What is a DePIN?

DePINs are the bridge between the physical and digital worlds. They use blockchains and provide token rewards for publicly recorded services.

Imagine a decentralized physical infrastructure network (DePIN) technology, a public library where everyone can contribute or borrow books freely. In this library, blockchain is a detailed catalog of books with information about every book’s location and circulation history, and it is always open to everyone. Just like libraries rely on readers’ participation to function smoothly, DePIN projects benefit from the collective input of many people.

DePINs create a network for physical things, such as WiFi and data storage, allowing people to share their resources directly with other users without requiring an intermediary.

However, you might be wondering how WiFi and data storage are physical things. 

While WiFi signals and data are digital, they rely on physical infrastructure like antennas, routers, hard drives and servers to function. These tangible components are what make them part of the physical network. So, how is a DePIN made?

These networks are built on a blockchain and use digital tokens or cryptocurrencies like Bitcoin (BTC) for transactions, making everything clear and trackable. Users who share their resources with the DePINs get tokens as a reward.

For DePINs, the blockchain works like a digital manager and record keeper. DePINs create an open system using blockchain technology, enabling anyone to provide services, such as network connectivity or energy management, without requiring special permission. 

The blockchain also tracks all actions, including service transactions, user interactions and network updates. These records are typically public, allowing anyone to access them.

Why are DePINs needed?

DePINs can make infrastructure — such as energy grids, transportation systems and communication networks — more accessible, efficient and resilient.

Unlike traditional networks controlled by a single entity, DePINs use blockchain technology to create distributed systems. This means that instead of relying on a few big companies, a small group of regular people can control things like electricity, internet access, data storage and other infrastructure.

DePINs also ensure that services remain accessible to all, even during disruptions or crises. This decentralized approach fosters innovation and competition, reduces costs and promotes diverse service offerings. 

Additionally, DePINs can remove the need for big upfront investments and bureaucracy. This approach allows for faster deployment and adaptation to local needs. This agility benefits consumers and creates opportunities for smaller businesses and entrepreneurs to participate in providing and sharing services.

How do DePINs work?

DePINs utilize physical hardware, decentralized networks and crypto rewards supported by security protocols and smart contracts.

DePINs use physical hardware nodes that include all the tangible infrastructure needed to connect a DePIN to the physical world, such as sensors, wireless hotspots, internet routers and computing devices. Think of these nodes like a neighborhood’s essential utilities — everyone in the community can own and operate their piece of the network, contributing to the overall infrastructure.

A blockchain records all activity and automates the sharing of rewards, ensuring openness and confidence between parties. It’s like a transparent community ledger that ensures everyone follows the rules and logs every transaction. Smart contracts and the Internet of Things (IoT) automatically carry out these transactions when particular criteria are met, ensuring everything runs smoothly and transparently.

Through tokenized economic models written into the network’s code, participants contribute resources that benefit the achievement of the DePIN’s goals. Users are compensated with crypto rewards for their contributions to the network. This serves as a compelling incentive for individuals to invest in, maintain and utilize the infrastructure — similar to earning tokens for participating in a community improvement project.

DePINs use peer-to-peer networking protocols to decentralize the ownership, control and management of physical infrastructure. This means that DePINs enable direct interaction and collaboration between infrastructure providers and consumers instead of relying on centralized authorities. Imagine a neighborhood where everyone trades goods and services directly without needing third parties or central marketplace.

To protect against cyber threats, DePIN security protocols and encryption secure sensitive data, such as infrastructure configurations and any unauthorized changes to the infrastructure’s operational data. This is akin to having secure locks to protect the community’s shared resources.

DePIN use cases

DePINs are building open and decentralized markets for the same services that traditional technology firms provide.

Storage solutions

DePINs can provide a new way to store data using a network of many devices. Instead of relying on a single, central system, DePINs make data storage safer and more reliable by spreading it across multiple nodes. 

Projects like Filecoin work by breaking data into smaller pieces, sharing them across the network and using cryptographic techniques to make the data secure and available.

Wireless connectivity

DePINs operate on a peer-to-peer infrastructure network, where devices like smartphones, IoT gadgets and routers communicate directly with nearby devices. DePINs deploy low-cost, easy-to-install wireless infrastructure across a wide area, eliminating the need for centralized hubs.

Projects such as Helium allow individuals to host hotspots that enable IoT device connectivity and earn cryptocurrency rewards. This distributed physical network model democratizes access to wireless networks, fostering innovation in smart cities, agriculture and logistics.

Energy distribution

Imagine local microgrids powered by solar panels storing extra energy in nearby batteries for emergencies or busy times. Smart grids can then manage energy flow efficiently, balancing supply and demand in real-time, seamlessly integrating renewables into community infrastructure. 

DePIN projects can promote green energy solutions and potentially improve energy reliability, making neighborhoods greener and more sustainable.

Decentralized sensors

DePINs can also operate as geo, traffic, environmental and infrastructure health monitors by leveraging blockchain technologies and the distributed architecture of physical sensors. Each sensor collects data on traffic or environment, then checks and stores it securely across the network.

Typically, individuals can offer data, and, in return, they earn native cryptocurrencies as rewards. When DePINs team up with various platforms, they collect data and provide more accurate geo and weather services, contributing to fields like farming and city planning.

How to build DePIN?

To build a DePIN and develop a thriving network of stakeholders, consider several factors and steps.

Now that you are familiar with the basics of DePINs, it’s time to learn how to create one. Let’s explore how to set up a decentralized energy grid. The steps to create a DePIN are as follows.

Step 1: Define objectives

Start by defining your goals, like incorporating renewable energy, boosting grid resilience or cutting costs. Decide which areas and types of energy you want to focus on.

Step 2: Choose a blockchain platform

Pick a blockchain platform that fits your decentralized energy grid needs:

• Define project needs: This is about what features you need, such as scalability, transaction speed, consensus mechanism, interoperability, governance model and additional features.

• Desired performance: Choose platforms with high throughput, low latency and efficient consensus mechanisms.

• Security: To enhance decentralized network resilience, look for platforms with strong security, smart contract languages and formal verification.

• Costs: Consider transaction fees, gas fees, hosting costs, development costs and maintenance expenses.

Step 3: Establish token economy

The next step is to create a native token for energy transactions and rewards. Also, establish a decentralized governance framework, such as token-based voting mechanisms for stakeholder decision-making. It’s like creating a reward points system for energy trading, where everyone uses points to trade energy and vote on decisions.

Step 4: Smart contracts

Develop secure, auditable and efficient smart contracts to automate energy transactions and manage resource allocation. Make sure they’re secure and efficient and can handle varying energy inputs and outputs.

Step 5: Hardware deployment

Deploy the physical infrastructure, such as smart meters and energy sensors, ensuring their connectivity with your chosen blockchain.

Step 6: Network participants

Bring together energy producers, consumers and service providers. Offer incentives like tokens or revenue sharing to grow your DePIN ecosystem.

Step 7: Security measures

Remember to implement DePIN security protocols to protect the network from cyber threats and ensure data integrity.

Challenges and disadvantages of DePIN

Despite numerous advantages, DePINs could lead to technical, regulatory and adoption issues.

As regulatory frameworks for the crypto industry are still unclear in many countries, DePIN builders can face complex legal requirements. Whether you’re considering starting a DePIN project or participating in one, staying compliant with existing crypto laws is important. 

Security remains a critical concern for decentralized networks. The risks associated with smart contracts and data privacy require DePIN project builders to find the right balance between blockchain’s transparency and security.

Moreover, apart from the issue of regulation and security, the establishment and maintenance of decentralized processes are complex. It is essential to understand how to manage the physical devices and the problems with infrastructure blockchain integration.