Amid a market frenzy for all things artificial intelligence, some are looking to leverage blockchains to ride the wave.
One recent trend is a fledgling crypto sector called DePIN — short for a mouthful term, decentralised physical infrastructure networks.
DePIN projects, in particular those sourcing decentralised computing power, are usually deployed on high-speed, low-cost blockchains including Solana and Cosmos.
Kellen Blumberg, a data scientist at crypto data platform Flipside, told DL News that DePIN projects can provide faster, cheaper, and more secure services compared to centralised providers.
Demand for computing power is growing. Experts say the computational power required for sustaining AI’s rise doubles every 100 days. That’s about 1220% per year — a potentially lucrative opportunity.
Flipside published a report that predicts that investment in and adoption of decentralised compute providers will outpace other DePIN sectors.
Meeting AI demand
DePIN projects aim to lower the costs of everything from mobile services to sourcing computing power needed to train AI.
They do this by tapping into a decentralised network of participants, rather than single centralised providers like Amazon Web Services or Google Cloud.
Decentralised compute providers recruit individuals with idle computer hardware, such as graphics processing units — or GPUs.
Providers then combine the GPUs in their network into a pool of computing power and rent it out. Those on the other end use the GPUs to train AI, conduct scientific research, or other tasks that require large amounts of processing power.
Render, a Solana-based decentralised compute provider that focuses on media rendering and AI, is currently the highest-valued, with a market value of over $3.8 billion.
According to Flipside’s report, Render has amassed a network equivalent to approximately 33,000 hours using high-end GPUs since its launch in 2017.
Other projects, like Cosmos-based Akash, claim to undercut prices at centralised computing power providers such as Amazon Web Services and Google Cloud by as much as 70%.
Both Render and Akash have issued tokens, which have soared in recent months. Render’s RNDR rallied 127% since the start of the year, while Akash’s AKT is up 113%.
DePIN tokens
There are reasons to be cautious, according to Chris Newhouse, a DeFi analyst at Cumberland Labs.
“Several newer DePIN protocols struggle to truly align economic incentives in a way that demands a token,” Newhouse told DL News.
Most tokens issued by decentralised compute providers function as an ecosystem currency, where those renting out computing power can pay in the project’s native tokens, while those lending their computing power to the network are also paid in the token.
At the same time, traders use the tokens to speculate on a given DePIN protocol’s future adoption.
Newhouse questioned why such projects need a token in the first place.
“If payment is in a native token, what does the supply and demand of compute power we’re renting out look like?” he said. “Why wouldn’t they just pay in US dollars or through stables?”
Some DePIN projects use native tokens as an incentive to get more computing power onto their networks, Blumberg said. “Incentives are helpful for attracting initial users, but sustainability is crucial.”
The situation is similar to that of crypto airdrops, where DeFi projects reward early users with newly-created tokens to attract users and deposits. But in recent months, many projects running this playbook have flopped.
The value of several projects’ newly-launched tokens have plummeted in step with their user activity after the airdrop incentive goes away.
DePIN projects may also be susceptible.
“Avoid projects that rely solely on high rewards and/or token trading activity without demonstrating genuine utility or adoption relevant to their stated purpose,” Blumberg said.
Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.
