Token Incentivized Physical Infrastructure Networks
Crypto’s Next Big Thing
With the advent of general purpose blockchains, notably Ethereum in 2014, a diversity of decentralized applications emerged from the primordial on-chain soup. While we experienced the rapid development of new sectors starting with DeFi summer in 2020, we haven’t seen a new sector contender since late 2021 push for DAO Tooling. Today I am going to talk about the emergence of what I believe will be a massive new sector of the burgeoning crypto economy, what we are calling Token Incentivized Physical Infrastructure Networks (TI-PIN) .
To date, entrepreneurs in the crypto industry have largely focused on building applications that have very little interaction with “The Real World’’ or “MeatSpace” as it is sometimes referred to. It’s hard to convince founders to design for meatspace when they’ve had WAY more financial success hawking digital land than tokenized apartment buildings.
That is probably one reason our industry has been catching so much heat from just about everyone not hanging out in a discord all day, instigator extraordinaire Zach Weinberg is not the only one asking “what’s the use case?”. That’s why it was no surprise to me and the rest of us at Lattice that when Crypto VCs & web3 evangelists started looking under couch cushions for a use case they turned to ones that interact directly with the real world. NotBoring’s Packy McCormick valiantly came to web3’s defense with his web3 Use Cases piece. In it you’ll notice that nearly all of Packy’s examples are interacting with the real world in some capacity, I’ve highlighted his examples for your reference; for the purposes of this piece we’ll be focused on the bottom right hand corner with Helium, DIMO, and the rest of the emerging TIPIN sector.
What is TIPIN?
There are alot of ways to describe this sector, some call it decentralized wireless (DeWi), Multicoin calls it Proof of Physical work, some just call it “Helium for X”. At Lattice we define the TIPIN sector as those projects leveraging token incentives for the development and deployment of Non-Fungible physical infrastructure that has existing real world demand.
Let’s break that down further…
Non-fungible physical infrastructure: The physical infrastructure is location dependent. For instance, the location of your Helium Hot Spot matters. Contrast that with a network like Filecoin, it too requires physical infrastructure in order to provide storage but the location of that infrastructure is largely interchangeable, it doesn’t matter if it is in Chattnooga or Changdu.
Existing Real World Demand: Networks tap into current real world demand. At first glance, Bitcoin & Ethereum would seem to fit pretty squarely into the TIPIN category, they both have famously used tokens to incentivize massive amounts of physical infrastructure. However BTC & ETH had to create demand almost entirely from scratch vs. developing physical infrastructure to capture existing real world demand.
Let’s take a closer look at some sector examples.
Helium is to TIPIN what Bitcoin is to cryptocurrencies. Launched in the depths of the 2019 bear market, Helium nodes or Hotspots provide miles of wireless network coverage for millions of devices around you using Helium LongFi. Participants earn HNT by mining and building coverage for The People’s Network using compatible Hotspots. By leveraging their native token HNT as an incentive, Helium has been able to bootstrap a decentralized wireless network of nearly 900K hotspots globally in the historically capital intensive sector of telecommunications. With Helium Improvement Proposal 51 (HIP51), the project intends to leverage their existing infrastructure and their passionate community to become a network of networks starting with the deployment of a 5G network on top of HIP53.
Lattice investment DIMO is building a user-owned mobility focused IoT platform that allows drivers to collect and share their vehicle data, and turning connected cars into web3 wallets. Drivers connect to the network via a DIMO approved hardware device or via smartphone. Once connected to the network and driving, drivers contribute data to the open ecosystem while earning DIMO tokens along with receiving additional vehicle diagnostics like battery life and trip reports. The DIMO network can be leveraged by 3rd party application developers (think decentralized car insurance) as well as consumers of data for other purposes (e.g. battery manufacturers). Before even launching a token, nearly 2,500 DIMO drivers have already logged more than 10,000,000 miles.
WeatherXM is a community powered weather network that rewards weather station owners and provides accurate weather services to enterprises. It may come as a surprise but global climate data is already a massive market that is currently operated by a combination of government and private sector providers with little transparency or standardization and with huge gaps in data and forecast availability. Similar to DIMO & Helium, WeatherXM requires network participants to deploy compatible hardware, weather stations in this case, and in exchange station operators (or weather data miners) are rewarded for sharing local weather data.Their reward mechanism uses a fair and transparent algorithm distributing rewards to the network contributors, based on the location and the quality of weather data their station produces. A transparent burn and mint equilibrium approach makes sure that future revenue from weather services is directed back to the community who created the data in the first place.
WeatherXM, similarly to DIMO, is building their web3 infrastructure before launching a token, and has already shipped over a thousand weather stations which are being deployed worldwide, actively collecting weather data, while the company is currently expanding manufacturing capability to meet demand.
Stealth Energy Infrastructure Project -
A yet to be announced Lattice portfolio company is building a network at the intersection of energy & web3. The network will incentivize the deployment of smart distributed energy assets (including smart thermostats and home batteries) to form a collective energy network. This network will leverage these connected assets to provide the energy grid with the flexibility needed to enable more renewable generation, accelerating our transition to a decarbonized energy system. Could crypto economic incentives invert the current crypto vs climate narrative? We think so.
While I’m excited about projects that are exclusive to the digital realm, we think the TIPIN sector is compelling for 5 core reasons.
- Non-Speculative Demand: The physical infrastructure being developed by these projects has a non-speculative demand source from real businesses and consumers.
- DeFi Composability: Many of these networks are natural integration points in the future with DeFi rails. An excellent example would be the ability to take out a permissionless loan for the acquisition of a home battery based off of projected revenue from supplying energy back to the grid.
- Application Platforms: Each of the networks is becoming an application platform in its own right for entrepreneurs looking to leverage the unique decentralized infrastructure.
- Expanded Audiences: Spending time in the communities of any of the above, you’ll notice that these are not your typical crypto crowds, they are IOT geeks, mobility enthusiasts, and weather junkies…we are always on the lookout for Crypto projects that expand the market into new audiences.
- Entrepreneurial Opportunity: Participating in these networks looks a lot like opening up a franchise, and franchises are a big part of the broader economy (Over 10%). You need some startup capital, physical real estate, some operational know-how, and then the community and protocol help take care of the rest.
The crypto industry has been doing some collective soul searching over the past several months as the bull market party came to screeching halt. While I remain incredibly confident in the entire crypto economy, I believe the emerging TIPIN sector has the potential to be one of the bright spots of the coming cycle and will shine during both bull & bear.
We are planning to host a half-day summit in the fall for builders, investors, and enthusiasts in this new sector. Please reach out to us about getting involved, we’d love to hear from you. — mike@lattice.fund
Thanks to Alex Rawitz at DIMO, Manolis Nikiforakis at WeatherXM, and Dallas Griffin for feedback on this piece.