introduction:
This year, venture capital in all crypto projects has recovered. According to incomplete statistics, as of April 2024, global investment funds have reached 4 billion US dollars, of which 70 DePIN projects have raised 192 million US dollars. Through the data, Golden Finance invited 5 industry veterans to discuss on July 18, 2024: Is now a good time to invest in DePIN projects? During the AMA live broadcast, many different perspectives and sparks collided, and the content is summarized as follows:
Guest introduction:
Lao Bai, ABCDE Investment Research Partner
Asa ，APAC Head at io.net
Jewish Director Zhao
Kai Ge, Partner of RuiHe Capital
Romeo, co-founder of Uweb
Golden Finance: In the current market environment, is it a good time to invest in DePIN projects? Which sub-sectors and projects are worth paying attention to?
Lao Bai:
Viewpoint 1: DePIN can be used as an extension of web3 from the software level, as more tentacles to reach the possibility of mass adoption.
Viewpoint 2: In the next 5 to 10 years, AI will be the biggest innovation in the investment and application sectors in web2. As long as AI innovation continues, we can always find a way to combine crypto+AI. This combination is likely to involve DePIN. From the perspective of AI's long narrative, you can pay more attention to the sub-sectors of DePIN related to AI.
Work:
Viewpoint 1: Pay attention to Multicoin - it has been firmly in the DePIN track for two consecutive cycles, turning this track from a marginal track into a mainstream track.
Viewpoint 2: The story of web2's potential to pay the bill. It has the prospect of unlocking Silicon Valley or unlocking technology funds and web2 funds. It has the potential to take over the cryptocurrency circle at the peak of the bull market, which is also mass adoption in another dimension.
Viewpoint 3: DePIN is still a meme. We have to wait until the real usable product can connect the decentralized infrastructure computing power. It may still take until the next cycle, or at least wait until the bear market to build it for a few years before this product can be truly mature.
Kai Ge:
Infrastructure: During the implementation phase, DePIN can serve as an infrastructure for emerging industries to transform digital assets or digitalize.
From the perspective of RWA: I suggest that you pay attention to some DePIN applications that can generate value and cash flow, such as green energy, streaming content, AI computing power, medical and health care based on smart wearable devices or smart nursing devices, etc.
Romeo：
AI: In the field of AI data, there are technical barriers, which can solve problems for web2 AI. Using web3 to motivate, we can obtain better data collection effectiveness or data cleaning, data layer establishment, and chaining. If tokens can be used to form a better incentive and feedback, then perhaps this application of AI can be better promoted.
Energy: The world will face a relatively long period of energy shortage in the future. A good DePIN project is one that can obtain continuous service output or continuous income. Perhaps it can cross the cycle and attract more investors to pay attention to the project. When it is truly able to capture value, the opportunity is greater.
Wearable devices: Mobile phones are the best DePIN applications because they combine software and hardware together to enable users to truly reach out.
Golden Finance: What are the latest breakthroughs in the current DePIN projects? In comparison, what are the obvious advantages and potential disadvantages of these projects in practical applications?
Kai Ge:
Advantages: At this stage, DePIN has been integrated with actual application scenarios and industries.
Disadvantages: The DePIN projects currently being implemented need to be cleverly designed, so that they can be combined with actual application scenarios, payment scenarios and industries from a to B perspective, while also highlighting the to C advantages in the economic model design.
Work:
Viewpoint 1: Combined with AI, the public's attention to AI provides the soil for the fermentation of this round of narrative, allowing everyone to participate in decentralization in a new way;
Viewpoint 2: Overcapacity has led to the cheapest domestic production capacity in the world. We can package all the products like mobile phones into DePIN and regard it as a new way of going overseas. Now I regard it as a new meme, which allows more people who have not been exposed to crypto to have a new medium to get in touch with crypto and bring in new incremental funds.
Lao Bai:
The difference between this round and the previous round: the categories of DePIN in this round have expanded to many tracks, including GPU computing power, decentralized websites, decentralized front-end hosting, decentralized VPN, etc.
Advantages: Now it is software + hardware, which is technically feasible; investors like Multicoin will create a narrative and create enough heat.
Disadvantages: No one uses it. What DePIN is doing now is the opposite, which is to make these decentralized nodes collaborate. Collaboration is difficult to be commercially viable, and the experience of centralized collaboration is more than an order of magnitude worse than centralized collaboration; there is still a long way to go.
In this round, wearable devices or real world data may be a new opportunity in the future. The real success of DePIN is that I can use the method to solve things that are difficult to do or impossible to achieve in a centralized world.
Jewish Director Zhao:
3C is a very important content that leads the market mass adoption.
Industry pain points: DApp has high customer acquisition costs. When acquiring customers, the conversion rate at each level will result in the loss of a large number of people, and the customer acquisition cost will increase exponentially.
For the same game, if it comes out with a hardware device, and not only does it not give you money but it also requires you to buy it, you will buy it instead. This is a very strange consumption decision, because you don't regard it as an investment behavior, but as a consumption behavior, and 3C products themselves are very overvalued. With such a simple cognitive difference, many people will be willing to make some consumer payments.
Advantages: Once consumer payment is generated, the project party can accumulate cash flow in the early stage through this pre-sale form and reduce customer acquisition costs. It can break through the original traffic again and spread the product layer by layer. After getting the mobile phone, the user can become a public chain user in one step and a DAPP user in one step, which also helps DAPP stand in front of users and improve user retention.
Golden Finance: From an institutional or investment perspective, what are the characteristics of high-quality encrypted DePIN projects?
Romeo：
At the first layer, the supply side is smaller than the demand side, and the supply can be increased using web3 or decentralized methods.
The second level is whether the business model can really solve the rigid demand problem. Viral marketing for customer acquisition has an incentive model sense.
The third layer is that the product itself has clear advantages in manufacturing and supply chain. The R&D costs can be covered in another form and there is reasonable pricing. Even if there is no token incentive, the product can still compete in the market. With the addition of web3, the opportunity is huge.
Lao Bai:
1. The team or investors are making trouble. Create a good narrative that 100% of people can understand and agree with.
2. Technology Design. The integral design and other aspects have made great progress compared with the previous generation.
3. New scenarios, new tracks. Scenarios that people think are difficult to achieve with centralization can be achieved with decentralized and distributed things.
4. Someone will really use it. Even if no one uses it now, you must firmly believe that one day in the future, this project will be carried out to the end, and users will really use it.
Kai Ge:
1. Combine DePIN with AI and use AI Agent to perform pricing arbitrage on green energy, etc.
2. High-quality projects should preferably be both to C projects and can be further designed into centralized mining scenarios.
3. The value space of DePIN is considered from multiple crypto-financial perspectives.
4. Realize user migration and upgrade in industrial scenarios.
5. Consider the layout of the trading market and diversify the market participants. There are not only providers and users, but also liquidity providers.
6. It will promote our intelligent manufacturing and production capacity.
Jewish Director Zhao:
1. Products that reduce the cost of acquiring customers. How to use methods with lower thresholds, events, or explosive things to attract a large number of people into the industry in a short period of time. 3C products may be more attractive to me because no one has played with them, because new users need to engage more with chains, coins, and the crypto world, and engagement itself is more meaningful.
2. Because DeFi has already calculated the financial direction or capital return rate very clearly, but has not achieved the general pricing of labor and social production time in the crypto world. DePIN can determine how a person should be rewarded for investing time in the blockchain world.
Golden Finance: Currently, the threshold for users to participate in and understand the DePIN project is high, and the requirements for mining participation and hardware configuration are higher, and the experience is not very good. What do you think are the reasons? What methods can help solve the above pain points?
Lao Bai:
Pain points: 1. Users cannot understand it; 2. It is expensive and has a high threshold.
How to solve: The project has something other than investment attributes, such as consumption attributes. There is a cool ring or watch with some meme displays or some other fun things on it. I think it is very easy to roll out if it has this kind of consumption attribute.
Kai Ge:
The economic model design is awkward. In the economic model, we need to consider two lines that go in opposite directions. That is to say, one is the actual application scenario of distribution and the other is the token narrative and market value management. This model can be designed, but it has not been completely solved and is only a suggestion.
Jewish Director Zhao:
3C has a big advantage. Unlike before, it is not necessary to have vertical channels to sell. If you want to sell 3C products, you can sell them through traditional channels, and even sell them in some 3C stores.
Open more sales channels, let more people participate in the sales process, cooperate with KOLs in the form of bringing goods, and sell mobile phones and other products
Golden Finance: Please ask the guest to summarize in one sentence what benefits the implementation of DePIN technology will bring to the Web3 industry and Mass Adoption?
Romeo：
DePIN is something that C-end users have the opportunity to own and experience, and it also allows web3 to increase market penetration faster. In the long run, it is indeed possible to combine it with RWA to generate better returns on the liquidity of some assets.
Kai Ge:
DePIN will be combined with AI and RWA to integrate global industry scenarios and finance. We believe it will attract more incremental users and novice users, as well as more actual payment transaction scenarios. We believe it will have an effect similar to Bitcoin spot ETF, which may bring about a new wave of bull market.
Jewish Director Zhao:
Any DePIN project that reduces the cost of acquiring customers makes sense. When doing DePIN, don’t pretend to be profound. Be more practical and introduce daily behaviors into crtpto from down to earth. 3C may bring a lot of interesting things in the future.
