New Infrastructure Wave: Analyzing Opportunities and Challenges in the DePIN Track

DePIN stands for Decentralized Physical Infrastructure Network, which builds infrastructure networks by incentivizing users to share personal resources through tokens, including areas such as storage space, communication bandwidth, cloud computing, and energy. It crowdsources infrastructure that was originally provided by centralized companies and distributes it to global users.

The market value of the DePIN field has reached $5.2 billion, surpassing the oracle field, and is showing a continuous upward trend. Whether it is the early Arweave and Filecoin, the Helium from the last bull market, or the recently popular Render Network, they all belong to this field.

The recent reasons for DePIN gaining attention again are mainly three:

1. The infrastructure has become more完善 than a few years ago, paving the way and empowering the DePIN track;

2. At the end of 2022, Messari first proposed the concept of DePIN, believing it to be "one of the most important areas for crypto investment in the next decade," injecting enthusiasm into the track with new definitions and expectations;

3. The narrative of Web3 is shifting from social and gaming to the DePIN track that is closely connected with users.

This article will deeply analyze DePIN from five perspectives: demand background, token economic model, industry status, representative projects, advantage analysis, and limitations and challenges.

Why is DePIN needed?

Current Status of the Traditional ICT Industry

Traditional ICT infrastructure mainly includes: hardware, software, cloud computing and data storage, communication technology.

Currently, six out of the top ten companies by market value in the world belong to the ICT industry, occupying half of the market. In 2022, the global ICT market size reached 439 billion USD, with data centers and software showing a growth trend in recent years.

The dilemmas of the traditional ICT industry

1. The high entry barriers in the industry restrict sufficient competition, leading to pricing being monopolized by giants.

Taking cloud computing and data storage as examples, high costs lead to participation only by giant enterprises, resulting in a highly concentrated market share. This causes pricing to be monopolized, and high costs are ultimately passed on to consumers.

In 2022, the total expenditure on cloud services by enterprises and individuals reached $490 billion, and it is expected to exceed $720 billion by 2024. 31% of large enterprises have annual cloud service expenditures exceeding $12 million, while 54% of small and medium-sized enterprises exceed $1.2 million. 60% of enterprises indicate that cloud costs are higher than expected.

2. Low utilization rate of centralized infrastructure resources.

According to the Flexera report, an average of 32% of companies' cloud budgets are wasted, meaning one-third of cloud resources are idle. This misallocation of resources stems from factors such as overestimating demand and a lack of understanding of costs.

In the face of high prices and resource waste, the DePIN track offers solutions. Decentralized storage is several times cheaper than centralized options; some projects use tiered pricing to efficiently match supply and demand.

The Token Economic Model of DePIN

The core logic of DePIN is to incentivize users to provide resources through tokens, including GPU computing power, hotspot deployment, storage space, etc., to contribute to the network.

In the early stages, tokens usually have no real value, and users participate like venture capitalists. Suppliers who are optimistic about the project invest resources to become "risk miners," profiting from the increase in the number of tokens and appreciation in price.

This incentive method creates a flywheel effect; when development is positive, it results in a positive cycle, while the opposite can easily lead to a withdrawal cycle.

1. Token attracts suppliers to participate: A good token economic model attracts early participants to provide resources and rewards them with tokens.

2. Attract developers and consumers: As resources increase, developers join to build products, attracting consumers with low prices.

3. Create positive feedback: An increase in demand leads to more income for suppliers, creating positive feedback and attracting more participants.

Under this loop, the supplier receives more token rewards, the demander enjoys cheaper services, the value of the project tokens aligns with the growth of participants, attracting more speculators and forming value capture.

Current Situation of the DePIN Industry

Early DePIN projects mainly focus on storage and communication technologies, such as Helium(2013), Storj(2014), Sia(2015), etc.

With the development of the Internet, Internet of Things, and AI, the requirements for infrastructure and innovation have increased. Currently, DePIN projects are mainly focused on computing, storage, communication technologies, and data collection and sharing.

The top 10 projects by market capitalization mostly belong to the Storage and Computing fields, with excellent projects like Helium and Theta also in the telecommunications field.

Representative Projects in the DePIN Industry

Filecoin & Arweave - Decentralized Storage Track

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. Currently, the storage space has reached 24EiB. Built on the IPFS protocol, it supports smart contracts. It uses a Proof of Storage consensus mechanism.

Collaborate with many well-known blockchain projects and enterprises, such as NFT.Storage, the Shoah Foundation, and the Internet Archive. OpenSea uses Filecoin to store NFT metadata.

Arweave is a permanent storage network that permanently saves data once uploaded. It incentivizes users to provide storage space through a "Proof of Access" mechanism.

There are significant differences between the two in terms of storage methods, economic models, and consensus mechanisms, each having its own advantages.

Decentralized storage has a clear price advantage compared to centralized storage. For the same storage of 1TB for one month, the average price of decentralized storage is less than half that of Google Drive and one-tenth that of Amazon S3.

In addition to price advantages, decentralized storage offers higher security, data distributed storage reduces the risk of single points of failure, and provides greater resistance to censorship. Users retain absolute ownership and control over their data.

On the downside, decentralized storage faces technical challenges such as storage retrieval efficiency and node reliability. Availability and performance may be affected by network participants, leading to fluctuations.

Helium - Decentralized Wireless Network

Helium was established in 2013 and is a pioneer in the DePIN track. It incentivizes users to purchase network equipment through tokens to form a network and achieve network supply. It has significant advantages in the Internet of Things (IoT) field, with the number of hotspots exceeding 900,000 last August, and 600,000 monthly active IoT hotspots, which is 20 times that of the traditional IoT network The Things Network.

Helium performs outstandingly in the IoT field, but has mediocre performance in the 5G field for the following reasons:

1. The IoT field adopts LoRaWAN technology, which is low power consumption, transmits over long distances, has good penetration, does not require specific authorization, and is suitable for large-scale IoT deployment.

2. The IoT network market has difficulty covering revenue due to its broad coverage but low data transmission volume, and no industry giants have emerged yet. Helium seizes the opportunity to solve the funding threshold issue through DePIN.

3. The 5G market faces a dual dilemma of compliance and market ceiling. The frequency allocation in the United States is strictly regulated, and Helium has chosen the CBRS GAA frequency band, which has a small coverage area and no obvious advantages. 5G is regulated by national policies, making it difficult to replicate the U.S. experience overseas.

4. The lack of transparency in collaborative devices affects the provider experience, leading to the phenomenon of second-hand devices being passed off as new.

On March 27 this year, Helium began migrating to Solana for reasons including:

1. The team focuses on network construction and hands over the maintenance of the underlying blockchain to a professional team.

2. The Solana ecosystem is rich, HNT is compatible with other innovative projects, increasing use cases.

3. The Solana state compression feature reduces NFT minting costs, facilitating the migration of Helium.

4. There is room for collaboration with projects like Solana Mobile Stack and the Saga phone.

In the long run, Helium's exploration in the IoT field has high value, and it has great potential in future areas such as smart agriculture and smart cities.

( Render Network - Decentralized Computing

Render Network is a decentralized GPU rendering platform. For large projects, the computational resources required for rendering are massive, often relying on centralized cloud service providers, which are expensive.

Render Network adopts a multi-layer pricing strategy to efficiently match GPU supply and demand:

• Tier1: The price is comparable to centralized platforms like AWS.
• Tier2: Provides 2-4 times the OctaneBench workload, with higher priority than Tier3.
• Tier3: Provides 8-16 times OctaneBench workload, lowest priority

In addition, Render Network emphasizes fully utilizing idle GPU resources to provide an efficient two-way market for global GPU computing supply and demand.

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( Theta Network - Decentralized Video Network

Theta Network adopts a blockchain-based optimized content delivery network to reduce the cost of video content transmission and improve distribution efficiency.

In traditional CDNs, viewers connect directly to POP servers. The Theta Network allows users to contribute bandwidth and computing power to become caching nodes, distributing videos closer to the viewer's location.

This enhances the viewer experience, provides token rewards for users supplying resources, and simultaneously reduces platform costs. With the increase in video content consumption, Theta Network is expected to be applied in more scenarios.

Other projects worth noting include:

• IoTex: Providing underlying infrastructure for IoT projects
• DePINscan: A data analysis platform for DEPIN developers
• Ketchup Republic: Create a web3-based platform for public reviews, directly giving merchant traffic fees to users.

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