CGV Research | When Cryptocurrency Technology Meets the Physical World: Seizing New Opportunities in the Ten-billion DePIN Market
Produced by: CGV Research
Author: Cynic & Shigeru
TL;DR
— — The concept of DePIN ：Exploring the concept of Decentralized Physical Infrastructure Network (DePIN), emphasizing the intersection of digitization and decentralization. DePIN combines physical hardware and blockchain technology, representing a new era of fusion between digital technology and the physical world. The article underscores the importance of DePIN in terms of data, power, and control redistribution, envisioning a more democratic, fair, and transparent future.
— — DePIN’s “chicken and egg” problem：Discussing one of the main challenges DePIN faces in its development, the “chicken and egg” problem. This problem describes a dilemma: to establish a robust decentralized network, a significant amount of hardware devices is needed to participate. However, to attract these devices, there must already be an established and well-functioning network. The article highlights the need to provide some form of incentive to attract early participants to the network.
— — How DePIN works ：Introducing the working principles of DePIN, including its decentralized nature relying on individual hardware devices and the use of blockchain technology to manage and secure the network. Blockchain, as a public, transparent, and tamper-proof digital ledger, records all transactions and interactions on the network, ensuring all nodes adhere to the network’s rules. Additionally, DePIN employs an incentive mechanism, typically based on cryptocurrency, to encourage nodes to participate and contribute their resources.
— — Applicable industry of DePIN：Exploring the potential applications of DePIN in industries such as telecommunications, energy, data storage, the Internet of Things, and supply chain. For example, in the telecommunications industry, DePIN offers a decentralized solution, allowing devices to communicate directly without intermediaries. In the energy sector, DePIN provides a decentralized energy grid solution, enabling direct power exchange between nodes.
— — Market explosion singularity of DePIN：Discussing the impact of increased technological maturity on the DePIN market, primarily due to advancements in blockchain and IoT technologies. High-throughput blockchain solutions, enhanced security and privacy protection, the development of cross-chain technologies, and the growth and maturation of IoT devices all provide DePIN with more nodes and data, strengthening its network effects.
1.The connotation of DePIN
As technology advances, we are at a crossroads of digitization and decentralization. Decentralization is not just a technological trend; it represents a redistribution of power, control, and data ownership.
In this context, the Decentralized Physical Infrastructure Network (DePIN) has emerged, offering us a fresh perspective on the interaction between the physical and digital worlds. This interaction goes beyond data and is primarily about power and control.
Through DePIN, we can envision a more democratic, fair, and transparent future where everyone can participate and benefit.
DePIN, also known as a Decentralized Physical Infrastructure Network, is an emerging technological concept that combines physical hardware and blockchain technology. These networks, also referred to as Proof of Physical Work (PoPW), Token Incentivized Physical Infrastructure Networks (TIPIN), and Edgefi Networks, represent a new era of fusion between digital technology and the physical world.
In this era, data is no longer passive digits; it’s closely intertwined with the physical world. Through DePIN, we can see a decentralized future where data, power, and control are all redistributed, and everyone can participate and benefit.
For example, in wireless networks, there are WiFi hotspots, or in energy networks, there are solar-powered home batteries. These networks are built in a decentralized manner by contributors from around the world. In return, these individuals and entities receive financial compensation and network ownership through token incentives.
2. Analyzing the Inherent Value of DePIN from the “Chicken and Egg” Problem
In the course of technological evolution, we often encounter a series of challenges, with the “chicken and egg” problem being one of the most classic. This problem describes a dilemma: to achieve a certain goal, you need to have A first, but to have A, you also need to achieve that goal first. In the context of DePIN, this problem becomes particularly prominent.
To establish a strong decentralized network, we need a substantial number of hardware devices to participate. However, to attract these devices, we need an already established and well-functioning network.
2.1 Why is the “Chicken and Egg” Problem Crucial in DePIN?
The value of a decentralized network lies in its participants. The strength and stability of a decentralized network are directly related to the number and quality of its nodes. More nodes mean higher redundancy, better data distribution, and greater system resilience.
However, for most hardware device owners, joining a new, unproven network carries risks. They may need to invest time and resources without a clear guarantee of returns. Therefore, to attract these early participants, the network needs to provide some form of incentive.
2.2 How Does DePIN Address This Challenge?
DePIN’s solution is to provide incentives to early participants. These incentives can take various forms, from cryptocurrency rewards to special privileges within the network.
For example, a DePIN might offer additional cryptocurrency rewards to its early nodes or grant them greater influence in network decision-making. This incentive system encourages more hardware devices to join the network, accelerating its growth and stability.
In DePIN, incentives are not only about solving the “chicken and egg” problem; they are also essential for ensuring the health and stability of the network. A healthy DePIN requires its participants to continuously provide and maintain their resources. To ensure this, the network needs to offer sufficient incentives to encourage such behavior. This may include providing cryptocurrency rewards, granting special privileges within the network, or other forms of rewards.
2.3 Design Challenges and Opportunities
Although DePIN provides a solution to the “chicken and egg” problem, it doesn’t mean it lacks other challenges. For instance, how to ensure the fairness of the incentive system? How to prevent malicious participants from exploiting the incentive system? How to ensure the long-term stability and health of the network?
These questions require deep consideration and solutions from DePIN’s designers and operators. However, at the same time, DePIN offers us a unique opportunity to rethink how to build and operate networks. Through innovative incentive systems and decentralized design principles, DePIN presents a more equitable, transparent, and democratic future.
3. How DePIN works
DePIN’s Operating Principles
DePIN’s operation is based on decentralization and blockchain technology. Firstly, DePIN relies on individual hardware devices, which are also referred to as nodes. These nodes can be personal computers, dedicated servers, or IoT devices. Together, these devices form a decentralized network without any central nodes or authoritative entities. This decentralized characteristic makes DePIN more secure and transparent.
Secondly, DePIN utilizes blockchain technology to manage and protect the network. Blockchain is a public, transparent, and tamper-proof digital ledger that records all transactions and interactions on the network, ensuring that all nodes adhere to the network’s rules.
Furthermore, to encourage node participation and resource contribution, DePIN employs an incentive mechanism. This mechanism is typically based on cryptocurrency, allowing nodes to earn rewards by participating in the network and contributing their resources.
Advantages of DePIN Compared to Traditional Physical Infrastructure Networks
Shared Ownership: DePIN encourages participants to collectively invest in the deployment and maintenance of infrastructure through a token reward mechanism. This bottom-up approach results in network ownership being shared among all participants rather than controlled by a few shareholders.
Cost Distribution: Decentralized physical infrastructure networks effectively reduce operational costs and expenses by mobilizing the shared resources of network participants.
Decentralized Features: Compared to traditional centralized infrastructure networks, decentralized networks offer higher security and resilience. The decentralized construction makes the network less susceptible to the negative impacts of corruption, tampering, hacking, and other potential issues associated with centralized control.
Open Competition and Innovation: DePIN brings opportunities for innovation to various industries. By eliminating the entry barriers set by traditional infrastructure networks, it incentivizes new participants to compete in markets traditionally dominated by a few large enterprises.
4. Which industries is DePIN best suited for?
With the rapid advancement of technology, the concept of Decentralized Physical Infrastructure Network (DePIN) is gradually becoming a reality. This network model, combining physical hardware and blockchain technology, offers countless opportunities across various industries.
4.1 Telecommunications Industry
The telecommunications industry is a prime area for DePIN. Traditional telecom networks rely on centralized base stations and switches for data transmission. However, with the increasing number of IoT devices and the widespread adoption of 5G technology, this centralized model becomes increasingly inadequate. DePIN provides a decentralized solution that allows devices to communicate directly without the need for central nodes. This not only improves network efficiency and resilience but also reduces maintenance and upgrade costs.
4.2 Energy Industry
The energy industry is also an ideal field for DePIN. With the development of renewable energy technologies, more households and businesses are generating their own power. However, traditional electrical grids are centralized and not suitable for this decentralized energy production model. DePIN offers a decentralized energy grid solution that allows various nodes (such as households, businesses, or small power plants) to directly exchange power. This not only enhances the efficiency of the grid but also provides new economic opportunities for participants.
4.3 Data Storage Industry
With the explosive growth of data, data storage has become a significant challenge. Traditional cloud storage solutions rely on centralized data centers, which not only increase costs but also pose security risks. DePIN provides a decentralized storage solution that allows various nodes to offer storage space and receive corresponding rewards. This model not only reduces storage costs but also enhances data security and reliability.
4.4 Internet of Things (IoT) Industry
IoT is another ideal field for DePIN. With the increasing number of devices, traditional centralized networks are becoming increasingly unstable and unreliable. DePIN offers a decentralized network solution that allows devices to communicate directly without the need for central nodes. This not only improves network efficiency and resilience but also provides devices with new functionalities and services.
4.5 Supply Chain Industry
Supply chain management is a complex process involving multiple participants and extensive data exchange. Traditional supply chain solutions rely on centralized databases and applications, which increase costs and complexity. DePIN provides a decentralized supply chain solution that allows various participants to exchange data directly without the need for central nodes. This not only improves supply chain efficiency and transparency but also provides new economic opportunities for participants.
4.6 Transportation Industry
With the development of autonomous driving technology, the transportation industry is undergoing significant changes. Traditional traffic management systems rely on centralized control centers and sensor networks. However, this model may no longer be suitable in the future of autonomous driving. DePIN offers a decentralized traffic management solution that allows vehicles to communicate directly without the need for central nodes. This not only improves traffic efficiency and safety but also provides vehicles with new services and functionalities.
DePIN provides countless opportunities across various industries. Through decentralized means, DePIN not only enhances efficiency and resilience but also offers new economic opportunities for participants. With technological advancement and market development, we can anticipate that DePIN will play an increasingly important role in the future.
5. Market explosion singularity of DePIN：
In the ever-evolving landscape of technology, innovation stands as the pivotal force propelling progress. Particularly in the domain of DePIN, the advancement of technological maturity is not only a milestone but also a turning point. It signifies the transition of DePIN from theory to practice, from concept to reality. The critical technological advancements behind this turning point will collectively shape the future of DePIN and pave the way for its market explosion.
5.1 The Advancement of Technological Maturity
5.1.1 Progress from Blockchain Technology
High-Throughput Blockchain Solutions: With the emergence of next-generation blockchain protocols, such as sharding technology and sidechains, blockchain networks have significantly increased their processing speed and throughput. This enables DePIN to handle more transactions and data, enhancing its practicality and efficiency.
Enhanced Security and Privacy Protection: By introducing advanced technologies like zero-knowledge proofs and homomorphic encryption, blockchain networks have bolstered their security and privacy protection capabilities. This provides DePIN with a more secure and reliable environment for data exchange and storage.
Development of Cross-Chain Technology: The development of cross-chain technology allows different blockchain networks to communicate and exchange data with each other. This provides DePIN with broader interoperability, allowing it to integrate more resources and services.
5.1.2 Progress from IoT Technology
IoT Technology: The growth and maturation of IoT devices will provide DePIN with more nodes and data, enhancing its network effects. According to Gartner’s predictions, the global number of IoT devices is expected to reach 25 billion by 2025. This growth will offer DePIN more nodes and data, further strengthening its network effects.
Proliferation of Smart Sensors and Devices: As the cost of IoT sensors and devices decreases, their applications in various fields become increasingly common. This provides DePIN with a wealth of data sources and nodes, enhancing its network effects.
Development of Edge Computing: The development of edge computing technology allows data processing to occur near IoT devices, reducing data transfer latency and costs. This enables DePIN to more efficiently handle and analyze data from IoT devices.
Enhanced IoT Security: With advancements in IoT security technology, such as stronger encryption methods and security protocols, the security of IoT devices and networks has improved. This provides DePIN with a more secure infrastructure and data source.
5.2 Support from Policies and Regulations
If governments and regulatory bodies can create favorable policies and regulations that encourage the development of DePIN, it will create conducive conditions for its widespread application, including but not limited to:
Innovative Tax Incentive Policies: Governments can implement tax incentives for DePIN projects. For example, they can offer tax reductions or tax credits to businesses and individuals deploying eco-friendly technologies or renewable energy facilities within the DePIN network.
Streamlined Permit and Approval Processes: Governments can simplify the permit and approval processes for DePIN projects, particularly for those involving cross-border or multiple administrative regions. This will reduce barriers to project initiation and operation, accelerating innovation.
Establishment of DePIN Innovation Funds: Governments can establish dedicated funds to support research and innovation projects related to DePIN. These funds can be used to finance startups, research institutions, or public-private collaboration projects.
5.3 Support from Enterprises and Industries
If major companies and industry leaders can support and adopt DePIN, it will provide significant momentum.
Strategic Investments by Industry Giants: Imagine if tech giants like Google and Amazon started investing in DePIN projects or established partnerships with DePIN startups. Such actions would not only provide financial support to DePIN but also enhance its visibility and reputation within the industry.
Supply Chain Integration: Large manufacturing and retail companies can improve efficiency and transparency by integrating DePIN technology into their supply chain management. For example, using DePIN-based solutions to track the entire process from production to delivery.
Energy Management Innovation: Energy giants can optimize energy distribution and trading by adopting DePIN technology. For example, establishing a decentralized energy trading platform that allows users to directly trade renewable energy.
5.4 Expansion of Technological Collaboration and Partnerships
Collaboration and integration with other technologies and platforms, such as 5G and edge computing, will provide more possibilities for DePIN applications. For example:
Integration of 5G with DePIN: Combining the high-speed and low-latency features of 5G networks, DePIN can achieve faster data transmission and real-time communication. For example, establishing an intelligent traffic system based on DePIN that utilizes 5G networks for instant communication and data sharing between vehicles, enhancing road safety and traffic efficiency.
Combining Edge Computing with DePIN: By integrating edge computing technology into DePIN, data processing can occur where it’s generated, reducing reliance on centralized data centers. This is especially useful for applications that require rapid response, such as security monitoring and emergency response systems in smart cities.
Collaboration of IoT Devices with DePIN: IoT devices can serve as nodes within the DePIN network, collecting and transmitting data. By combining IoT with DePIN, more secure and efficient data management can be achieved. For example, in agriculture, data collected by IoT devices can be analyzed through DePIN to optimize crop planting and resource allocation.
Fusion of AI with DePIN: Combining AI technology with DePIN can enable more intelligent data analysis and decision support. For example, in healthcare, patient data collected through DePIN can be deeply analyzed with AI to provide personalized treatment plans.
5.5 Strengthening Globalization and Cross-Border Cooperation
The concept and application of DePIN are not limited by geographical boundaries. A global perspective and cross-border cooperation will bring more significant markets and opportunities. For example:
Global Disaster Response Network: Imagine a global DePIN system for disaster response. In the event of earthquakes, floods, or other natural disasters, this decentralized network can rapidly mobilize global resources, including drones, sensors, and communication devices, to provide real-time data and support for rescue operations.
International Clean Energy Grid: DePIN can be used to build a cross-border clean energy sharing network. For example, utilizing solar energy from the Sahara Desert and wind energy from Northern Europe, decentralized energy grids can distribute energy worldwide, optimizing energy usage and reducing waste.
Global Healthcare Monitoring System: Deploying a DePIN-based healthcare monitoring system on a global scale can track the spread of infectious diseases, monitor public health conditions in real-time, and share critical medical data worldwide, effectively addressing global health crises.
In conclusion, the market explosion of DePIN requires various factors to work together. Technology, policies, economics, communities, and markets will all play crucial roles in this process.
6. Some representative projects of DePIN
As the DePIN concept gained popularity, many projects began to explore this area. Here are some examples of projects that have successfully applied the DePIN concept and how they are leveraging this new technology to innovate and deliver value.
6.1 Helium
Helium is a decentralized wireless network designed to provide Internet connectivity for low-power devices. Helium’s network is made up of hotspots deployed by individuals and enterprises. These hotspots not only provide wireless coverage, but also validate other hotspots in the network. In this way, Helium creates a decentralized, self-validating network. Participants can earn Helium tokens as a reward by deploying hotspots and verifying network activity.
6.2 HiveMapper
HiveMapper is a decentralized mapping network that uses video data to create 3D maps. HiveMapper allows anyone to upload video data and use that data to create and update 3D maps. In this way, HiveMapper has created a decentralized, community-driven mapping platform. Participants can be rewarded by providing video data.
6.3 Render
Render is a decentralized cloud computing platform designed for 3D rendering, machine learning, and other computationally intensive tasks. Render allows users to provide unused GPU power as part of a network. These GPU resources are pooled to support tasks that require a lot of computing power. Participants can earn Render tokens as a reward by providing GPU resources.
6.4 Filecoin
Filecoin is a decentralized storage network designed to provide users with secure and reliable data storage services. Filecoin allows anyone to provide unused storage space as part of a network. These storage resources are pooled together to provide services to users who need storage space. Participants can earn Filecoin tokens as a reward by providing storage space.
These projects are successful applications of the DePIN concept. Not only do they demonstrate the potential of decentralized technologies, they also provide new economic opportunities for participants. As technology advances and the market evolves, we can expect more DePIN projects to emerge in the future, providing us with even more innovation and value.
Conclusion
As we delved deeper into DePIN, we realized that this was not only a technological breakthrough, but also a challenge to existing social and economic structures. DePIN presents a vision of the future based on decentralized power, data transparency, and broad participation. In this scenario, each participant has the opportunity to have an impact on the development of the network, and this decentralized nature not only drives technological innovation, but also promotes social equity and justice.
DePIN therefore marks not only a major advance in the field of technology, but also a shift in the way human society is governed. It represents the evolution from centralized control to decentralized governance, from closed systems to open networks.
Driven by DePIN, we can expect a future of a more connected, intelligent and human digital world.
About Cryptogram Venture (CGV): Cryptogram Venture (CGV) is a compliant and qualified research and investment institution in the crypto industry, headquartered in Japan. With a business focus on “research-driven investment,” they have participated in early-stage investments in multiple well-known projects. CGV plays an important role in projects regulated by the Japanese government, such as the JPYW stablecoin, and collaborates with numerous funds including Huobi Venture, Rocktree Capital, Cryptomeria Capital, and others.
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