Article Hash (SHA1): b5be995ca6de70a97afdd995fe484dc091b3c2dd
Number: Lianyuan Security Knowledge No.011
DePIN (Decentralized Physical Infrastructure Network) is gradually realizing large-scale interaction between the physical world and Web3, and gradually subverting the operating model of traditional infrastructure. Through the combination of sensors, wireless networks, computing resources, and AI with blockchain technology, and using crypto-economic incentives to promote crowdsourcing development, DePIN is forming a decentralized value network. DePIN's business model contains an important feature: hardware revenue is used as the first growth curve, and the realization of data services is superimposed on this basis to form a second growth curve. The superposition of this double curve is one of the key factors that DePIN can lead the current cycle of growth. It also shows how DePIN-like projects can create huge wealth effects in the process of building a decentralized infrastructure network, and ultimately form a large-scale decentralized value network.
This concept foreshadows an application scenario full of imagination: the common infrastructure around us, including communication base stations, car charging piles, photovoltaic panels, billboards, and data storage and computing equipment behind the operation of the Internet, will no longer be controlled by centralized entities and institutions, but will be divided into units of the same size and controlled by individuals or large-scale miners. Physical infrastructure of the same type is highly standardized and scaled, forming a carpet-like coverage.
Through a decentralized approach, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the security and resilience of the overall system. From energy production to data processing, all types of facilities have the potential to transform to a decentralized model. The above-mentioned DePIN-related industries now have a combined market size of more than $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN field is estimated to be approximately $2.2 trillion, and is expected to reach $3.5 trillion by 2028.
DePIN Track Division
The DePIN track covers six sub-fields: computing, AI, wireless communications, sensors, energy, and services. From the perspective of the supply chain, DePIN can be divided into:
Upstream: hardware manufacturers and supply-side users who are “miners”.
Midstream: project platform, blockchain responsible for data verification and token settlement, and on-chain layer 2 protocol serving DePIN; modular service components for developing and managing the DePIN network (such as platform interface, data analysis and standardization services), SDK toolkit developed by DePIN, API interface, etc.
Downstream: Connecting with demand-side dApp applications and interfaces.
Most DePIN projects choose Solana or IoTeX as the settlement layer of the token economy. AI and cloud computing projects in the sub-field focus more on on-chain settlement and the development and management of project platforms. The underlying hardware devices dispatch idle electronic devices through middleware, such as mobile phones or computers equipped with high-performance consumer-grade GPUs.
DePIN Industry Development Overview
According to DePIN Ninja data, the number of DePIN projects that have been launched has reached 1,215, with a total market value of approximately $43 billion. Among them, the total market value of projects that have issued coins and are launched on the DePIN sub-section of Coingecko exceeds $25 billion. In October last year, this figure was only $5 billion, and it has increased fivefold in less than a year, which shows the rapid growth of the DePIN industry. This shows that the market demand and recognition for decentralized physical infrastructure networks are constantly increasing. With the launch of more projects and the expansion of application scenarios, the DePIN industry is expected to become an important field for the combination of blockchain technology and real-world applications.
Enlightenment from DePIN business logic
The prototype of DePIN can be traced back to the concept of IoT + Blockchain in the last cycle. Projects such as Filecoin and Storj have transformed centralized storage into a decentralized operation mode through the crypto-economic model, and have been put into practical use in the Web3 ecosystem, such as on-chain NFT storage and front-end and back-end resource storage of DApps.
IoT + blockchain only reflects the characteristics of decentralization ("De"), while DePIN emphasizes the construction of physical infrastructure and large-scale Internet networks. The "PI" in DePIN stands for physical infrastructure, and "N" stands for network, which is the value network formed after the DePIN hardware reaches a certain coverage scale.
The most typical example is Helium, which was founded in 2013. It was not until 2018 that it decided to use blockchain as an incentive for decentralized deployment of the Internet of Things. So far, Helium has almost met all the elements of DePIN: node economy, miner model, value network, crowdsourcing incentives, and is the leading project in the field of DeWi (decentralized wireless communication); in addition, the $20 communication package service launched by Helium Mobile in cooperation with T-Mobile can not only obtain token rewards, but also enjoy reliable communication services, while solving the signal coverage problem in remote areas of the United States, forming a win-win situation for all three parties. Helium and Filecoin both belong to the category of DePIN, but the difference between the two is that Helium emphasizes hardware more, enabling it to support the growth of data services in the second curve through hardware revenue and build an independent ecosystem.
DePIN’s explosive growth is based on the double curve theory
The "Second Curve" is a concept in management and innovation theory, originally proposed by management scholar Charles Handy. It refers to the need to introduce new innovations or changes when an organization, product or business reaches the peak of its traditional growth curve to start a new growth curve and avoid stagnation or decline.
Hardware value is the first curve of value creation
On the first growth curve, the business will experience rapid growth in the early stages and then gradually reach its peak. The growth momentum of the first curve of the DePIN project comes from the revenue and profits generated by the sale of hardware. Traditional infrastructure, especially in areas such as data storage and communication services, has a linear business logic of centralized service providers or entities: the business needs to invest in infrastructure construction in the early stages, and then provide services to end users (C-end) after the facilities are improved. Therefore, the development of such businesses often requires the participation of giant companies to bear the high costs in the early stages of business operations.
The DePIN project splits the centralized supply side and crowdsources it to complete the establishment of the hardware network. The DePIN project attracts the participation of supply-side users by promoting itself, transferring the huge infrastructure investment costs to supply-side users, and achieving a low-cost and lightweight startup. Supply-side users become "shareholders" of the project by holding hardware, and help the project deploy the hardware network with the expectation of making money from mining in the future.
For example, Hivemapper and Helium have performed very well:
Helium: A decentralized wireless network with Helium Hotspot and Helium Mobile as its main businesses. Helium Mobile is a mobile communication service launched in cooperation with T-Mobile, which has grown from 0 to 93,000 subscribers in 5 months.
Hivemapper: A decentralized mapping platform, whose main business includes HiveMapper Dashcam. This device is priced at $549. Based on the current number of node deployments, Hivemapper's revenue from hardware sales alone has reached more than $60 million.
Other projects such as Jambo and OORT have also seen good growth in hardware revenue. For example, Jambo uses mobile phones as its selling point and has achieved excellent sales results in the African market; OORT has achieved significant hardware sales revenue through its innovative models in cloud computing and edge computing.
The realization of data value and network value is the second curve of DePIN growth
After the DePIN project has accumulated a certain amount of income by selling hardware in the early stage, that is, before the first curve of equipment sales growth is about to reach the critical point, the second curve will be started after the early equipment sales business reaches its peak. The core of the second curve growth lies in the data value network established on the basis of the mature large-scale hardware network.
DePIN aggregates a series of value chains, splits the centralized supply side, and uses public chains to aggregate multiple demand sides, ultimately forming a data value network under the DePIN model.
Although the DePIN project emphasizes physical properties, its core business logic revolves around how to obtain value from data. Data passes through the blockchain storage layer.
Conclusion
DePIN achieves efficient deployment and management of physical infrastructure in a decentralized manner, demonstrating huge market potential and room for growth. Despite technical, demand, economic, and regulatory challenges, DePIN's decentralized nature and innovative business model provide a solid foundation for its future development. The PandaLY team will continue to follow the trends of DePIN and explore them in depth in subsequent posts.
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