A broader perspective and insight of the rise of DePIN

LIZZIE LU
ZMQuant
Published in
4 min readFeb 18, 2024

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Lately, the DePIN track has gained significant attention. On one hand, tokens like MOBILE have seen their value surge manyfold, while on the other, there’s been an influx of new forks in fields such as storage, communication, cloud computing, and energy.

In essence, DePIN operates as a decentralized network that distributes infrastructure services, traditionally provided by centralized companies, to a global user/miner base. The core question is: why would miners willingly contribute their resources to DePIN?

So DePIN’s fundamental logic is to incentivize miners with tokens to provide resources like GPU power and storage space to benefit the DePIN network.

Initially, these tokens often lack value, making miners akin to that of risk-taking investors. Miners choose promising DePIN projects and invest resources to profit from token accumulation and potential price appreciation.

This incentive mechanism creates a flywheel:

1. Attracting miners with tokens: A well-structured token model lures early adopters/miners to develop the network and provide resources, with tokens as rewards.

2. Attracting developers and users: As more resources are provided, developers join to build products, and users are drawn by DePIN’s cost-effectiveness compared to decentralized infrastructure.

3. Flywheel effect: With more users, miners earn more income, and attracting more participants on both sides.

In this case, ideally, miners receive more valuable token rewards, and users benefit from more cost-effective services. As token prices rise, more participants and speculators are attracted.

In summary, through a token incentive mechanism, DePIN initially attracts miners/builders and subsequently users, thereby establishing the project’s initial launch and core operational mechanism.Token price holds paramount importance for DePIN projects and can dramatically influence the project’s survival.

The status of the DePIN industry

Let’s have a quick review of the current status of the DePIN industry. Early DePIN projects@iotex_io@helium@storj, including decentralized networks and storage solutions, primarily focused on storage and communication technologies.

With the continuous development of the internet, IoT, and AI, there’s a growing demand for innovative infrastructure solutions. Presently, DePIN projects are mainly concentrated in computing, storage, communication tech, and data sharing. Here are some advantages of DePIN.

With the continuous development of the internet, IoT, and AI, there’s a growing demand for innovative infrastructure solutions. Presently, DePIN projects are mainly concentrated in computing, storage, communication tech, and data sharing. Here are some advantages of DePIN.

So first of all, in the infrastructure sector, DePIN’s decentralized nature lowers entry barriers for businesses, breaking monopolies of a few giants. This offers smaller enterprises and startups equal competition opportunities.

Meanwhile, in traditional economic models, many resources remain idle, failing to realize their full potential value. However, DePIN addresses this by incentivizing users to share and maximize resource utilization.

Additionally, emerging DePIN projects are trying to fork Tripadvisor or Groupon in the form of Web3 dApp. They directly channel marketing funds from businesses to users, reducing marketing costs.

Nevertheless, despite the broad categories covered by the DePIN sector, its development also faces many limitations and challenges, especially the liquidity of project tokens in the early stages.

A broader perspective

Over the past year, DePIN’s growth has significantly impacted the entire blockchain ecosystem, primarily due to its potential as a consumer-oriented application layer akin to DeFi and gaming.

The chain activities in the DePIN sector are led by platforms like Solana and IoTeX, who are creating innovative solutions tailored for DePIN. This necessitates chains that are high-performance and composable to handle extensive consumer traffic.

Moreover, the ascent of DePIN is influencing decentralized governance. Many leading DePIN projects are incorporating DAO governance into their strategies, reflecting a trend towards token-based organizational coordination.

Currently, most DAOs like Uniswap and Compound focus on digital assets. However, as DePIN evolves, there’s an increasing need for DAOs to manage physical assets, such as servers and sensors, expanding their governance scope.

This shift suggests DePIN might lead to a trend where DAOs’ responsibilities expand from digital to physical assets, necessitating operations and behavior that align more closely with traditional corporations, marking a potential pivot for Web3 in real-world applications.

As market makers bridging traditional and decentralized finance, ZMQuant can assist new and established DePIN projects by crafting tailored economic models to enhance their business strategies, moving closer to ideal off-chain operations with on-chain governance.

About ZMQ

ZMQ is a Leading Global Quantitative Market Maker and liquidity provider in Digital Assets. Since jumping into the crypto market in 2018, ZMQ has been focusing on providing liquidity globally for token projects and exchanges, institutional crypto investments and consulting services to bring better price discovery, trading executions, transparency to investors and efficient pricing to the market.

If you have any new ideas about crypto market making and liquidity service, please reach out to us at biz@zmquant.com!

Website: www.zmquant.com

Twitter: @zmquant_com

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LIZZIE LU
ZMQuant

Crypto Market Making | Hedge Fund | Investment | Advisory | Marketing | Web3/NFT/Game/DeFi / Layer1,2