Article author: humanityprot
Article translation: Block unicorn
Amid concerns about the Meme coin craze and the so-called moral crisis of cryptocurrency, the rise of the DePin network once again strongly establishes the popularity of cryptocurrency for real-world practicality. Messari coined the term "DePin" in 2022, a new term, but the idea behind it is as old as cryptocurrency itself. DePin is an abbreviation for Decentralized Physical Infrastructure, which refers to a community network driven by protocols and token incentives that coordinates hardware resources.
Bitcoin, the original blockchain, is the archetypal DePin network. That’s because it invites anyone in the world to collectively contribute computing resources to secure its distributed ledger, and is rewarded with “digital gold.” This model is revolutionary not only for its technology but also for its economic impact. However, as crypto has evolved, it has often veered into abstract speculation and has often lost touch with its proven ability to smoothly coordinate physical resources. Today’s DePin network is more sophisticated, offering a path back to cryptocurrency’s origins and promising to quiet cryptocurrency’s critics by promoting more just economic relations.
Better operator economics
The DePin network creates a new economic model that improves upon existing models in the operator economy. The operator economy—more commonly referred to as the “gig” or “sharing” economy—emerged with companies like Uber and Airbnb, which leverage vast networks of independent operators to coordinate and deliver valuable services, such as rides and homes. Their reliance on networks of private companies to use crowdsourced labor and material resources has proven to be wildly successful, validating a new service paradigm that can compete with, and even surpass, more traditional business-to-consumer models.
This Web2 operator economy is highly profitable for unicorns and their shareholders. However, the picture is less positive for other stakeholders, such as workers who contribute time and resources to the network and early adopters who see long-term value in the product. As with many large tech companies, the operator economy often embodies an extractive logic that favors monopoly, creates a precarious labor force, and relies on subsidized venture capital and unpredictable governance, leading to platform risk.
DePin improves the operator economics by making it more democratic, economically inclusive, and transparent. Like other blockchain applications that have found product-market fit, such as DeFi, the DePin protocol replaces the idle monopolists and rent takers at the core of Web2 operator networks with software and code. As a result, they are able to redistribute economic value to participants based on their contribution to the network. Take the ride-hailing protocol Teleport, for example. Teleport is very similar to Uber, except it dismantles the company behind the ride-hailing market. This means it can return more value to drivers and passengers through higher wages and lower prices.
Companies like Uber and Grubhub rely on a class of gig workers who are deprived of employee benefits and are unstable. In contrast, the DePin Network is specifically designed to reward network participants who invest their hardware and time into the network, giving them tokens through permissionless smart contracts. This means that every contributor to the DePin Network can become an economic stakeholder, rather than just an input in a corporate spreadsheet. More inclusive capitalism drives the development of the Web3 operator economy, which is not only fairer to network contributors; it also ensures that risk returns are not only obtained by a few venture capital firms, but also by participants who spend time and money to grow the network. Allowing participants to become owners is also good for the business; because these initial owners will become network evangelists and help guide the growth of the next wave of users.
The more permissionless nature of DePin networks also means they lower barriers to entry, attract a wider range of participants, and expand geographic coverage, making them ideal for serving edge cases. On the supply side, they open the ecosystem to all qualified manufacturers, ensuring that a single hardware supplier does not become a monopoly and ensuring that the network provides better products at lower prices.
Finally, the protocol-driven nature of the DePin network provides more protection against platform risk and censorship. Unlike centralized, code is harder to block or censor. This means that hardware services based on DePin will be more difficult to disrupt for political or other illegal reasons. However, it may also mean that the DePin network will be better able to maintain services that cross legal boundaries, creating challenges for governance and regulation.
Different areas of Depin
Most Web3 operators are honing their skills in more and more specific areas, which marks the maturity of the Web3 operator economy.
Hardware operators are key to the DePin revolution, matching physical assets with user needs. Take io.net, which connects companies that need AI processing power with a network of GPU suppliers. Helium operates in a similar way, connecting small cell hardware owners with users who need 5G connectivity. These examples highlight a key trend. In the expanding operator economy, hardware becomes a shared commodity, and each participant plays the dual role of consumer and provider.
Data operators transform raw data into valuable assets. They deploy hardware to collect and process data, creating datasets and APIs for commercial use. Examples such as DIMO and Hivemapper illustrate this trend, with operators collecting vehicle data for insurance companies or capturing street imagery for real-time street mapping. Beyond pure collection, these operators often enhance the data before packaging it into a marketable product. They also play a vital role in transporting real-world data across networks, leveraging IoT sensors to not only collect data but also provide services.
Storage operators form the backbone of data persistence in the Web3 operator economy. Projects such as Arweave and Filecoin are pioneers in this space, providing decentralized solutions for file storage. They ensure that data is not only saved, but also available for future use. KwilDB is a decentralized database that operates on a similar principle. It provides secure and persistent storage for structured data. These platforms are crucial because they keep information safe.
Compute operators provide basic processing and communication services. Projects like Aethir demonstrate the potential of decentralized cloud rendering networks, enabling developers to build a range of decentralized consumer applications and enabling users to tap into collective computing power. Similarly, Akash provides a cloud services marketplace that challenges traditional providers like AWS and GCP with decentralized alternatives. These platforms embody DePin’s transformative ethos as they not only decentralize access to computing resources, but also democratize it.
challenge
The Web3 economy powered by DePin also faces many challenges. First, the DePin project must effectively navigate the complex regulatory environment of the real world. For example, data collection services like Hivemapper need to juggle governance, data management, and security regulations, each of which has its own strict compliance requirements. Similarly, 5G networks encounter a variety of spectrum licensing laws, which vary greatly between jurisdictions. These obstacles can introduce significant friction that slows progress and requires a delicate balance between innovation and compliance.
Secondly, DePin’s own market dynamics may bring instability to the DePin project. While tokens can quickly attract more hardware operators, this does not ensure user adoption. Oversupply in the absence of demand for end products will lead to imbalances that undermine the stability of the network. Therefore, the design of the token economic mechanism is crucial; excessive participation incentives may trigger inflation, weakening the value of the token and the credibility of the network. If the incentive plan is too small, then the network will run the risk of not being able to scale to meet market demand.
Third, and finally, while decentralization is a cornerstone of the Web3 ethos, it also presents a host of challenges. Centralized services benefit from hierarchical coordination and management, which can lead to superior performance. In contrast, decentralized networks may struggle to match these governance and technical efficiencies. For example, the distributed nature of computing sharing may result in delays in processing machine learning tasks compared to the centralized capabilities of data centers. If decentralized systems cannot provide comparable performance, their cost-effectiveness alone may not be enough to convince users to abandon established centralized services.
Summarize
DePin has the potential to unlock market efficiencies and create fairer operator economics. However, its ultimate success will require more time and effort, especially for projects launching two-sided markets in highly regulated industries. Assuming DePin can address its challenges with a complex regulatory environment, challenging token economic models, and comparable performance, its success could be revolutionary. More importantly, it would prove even the most staunch critics wrong about the real-world practicality of Web3.
