Understanding DePIN (Decentralized Physical Infrastructure Networks)
Hello everybody,
In the traditional market, to operate a website or application, it is necessary to utilize fundamental physical infrastructure elements such as hardware, internet connectivity, domain, cloud services, and power networks.
The deployment and operation of physical infrastructure in the information technology industry are influenced by the dominance of large corporations, due to their requirement for significant capital investment and challenges in logistics. As a result, these corporations often have monopolistic control over pricing, conditions, and service provision to end users, causing a lack of competition and constraints on innovation within the industry.
DePIN is a new solution developed based on blockchain technology to address the issue of centralization in the construction and operation of physical infrastructure in the real world. To gain a better understanding of DePIN, let’s explore it in today’s article!
I’m Neo — Admin — Community Manager of Optimus Finance and Growth Marketing of LECLE Vietnam.
Table of contents
1. What is DePIN?
2. Formation of DePIN
2.1. Idea
2.2. History
3. How DePIN Works
4. The potential of DePIN in the future
5. Challenges of DePIN
6. Some notable projects
6.1. Filecoin (FIL)
6.2. Arweave (AR)
6.3. Storj
6.4. Helium (HNT)
6.5. Pollen Mobile
6.6. Hivemapper Network (HONEY)
6.7. React Protocol
7. Closing thoughts1. What is DePIN?
DePIN (Decentralized Physical Infrastructure Networks) is a network system of physical infrastructure built on blockchain technology and other distributed technologies.
The main objective of DePIN is to disrupt the current centralized model of physical infrastructure by utilizing blockchain and tokens to create a decentralized environment, enabling multiple parties to collaborate in the construction, operation, and management of physical infrastructure.
DePIN is considered a step forward in the development of the Internet of Things (IoT) and the Web3 ecosystem, encouraging interaction between users and businesses to collaboratively build, maintain, and operate the infrastructure network.
The goal of DePIN is to create an environment where ownership belongs to the community rather than being concentrated in a single entity. This enables end users to receive innovative and cost-effective services compared to traditional models.
DePIN is divided into four categories:
- Cloud/Storage Network: This includes file storage, databases, CDN (Content Delivery Network), and VPN (Virtual Private Network).
- Wireless Network: This encompasses technologies like 5G and LoRaWAN (Long Range Wide Area Network).
- Sensor Network: It involves devices interconnected and equipped with sensors to collect real-time data from the physical world, such as mapping information.
- Energy Grid Network: This involves aggregating distributed energy sources to create a more flexible and efficient energy grid network.
2. Formation of DePIN
2.1. Idea
The idea behind DePIN originates from the belief of Web3 developers that people worldwide can collaborate to build an infrastructure network that is independent of third parties and does not require mutual trust.
After establishing a decentralized physical infrastructure network, it will attract user participation and contribute to the development of the network. Members involved in building and operating the network will be rewarded with fees from users, typically in the form of tokens.
In the best-case scenario, this will create a “Flywheel” effect, where the usage demand will continue to increase, driving sustainable growth of the network.
2.2. History
In November 2021, IoTeX, a blockchain project developed for serving the Internet of Things, introduced the concept of monetizing resources from smart devices and artificial intelligence to create value and ownership for everyone through the combination with blockchain technology, known as MachineFi.
Since then, in 2022, several ideas for building decentralized physical infrastructure networks have emerged, including:
- In April 2022, the Proof of Physical Work (PoPW) consensus mechanism was introduced to incentivize participants in building hardware networks, including wireless, mobile, environmental, computing, and storage networks.
- In July 2022, TIPIN (Token Incentivized Physical Infrastructure Networks) was introduced as a network that utilizes token-based incentives to encourage user contributions to the deployment and operation of physical infrastructure. It aims to create a more efficient and fair model.
- In September 2022, EdgeFi emerged as a new version of decentralized infrastructure networks, focusing on deploying hardware resources closer to end-users in edge regions of the network. EdgeFi emphasizes edge computing, where data generation and processing demands are highest from IoT devices.
- In November 2022, Messari conducted a Twitter poll to name the overarching concept related to physical infrastructure in Web3. The result was the victory of “DePIN” with 31.6% of the votes, becoming the commonly used term.
3. How DePIN Works
DePIN is a platform built upon the fundamental concept of the Internet of Things (IoT), utilizing blockchain technology and cryptocurrencies to enable global collaboration in constructing, maintaining, and operating decentralized physical infrastructure networks without the need for any third-party involvement.
To operate efficiently, DePIN consists of four fundamental components in its structure, including:
- Physical Infrastructure: DePIN relies on physical infrastructure to function. This can encompass anything from mobile networks, base stations, and routers for wireless networks, to servers for cloud networks.
- Off-chain Computing Infrastructure: DePIN relies on off-chain computing infrastructure to connect the physical world with the blockchain. Activities in the real world by users are recorded, and the fees they pay are distributed to hardware providers. This data can be aggregated for different use cases on the blockchain.
- Token Incentives: Participants involved in building DePIN are incentivized to contribute to the network through token rewards. This provides them with motivation to build the network before the project can generate sustainable revenue from user demand.
- End Users: Once the network is established, end users can begin paying to use the services provided by DePIN in the real world.
4. The potential of DePIN in the future
DePIN is emerging as a highly promising field in the future, particularly with over 40 billion smart devices and trillions of sensors worldwide.
With the ever-increasing demand for decentralized infrastructure, more individuals and companies are becoming interested in utilizing DePIN to build their own infrastructure networks.
What makes DePIN particularly unique is its utilization of blockchain technology and token-based reward mechanisms to provide an efficient and cost-effective approach to building future physical infrastructure networks. These technologies enable decentralized collaboration among participants and create a fair environment where hardware providers and users are both evaluated and compensated with tokens. This fosters a sense of fairness and incentivizes active participation in the network.
With DePIN, building physical infrastructure networks becomes easier, bringing efficiency and cost savings to both individuals and businesses.
5. Challenges of DePIN
While DePIN holds significant potential, it still faces challenges that need to be addressed. These challenges have hindered its widespread development despite its existence for some time.
One of the key challenges lies in ensuring that the token-based incentive model aligns more effectively with the contributions of participants. Future DePIN projects need to establish more attractive incentive models to incentivize greater participation in network building.
Furthermore, the time required for building and deploying physical infrastructure can be lengthy, making it challenging for DePIN projects to generate profits in the early stages. As a result, participants involved in network construction may gradually lose motivation for long-term contributions.
Lastly, there is the competitive pressure from Web2 giants like Google, Apple, Amazon, and others. To disrupt this competition, Web3 companies need to exert even more effort and professionalism in developing infrastructure and attracting traditional users to adopt their products.
6. Some notable projects
6.1. Filecoin (FIL)
Filecoin is a blockchain built specifically for decentralized storage. Users pay to store their files, and storage providers are rewarded with FIL tokens.
6.2. Arweave (AR)
Arweave is a project aiming to become a long-term storage solution for NFTs and DeFi, enabling users to store information permanently without censorship through a linked set of data blocks called blockweave. Miners provide proof of data storage and are rewarded with the project’s AR tokens.
6.3. Storj
Storj is a decentralized cloud storage service that allows users to upload and store files on the blockchain. Once encrypted, the files are divided into over 80 pieces and distributed across storage nodes. Storj provides various storage options with capacities of up to 50GB.
6.4. Helium (HNT)
Helium is a wireless infrastructure network. Users can become wireless hotspot providers on the Helium network and earn HNT tokens. The goal of Helium is to provide coverage for wireless Internet of Things and 5G connections.
6.5. Pollen Mobile
Similar to Helium, Pollen Mobile allows users to become wireless network hotspot providers and earn Pollen Coins. Its goal is to build a completely user-owned decentralized mobile coverage network.
6.6. Hivemapper Network (HONEY)
Hivemapper Network enables users to map data using dash cameras. By driving or walking, users contribute to the Hivemapper mapping process and earn HONEY tokens as rewards for their participation.
6.7. React Protocol
React Protocol is a community-owned project with the goal of sharing excess energy from power storage. This is aimed at cleaning up the energy supply and providing users with a passive income source called Connect-to-Earn.
7. Closing thoughts
DePIN is an exciting field that brings a new approach to building and operating real-world infrastructure, ensuring fairness, efficiency, and leveraging the benefits of all participants. With the combination of traditional physical infrastructure and blockchain technology, DePIN is expected to unlock new use cases and make significant contributions to the development of the physical world.
What about your thoughts? If you want to know further about it, don’t hesitate to share it with us! 😀
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