Author: Erik Lowe, Pantera Content Director; Cosmo Jiang, Pantera Portfolio Manager; Eric Wallach, Pantera Investment Analyst; Translation: Golden Finance xiaozou
The Industrial Revolution was a transformative era that reshaped economies by increasing productivity through breakthrough large-scale machine manufacturing. During the Industrial Revolution, there was a shift from a largely local agricultural economy to urbanized industrial centers, and social centralization was an inevitable product.
However, while centralized production has improved efficiency, it also brings challenges. Factories are vulnerable to catastrophic events such as fire or other single points of failure, such as mechanical failure.
While we have gone through a series of “industrial revolutions” over the past few centuries, driven by new technological advances, modern companies still face many core issues related to the concentration of resources and human capital. In addition, the costs and frictions of building large-scale businesses are now higher as management becomes larger and regulatory processes become more onerous.
However, we now believe a new phase is taking shape: a reimagining of how businesses, services, and networks are constructed and managed. Decentralized Physical Infrastructure Networks (DePIN) promise to usher in a new era of productivity, driven not by centralized forces, but by decentralized ones.
1. What is DePIN?
“The Decentralized Physical Infrastructure Network (DePIN) uses token rewards to incentivize the deployment of hardware-based networks and the completion of real-world tasks.” — Messari Taxonomy
At the heart of DePIN are decentralized marketplaces that connect resource suppliers with buyers. Unlike the typical traditional model (where one company is responsible for resource production), the supply side is a network of many independent operators. Through economic rewards such as tokens or fees, these operators are incentivized to contribute their resources (usually in the form of physical hardware), aligning their interests with the success and development of the DePIN ecosystem.
DePIN is highly regarded for its potential to revolutionize physical infrastructure networks in a range of industries such as cloud computing, wireless networking, and cloud storage. For example, the Helium Network is a decentralized wireless infrastructure network for IoT (Internet of Things) devices that allows operators to deploy wireless hardware to earn Helium tokens, which are rewards for expanding network coverage.
A key difference between DePIN and its centralized counterparts is who the stakeholders are. Rather than flowing to rent-seeking intermediaries or companies, the value of DePIN is distributed to the operators who jointly own and operate the network.
Many DePIN projects are innovative and interesting, but the question arises: “If my existing services are working well, what added value will DePIN provide me?”
2. What are the advantages of DePIN?
The benefits of DePIN can be summarized into the following key advantages:
Reliable, Resilient, and Secure — A sufficiently decentralized distribution of node operators ensures more consistent network uptime and resistance to single points of failure inherent in centralized physical systems. Security or fraud risks associated with closed systems can be mitigated by a transparent, immutable, and auditable blockchain network.
Affordability for users - Since the DePIN project is operated by a carrier network, the operating expenses of centralized operators such as physical maintenance and legal fees have less impact on the price, so the savings can be passed on to users.
Community-driven decision making - Decisions made by a small number of company executives may not always be in the best interests of users and/or operators, and in some cases their decisions are primarily driven by self-interest. In DePIN, decisions are made by the community of token holders, which may promote a healthier ecosystem and benefit network participants in a more equitable manner.
Growth of the gig economy - Over the past few years, the nature of work has changed, with more people wanting the freedom to work independently or looking for passive income sources. DePIN networks often tap into the potential supply of labor and the ability for someone to do more without disrupting their regular job - like someone making a few deliveries on the way home from get off work.
Better products and services - A strong DePIN flywheel has the potential to create better products than centralized counterparts. As user demand increases, growth is captured by tokens with a strong value accumulation mechanism. These tokens in turn incentivize more operators to contribute, further improving the product and attracting more users. This is the DePIN flywheel.
We believe DePIN has a bright future, but we also know it is not without challenges. Issues such as regulatory hurdles, potential security concerns, and reliance on widespread adoption are all potential obstacles. However, its potential benefits make it a concept worth exploring.
3. DePIN Project Case Study
Below we share two case studies of projects at the forefront of the DePIN revolution.
（1）GEODNET
GEODNET is building the world's largest decentralized Real Time Kinematics (RTK) network powered by a community of satellite miners to enable massive IoT. It is disrupting incumbents by establishing an affordable, global, decentralized real-time data marketplace.
Here is our overall investment thesis:
Product Differentiation: GEODNET's RTK network provides better GPS data (1 cm accuracy vs. 2 m for standard GPS) and is more affordable (10x cheaper), and its worldwide community network allows for faster expansion.
Huge Market: Global Navigation Satellite Systems (GNSS) is a $200 billion+ market. Public companies such as Trimble ($15 billion market cap) and Hexagon ($30 billion market cap) have revenues of $10 billion and EBITDA of $3 billion.
Growth Flywheel: Miners can earn GEOD tokens by contributing to the network through the purchase and installation of GNSS base stations. These incentives have already led to 5,500 devices being added to the GEODNET network, more than any of its large listed competitors.
Development momentum: In less than three years, GEODNET's recurring revenue has reached approximately US$1 million, and the number of network miners has exceeded 7,600, catching up with or exceeding the network size of listed companies.
Value accumulation: 80% of GEODNET revenue is used to purchase and burn GEOD tokens.
（2）Hive folders
Hivemapper is a decentralized mapping network that uses cryptocurrency incentives to crowdsource high-quality, up-to-date global map data. Hivemapper aims to leverage community contributions to disrupt the digital mapping market dominated by centralized technology giants by providing newer, more comprehensive, and more affordable map data.
Here is our overall investment thesis:
Long-term trends: The digital map market is growing rapidly and is expected to reach $37 billion by 2026, driven by growing demand in enterprises, logistics and the emerging advanced driver assistance systems (ADAS) or autonomous driving sectors.
Competitive advantage: Hivemapper’s crowdsourcing model enables map data updates 20-100 times faster, with significant cost advantages compared to competitors’ traditional mapping methods (e.g., approximately $300-$550 per contributor, Each Google Maps tool costs $500,000).
Basic achievements: Hivemapper has nearly 150,000 contributors and has mapped more than 14.38 million kilometers of non-overlapping roads, accounting for 24% of the world's non-overlapping roads, and is 5-6 times faster than Google Maps. The network has also gained multiple corporate customers, which is also reflected in the on-chain revenue.
Catalyst: The Hivemapper Bee dash cam launched this year significantly improved data quality and user experience. Growth in the adoption of ADAS and the increasing number of autonomous vehicles, coupled with new EU regulations requiring vehicles to be equipped with intelligent speed assist systems, are long-term drivers of demand for newer, more detailed map data.
Key risks: Competition from large incumbents, regulatory challenges of cross-jurisdictional data collection, high upfront costs for emerging market contributors, and execution risks of managing a complex token reward system.
