Will 2024 be DePIN year?

Introduction

If you ask what the biggest surprise in the crypto world in 2023 is, the answer must be ETFs, runes, and DePINs. Among them, DePINs belong to the old tree sprouting new shoots, and Helium, founded in 2021, has created the biggest surprise so far.

1. The DePIN track is spreading hot

DePIN covers a wide range of fields, including server networks, wireless networks, sensing networks, and energy networks. According to encryption research firm Messari, the overall industry size of DePIN is currently about $2.20 trillion and is expected to grow to $3.50 trillion by 2028.

With the topics of Mobile and Honey sweeping the entire network, the old projects of Fil and Storj have also returned to the field of vision. The popularity of the DePIN track has a trend of widespread spread. In the DePIN growth rankings, MOBILE, IOT, and HNT have always performed well, and Streamer Network’s DATA token has also performed outstandingly, with a maximum increase of more than 215% in 7 days. This seems to tell us that DePIN has become a hot trend in the current track and will occupy an extremely important position in the new cycle.

2, Solana and DePIN two-way running

The market value of DePIN ecosystem on Solana is second only to Ethereum, reaching $2.70 billion, just one step away from Ethereum’s $3 billion. In the past year, both Solana and DePIN have shown significant growth, taking us to witness the synergistic power generated by the combination of Solana blockchain and DePIN protocol.

Helium Bundled Solana Narrative

In September 2022, Helium developer Nova Labs announced that it had signed a Mobile Virtual Network Operator (MVNO) agreement with telecommunications giant T-Mobile to launch commercial mobile smartphone services under the Helium Mobile brand in Quarter 1 of 2023.

In November 2022, Nova Labs announced that it will provide SIM cards and free trials to users of Solana Labs’ new Saga phone (Saga phone is Solana’s flagship Android device, tightly integrated with the Solana blockchain).

In early 2023, Helium successfully completed its migration to Solana , proving the feasibility of building a DePIN business on Solana and triggering growth in the entire DePIN sector.

Under the dual superposition of Solana empower and DePIN narrative, the price of $MOBILE has been rising all the way, and in December, it achieved an intraday increase of 110%, leading the related generation of the DePIN track in a single day, comprehensively driving and assisting the growth of the popularity of the DePIN track.

Solana ecosystem promotes DePIN

The focus of the Solana ecosystem is mainly on DeFi, Memecoin, and DePIN. Kuleen Nimkar, the head of DePIN at the Solana Foundation, pointed out in an interview with The Block that “DePIN projects on Solana (including Helium, Render, Hivemapper, etc.) demonstrate the potential of decentralized physical infrastructure networks to elevate the Gig Economy to a new level. At the same time, Helium, as the top DePIN project in the Solana ecosystem, is also one of the core strategic focuses of Solana in 2024.”

Kuleen believes that contributors to the DePIN network can earn considerable income by supporting the network early on, and the earned tokens will be appreciated as the network develops: “This has never happened in the web2 Gig Economy. Early Uber drivers did not see the huge benefits of supporting it before Uber became a giant.”

It can be seen that Solana also hopes to cooperate more with DePIN, form a strong binding relationship similar to DeFi and Ethereum, inscriptions and Bitcoin, and build its own unique ecosystem. With the general rise of Solana’s DePIN token, it just helps us prove Solana’s emphasis on DePIN and the positive market effect it brings.

3. Long-term coexistence of advantages and obstacles

Resource sharing and efficient use

The most essential core of DePIN is resource integration, which incentivizes users to share resources through tokens, enabling resources to efficiently flow into the hands of demanders. Therefore, the characteristics of DePIN are also clear at a glance.

• Crowdsourced hardware is more cost effective
• Collective ownership — aligning with user interests and rewarding users
• Democratized access — an open and unrestricted network environment
• Decentralization — No need for permission and censorship resistance

DePIN and traditional infrastructure, just like DeFi and CeFi, reduce the role of intermediaries to some extent, making resources more unobstructed between the supply and demand sides.

DePIN mode flywheel effect

Due to the use of tokens, the DePIN project can benefit from a positive flywheel effect, even if the usage increases (demand) by burning or repurchasing the token price, and then providing additional incentives for contributors to continue building the network as the dollar value of the tokens they receive increases.

With the development of the internet, investors are becoming increasingly interested and starting to support the project with funds. If a project is open source or provides contributor/user data to the public, developers can build dapps on top of the data to create additional value in the ecosystem, thereby attracting more users and contributors. The following figure shows an example of how this flywheel works in today’s market.

Technology and models are not mature enough

DePIN aims to democratize infrastructure. By allowing individuals and small businesses to participate in the deployment and operation of infrastructure networks, DePIN can obtain basic services and resources more fairly. Therefore, DePIN is an imaginative track that can both “put old wine in a new bottle” and completely break through industrial boundaries.

The core of DePIN is the complete infrastructure system constructed by the token incentive system, but currently it is more like the miner model of Filecoin, which has the problem of excessive initial rewards and inability to maintain the scale effect in the later stage. There is no token economy model that can support the growth and maturity of the DePIN ecosystem. Moreover, most DePIN projects focus on how to motivate participants to purchase hardware, and only a few projects attempt to solve the financial model that drives demand.

Whether it is from the technical level, or from the cost aspect, or the optimization of the financial model, DePIN still has a long way to go. The author believes that the maturity of the DePIN track still needs at least 10 times the growth space to get rid of the short-term heat and enter the long-term development road.

4. Summary

The number of DePIN track projects is increasing, especially the recent hot market trend, which indicates the market’s recognition of this track. However, the DePIN track is relatively new and the absolute growth value is not very high, resulting in a relatively niche market in the entire web3 market, requiring more attention and preferential treatment, including more investors starting to pay attention to this direction, so that more community developers are willing to join this track and develop and deepen applications together.

In 2024, with the rotation of a new market cycle, DePIN will inevitably participate, but whether it will become a big year for DePIN remains unknown. Once an excellent or even revolutionary financial model appears in the field of DePIN, all of this will no longer be a problem. The DePIN flywheel will spontaneously drive to solve all technical and cost issues.

However, in the long run, the increasing maturity of DePIN will inevitably require long-term investment and operational development from the market, institutions, and developers in order to gradually penetrate into people’s lives and applications, from complementarity to parallelism with existing infrastructure, and then to replacement.

About Depin

1. What is DePIN?

DePIN (Decentralized Physical Infrastructure), proposed by Messari in December 2022, is an incentive for individuals and businesses around the world to build any infrastructure (WiFi, hard disk storage, batteries, etc.) in a decentralized way through blockchain technology and token rewards, providing services to anyone. DePIN is the next stage in the development of encrypted networks, dedicated to deploying physical infrastructure and hardware in the real world.

2. DePIN network composition

Physical Resource Network (PRN): incentivizes participants to use location-based hardware to provide unique goods and services in the real world, such as WIFI, 5G, VPN, energy information sharing, and geospatial data.

Digital Resource Network (DRN): A real-world physical infrastructure network that incentivizes participants to use hardware to provide digital resources, such as broadband networks, storage networks, and computing networks.

3. DePIN core logic

DePIN encourages users to share network resources, including GPU computing power, hotspots, storage space, etc., through token incentives. The purpose is to achieve efficient use of resources and demand matching while individual resource providers can obtain actual incentives.

Note: All of the above opinions are not investment advice. If there are any inappropriate points, please feel free to leave a message to supplement or correct them.

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