purchase larger properties and generate passive income without being constrained by the constraints of conventional real estate markets by enabling fractional ownership of real estate, implying that 10 people could own one property and each benefit from their investments.

Conclusion

There are several other technical considerations in building a DePIN solution, but this article aims to highlight just the importance of considering these factors and also highlight a few benefits of DePIN. DePIN provides an alternative to conventional centralised infrastructure architectures that is more transparent, robust, and scalable. It is pertinent to highlight also that consensus procedures for DePIN systems are needed that go beyond financial verification in order to verify real-world activities, including service delivery, data storage, and coverage. Particularly important are Proof of Coverage (PoC), Proof of Storage (PoSt), and Proof of Service, which enable DePIN networks to reward users for practical contributions to decentralised infrastructure.

Worthy of note, scalability, security, and usability must be balanced while combining a number of decentralised technologies, including tokenomics, smart contracts, and secure physical hardware, when designing a DePIN architecture.