The advent of blockchain technology has revolutionized several industries, ranging from finance (DeFi) and gaming (GameFi) to web2 brands such as Nike for digital fashion and Starbucks for web3 customer loyalty. However, one area that has remained essentially unchanged is the physical infrastructure.
Traditionally, the deployment and management of physical infrastructure, such as telecommunications networks, cloud services, mobility networks and power grids, has been dominated by large enterprises due to their huge capital requirements and challenges. logistics.
As a result, these companies had a virtual monopoly over prices, terms and services offered to end users, which led to a lack of competition and innovation. That is, until blockchain and Web3 came into the picture.
Most are familiar with DeFi, GameFi, SocialFi, and Decentralized Autonomous Organizations (DAOs). DePIN, which stands for Decentralized Physical Infrastructure Networks, is a growing use case with real-world exposure. It uses tokens to seed the deployment of physical infrastructure and then creates a network effect that unlocks the new design space of real-world based DApps.
DePINs are an emerging trend in cryptography that leverages blockchain technology to create and operate physical infrastructure and real-world hardware networks without permission, without trust, and programmatically.
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These DePINs are arguably the next evolution of the Internet of Things (IoT) for the Web3 ecosystem or a decentralized IoT where users, device users, and businesses own and monetize. DePINs allow individuals distributed around the world to collectively build, maintain, and operate people-owned physical infrastructure networks without the need for a single, centralized entity.
DePINs incentivize supply-side participants to build the network by leveraging crypto-economic protocols, providing end users with more cost-effective and innovative services than traditional models.
The origin of DePIN
In November 2021, our very own IoTeX became the first Web3 project to give this booming economy a name, calling it MachineFi. Messari became the first to list it as DePIN in July 2022.
Token-Incentive Physical Infrastructure Networks – or TIPIN – surfaced the same month. TIPIN describes a network that uses symbolic incentives to motivate individuals to contribute to the deployment and operation of physical infrastructure and hardware networks, thereby creating a more efficient and equitable model for infrastructure deployment.
Then, in August 2022, came Physical Proof of Work (PoPW), which more specifically referred to incentive structures allowing anyone to contribute without permission to a set of shared goals. Helium, for example, allows its users to contribute to decentralized wireless networks with hotspots that allow people to connect smart devices in a secure, low-cost, and energy-efficient way.
Hivemapper is another example. It describes itself as a decentralized map built by people using the world's first encrypted dashcam. And DIMO, a user-owned DePIN platform that enables users to maximize the value of their connected devices, starting with cars.
Additionally, HealthBlocks provides a secure platform for sharing and coordinating healthcare data by leveraging blockchain and token incentives to create a more efficient and patient-centric healthcare system.
And then there are DePIN infrastructure providers, such as IoTeX, which offer centralized infrastructure such as W3bstream, developer tools, and go-to-market support to enable decentralized infrastructure network projects.
In September 2022, EdgeFi emerged as a variant of decentralized infrastructure networks focused on deploying hardware resources closer to end users at the edge of the network. In short, EdgeFi is a decentralized infrastructure network that prioritizes edge computing.
In November 2022, Messari decided it was time to put a name to Web3 physical infrastructure and conducted a Twitter poll where voters had to choose between PoPW, TIPIN, EdgeFi, and DePIN. They omitted MachineFi. DePIN won with 31.6% of the vote (136).
And in December 2022, Messari mentioned it for the first time in research, saying it would be “one of the most important areas of crypto investment for the next decade.”
How does DePIN work?
DePINs use blockchain technology and crypto-economic protocols to enable individuals distributed around the world to collectively build, maintain, and operate physical networks in a trustless, permissionless, and programmatic way. The four fundamental components of DePINs are:
- Physical infrastructure network: DePIN networks require physical infrastructure to operate. These can be vehicles for mobility networks, solar panels and batteries for energy networks, access points and routers for wireless networks or servers for cloud networks.
- Off-chain compute infrastructure: DePIN relies on a middleware linking the physical and blockchain worlds. Actual user activities are factored into their reward calculator and distribution. Additionally, this data can be aggregated for on-chain use cases, such as data evidence for smart contracts and decentralized data marketplaces.
- Blockchain architecture: Each DePIN network interacts with the blockchain architecture which contains smart contract logic. This blockchain network acts like a ledger, rewarding transactions and other exchanges of value between members of the network, such as buying broadband access from someone who rents their router.
- Token Incentives: Supply-side participants are incentivized to join and contribute to the network through token rewards. These tokens act as a subsidy to supply-side participants, allowing them to grow the network before it generates sustainable fees from demand-side usage.
A. Participants on the supply side: Anyone can become a supply-side participant in a DePIN network by deploying their physical infrastructure and connecting it to the network. For example, an owner could deploy a router and become a wireless network service provider.
b. Demand-side use: Once the network is established, end users can start paying to use network services or consume real-world data from the crowd. This creates a feedback loop that attracts more supply-side participants and investors, which drives network growth and adoption.
What is the future of DePIN?
Given that there are already over 40 billion smart devices and machines and billions of sensors deployed worldwide, the future of DePIN is bright. And as the demand for decentralized infrastructure continues to grow, more individuals and businesses will turn to DePIN to build their networks.
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With the ability to leverage blockchain technology and token incentives, DePIN offers a more efficient, cost-effective, and collective ownership approach to reimagining the way we build the physical infrastructure networks of tomorrow.
DePINs represent an exciting new frontier in the world of blockchain technology. They offer a new way to build and operate real-world infrastructure that is more equitable, efficient, and aligned with the interests of network participants. As technology evolves and new use cases emerge, we can expect DePINs to play an increasingly important role in the development of our physical world.
A paradigm shift
DePIN represents a paradigm shift in the deployment and operation of physical infrastructure. It enables a more efficient, decentralized and equitable approach to infrastructure deployment.
With the ability to rapidly scale and disrupt traditional industries, DePIN has the potential to become a significant player in the infrastructure world. As more DePIN projects are developed and deployed, we expect significant disruption and innovation in the way we build and maintain physical infrastructure networks.
Raullen Chai is the co-founder and CEO of IoTeX. He previously worked for companies such as Google, Uber and Oracle. He holds a doctorate. from the University of Waterloo, where his research focused on the design and analysis of lightweight ciphers and IoT authentication protocols. At Google, he led many important security initiatives for its technical infrastructure, including SSL attack mitigation, privacy-preserving SSL offloading, and certificate transparency for all Google services. He was also the founding engineer of Google Cloud Load Balancer, which now serves thousands of cloud services, with over one million requests per second.
Andrew's Law is a researcher at IoTeX, where he conducts extensive scientific research on the Internet of Things (IoT), blockchain, and Web3 applications. He previously worked as an Application Engineer for EvapTech in Malaysia and holds a Ph.D. in Industrial and Systems Engineering from Virginia Tech.
W3bstream is IoTeX's decentralized middleware infrastructure for connecting smart devices to smart contracts. Healthblocks and DIMO are IoTeX's DePIN ecosystem partners. This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.