DePIN - Building a Decentralized Value Network

Introduction

DePIN is realizing large-scale interaction between the physical world and Web3, gradually overturning the operational model of traditional infrastructure. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, it promotes crowdsourced development through cryptocurrency economic incentives. An important feature of DePIN's business model is that hardware revenue serves as the first growth curve, and on this basis, monetization of data services is layered to form the second growth curve. This is one of the key factors that enable DePIN to lead the growth of the current cycle, while also demonstrating how DePIN-like projects can create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything World

Decentralization physical infrastructure network ( DePIN ) refers to the deployment of physical infrastructure and hardware networks in the real world using cryptocurrency economic protocols. This indicates an application scenario full of imaginative possibilities: common infrastructures around us, including communication base stations, charging piles, photovoltaic panels, billboards, as well as data storage and computing devices behind the operation of the Internet, will no longer be controlled by centralized entities and institutions, but will be divided into equally sized units, held by individuals or miners. Physical infrastructures of the same type are highly standardized and scaled, forming a carpet-like coverage.

By means of decentralization, the layout and utilization of infrastructure can achieve greater efficiency and lower costs, while enhancing the overall system's security and resilience. From energy production to data processing, various facilities have the potential to transition to a decentralized model. The total market size of the related industries involved in DePIN currently exceeds $5 trillion. Therefore, the potential market size in the DePIN field is estimated to be around $2.2 trillion, and it is expected to reach $3.5 trillion by 2028.

1.1 DePIN Track Division

The DePIN track covers six subfields: computing, AI, wireless communication, sensors, energy, and services. From the supply chain perspective, DePIN can be broken down into:

• Upstream: hardware manufacturers and supply-side users acting as "miners".

• Midstream: A project platform that is responsible for data verification and token settlement blockchain, and a layer two protocol on-chain that serves DePIN; as well as modular service components ( for developing and managing the DePIN network such as platform interfaces, data analysis, and standardized services ), the SDK toolkit for DePIN development, API interfaces, etc.

• Downstream: Connecting the demand-side dApp applications and interfaces.

Apart from IoTeX and the former Helium, most DePIN projects rarely manage to cover every aspect of the DePIN business. They usually choose Solana or IoTeX as the settlement layer for their token economy. AI and cloud computing projects in the sub-field tend to focus more on on-chain settlement and the development and management of project platforms, while the underlying hardware devices schedule idle electronic devices, such as mobile phones or computers equipped with high-performance consumer-grade GPUs, through middleware.

1.2 Overview of DePIN Industry Development

According to data from DePIN Ninja, the number of DePIN projects that have gone live has reached 1,215, with a total market capitalization of approximately 43 billion dollars. Among them, the projects that have issued tokens and are listed in the DePIN sub-section on Coingecko have a combined market capitalization of over 25 billion dollars.

In October of last year, this number was only 5 billion USD, and in less than a year it has increased fivefold, demonstrating the rapid growth of the DePIN industry. This indicates that the market's demand and recognition for decentralized physical infrastructure networks are continuously rising. With more projects launching and application scenarios expanding, the DePIN industry is expected to become an important area for the integration of blockchain technology and real-world applications.

2. Insights from the DePIN Business Logic

The prototype of DePIN can be traced back to the previous cycle's IoT + Blockchain ( concept. Projects like Filecoin and Storj transform centralized storage into a decentralized operating model through cryptoeconomic mechanisms, and have found practical applications in the Web3 ecosystem, such as on-chain NFT storage and the front-end and back-end resource storage of DApps.

The Internet of Things + Blockchain only reflects the characteristics of Decentralization ) "De" (, while DePIN emphasizes the construction of physical infrastructure and the large-scale interconnected network. In DePIN, "PI" stands for Physical Infrastructure ), and "N" represents Network (, which is the value network formed after the DePIN hardware reaches a certain coverage scale.

The most typical example is Helium, which was established in 2013 and only confirmed the use of blockchain as an incentive for decentralized deployment of the Internet of Things in 2018. So far, Helium has almost met all the elements of DePIN: node economy, mining model, value network, crowdsourced incentives, and it is a leading project in the field of DeWi) decentralized wireless communication(; in addition, at the end of last year, Helium Mobile launched a $20 communication package service in cooperation with T-Mobile, aimed at traditional users. When users use the Helium network for data transmission, they can not only earn token rewards but also enjoy reliable communication services. At the same time, Helium has also helped T-Mobile solve the signal coverage problem in remote areas of the United States, creating a win-win situation for all three parties. The large number of traditional users it serves has a strong momentum to push DePIN beyond its current boundaries, and is expected to accelerate the mass adoption of blockchain technology and Web3 networks.

Helium and Filecoin both belong to the DePIN category, but the difference between the two is that Helium places more emphasis on hardware, allowing it to support the growth of data services on the second curve through hardware revenue, building an independent ecosystem, while also harvesting Alpha and Beta returns.

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3. The explosive growth of DePIN is based on the dual curve theory

The "Second Curve" is a concept in management and innovation theory, originally proposed by management scholar Charles Handy). It refers to the need to introduce new innovations or changes when an organization, product, or business reaches the peak of its traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the previous successful DePIN project experience, it is already evident that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with the monetization of the data value network layered on top of the first curve, serving as the guiding principle for the second curve of development.

Product R&D and operational capability are key to ensuring the growth of the first curve; to initiate the growth of the second curve, two capabilities are required: first, the organizational capability of a decentralized system, and second, the service capability for the demand side.

In the context of the DePIN ecosystem, it is necessary for the project team to first ensure the smooth operation of the data value network under the premise of having the capability to organize and undertake large-scale data transmission hardware networks. Only then can the demand side smoothly connect and ultimately provide high-quality, standardized data services. This will ultimately achieve a hyperbolic business double growth, forming a positive cycle within the project ecosystem.

( 3.1 The value of hardware is the first curve of value creation.

In the first growth curve, the business will experience rapid growth in the early stages, then gradually reach its peak. The growth momentum of the DePIN project's first curve comes from the revenue and profit generated by hardware sales.

Traditional infrastructure, especially in areas such as data storage and communication services, has a linear business logic for centralized service providers or entities: in the early stages of the business, investment is needed to build infrastructure, and after the facilities are completed, services are provided to end users )C-end (. Therefore, developing such businesses often requires the participation of major enterprises to bear the high costs in the early stages of business operations, including hardware purchases, land leasing, deployment, and hiring maintenance personnel at various stages.

The DePIN project splits the centralized supply side and adopts a crowdsourcing model to establish a hardware network.

Therefore, the first step in dismantling centralized infrastructure is the key to achieving the first curve of growth for the DePIN project.

The DePIN project team must first work hard to promote itself, spread its narrative, and attract participation from supply-side users through a series of operational methods, including pre-selling "mining machines," offering airdrops for purchases, and more; shifting the enormous infrastructure costs to be borne by supply-side users to achieve a low-cost, lightweight launch. At the same time, supply-side users become "shareholders" of the project by holding hardware, while helping the project team deploy the hardware network with the expectation of earning money from mining in the future.

Not only that, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are jointly completed by the project party and miners, meaning that the device provider is only responsible for the research and development and sale of the devices, while the updates and maintenance are carried out by the supply-side users. In the process of collaboratively maintaining and building the hardware network, the interaction with the project party and middleware strengthens the community identity of miners ) and supply-side users ###, as well as their recognition of the DePIN project.

If a DePIN project can smoothly run through narrative marketing, mining machine sales, and community operations; then, the core elements of the project's own first growth curve have been gathered, ultimately forming the first curve of increasing network coverage scale - increasing token incentives - attracting more miners to join.

The following is the current data on the number of active nodes. Hivemapper, Helium, and Natix rank in the top three, with more than 100,000 nodes deployed worldwide.

Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have all exceeded 100,000, with Helium and Hivemapper showing very impressive business performance:

Helium

• Helium is a decentralized wireless network, its main services include Helium Hotspot, providing low-power wide-area network (LoRaWAN) coverage; Helium Mobile, a mobile communication service launched in collaboration with T-Mobile and TEF.

• The $20 communication package service launched in collaboration with T-Mobile on January 25 has increased from 0 to 93,000 subscribers in 5 months.

• Cooperation with one of Mexico's telecommunications giants, Telefónica (TEF), to enter the Mexican market with a population of 126.7 million has further enhanced Helium's revenue sources and market influence.

Hivemapper

• Hivemapper is a decentralized mapping platform aimed at creating a global, real-time updated map ecosystem through blockchain technology and cryptocurrency incentives. Hivemapper's main business includes HiveMapper Dashcam - a dashcam that allows users to collect geographic data while driving by installing this device.

• This device is priced at 549 USD. A rough estimate based on the current number of node deployments indicates that Hivemapper has already achieved over 60 million USD in revenue solely from hardware sales.

• As of now, the mapping data collection network established by Hivemapper has covered most regions in Europe and America. Hivemapper's data service revenue has also seen significant growth.

• In terms of hardware revenue, there are also other projects that have taken different approaches to achieve good growth. For example, Jambo has focused on mobile phones and achieved outstanding sales performance in the African market. OORT has technological barriers in cloud computing and edge computing, realizing significant hardware sales revenue through its innovative model. Ordz Game, as GameFi