Author: Connor Lovely, CoinDesk; Translated by: Baishui, Golden Finance
DePINs (decentralized physical infrastructure networks) are everywhere. As someone who has been involved in this vertical since its inception in 2019, I realize that I am probably more of an early adopter and more enthusiastic about DePINs than most. But when I sat down to write this article and took a quick inventory of the DePINs I participate in on a daily basis, even I was surprised by the number and variety of projects now available.
First, I wear a Cudis ring on my hand, which provides me with health data and pays me credits for future airdrops. I have Helium and XNET WiFi hotspots at home, which provide wireless connectivity for my devices (and other people's devices) and pay me tokens when used. Helium Mobile (which is my only mobile carrier, by the way) has an app on my phone that pays me cryptocurrency for opting in to sharing location information, which is used to better triangulate data usage and network needs. I have the Grass browser extension running on my computer, which allows AI labs and web crawlers to view the internet through my residential IP and earns me credits for airdrops. Finally, I have the DIMO device in my car, which provides me with real-time data about my vehicle, provides this anonymized data to third-party developers, and (again) pays me tokens.
Today, the DePIN industry has over 1,300 projects, and its growth is accelerating in the bull market. While the popularity of the DePIN model is exciting, what is more interesting to me is how exactly the next generation of DePINs will build their networks... and how they differ from the previous generation of DePINs. Here is what I see.
This generation of DePIN builds on the learning and iterations of the past five years and is making progress in the following ways:
Everything is demand-oriented
The most common but fair criticism of the first generation of DePINs, such as Helium’s IoT network, is that they did a good job of building supply, but not enough demand. This generation of DePINs is securing demand early, in many cases before the TGE. They are also building supply in a more targeted, measured way, letting demand dictate where in the country or world they incentivize supply-side buildouts.
Lowering the barrier to entry for contributors
In this cycle, we have seen the rise of DePINs that leverage generic hardware, rather than custom hardware, that already exists on their supply side. Another way to accelerate growth on the supply side is to leverage everyday activities that people are already doing. An example of both of these strategies is Natix, which uses smartphones in cars as street view cameras. The company hopes to leverage behavior that already happens every day (driving), rather than trying to incentivize net new behavior with tokens (a much more “expensive” proposition from a token incentive perspective). The contrasting example here is wireless DePINs, such as Helium, which hopes to incentivize contributors to climb onto rooftops to install CBRS radios.
Tend to guess
Incentives make the world go round. DePINs have always known this, but in this cycle we see things get more intense. The emergence of points as a mechanism to record contributors’ contributions before the TGE has been a huge success and has given this generation of DePINs more flexibility and time to gather data before finalizing their token economics. Referral programs have changed the game, where contributors may receive a fixed number of points or tokens, or even a percentage of their referrer’s points or tokens in perpetuity.
Staying centralized longer
Without a dedicated person or team to make quick decisions, iterate, and push, no project, idea, or concept can be realized. Ideas are most fragile (but also most flexible) in the early stages. In this cycle, we all hope to see DePIN quickly find product-market fit (PMF), effectively expand supply and demand, and generate revenue on the chain; we don't care much about decentralization until there are some early signs of PMF. Only things that work are worth decentralizing.
Take 3DOS, for example, it is the DePIN of manufacturing. The founder created a popular 3D printer operating system that allows devices to be networked and have their print jobs automated and remotely controlled. He sees broad applications in the Web2 world, with NASA, Google, and 40% of universities in the United States as his customers. He sees 3D printers as a shared resource and is creating a global manufacturing network where businesses can submit jobs, find printers in the area closest to the end customer (reducing shipping costs and time), and then sign contracts with printer owners or shops to fulfill the contracts. 3D printer owners can monetize existing assets, businesses can save money and time printing goods, and everyone benefits.
I mention 3DOS because it is an exciting use case, but also because it is early in its lifecycle, and John Dogru (founder) is exercising complete, centralized control over the idea, software, network, demand side, etc., as he should. Without him at the helm in the early stages, nothing will get done, and there will be nothing worth decentralizing!
DePIN (as an industry) is still in its infancy, but there has been enough time to learn and improve from the first generation. This generation of DePIN prioritizes demand at the earliest stage, expands the supply side faster by lowering the barrier to entry and favoring speculation, and stays centralized longer to develop faster.
New DePINs are being launched at an incredible pace, and there will be more iterations and learnings to come. DePIN remains one of the most influential ideas in crypto, and a powerful force for good in the real world.