The green energy industry has emerged in recent years. ESG and carbon footprint are among the indicators that many European and American countries are most concerned about. You may have heard more or less the news that residents install solar panels on their residences and then sell the excess electricity to the Government and Central Power Corporation. Have you ever thought about what if one day we could trade these excess or idle resources on the blockchain and sell energy or services directly to each other?

The rapid growth of the RWA sector in the first half of this year has driven the market’s attention to another sector that is highly connected to reality, “DePIN”. Compared with air coins and meme coins, before the next bull market comes, the market seems to favor these sectors that have more and more opportunities to be implemented due to technological development. Coupled with the competition for computing resources promoted by the AI ​​boom, DePIN is indeed possible to become one of the main narratives of the next cycle.

In this article, we will introduce what DePIN is, DePIN’s development advantages, operating model, and what DePIN’s current main tracks are.

DePIN: from Blockchain to offline infrastructure that connects life

DePIN means decentralized physical infrastructure. It is also often called physical proof of work (PoPw), token reward physical network (TIPIN) and EdgeFi.

DePIN uses blockchain technology and token rewards to mobilize individuals scattered around the world and release their own resources to jointly deploy and maintain the operation of different types of infrastructure.
Infrastructure refers to the basic facilities and services required by a society, city or country to support the regular operations of daily life, including various physical facilities, systems and services, covering transportation, communications, energy , water sources, sanitation, education and other fields. The existence of infrastructure is crucial to promoting economic development, social stability and people’s quality of life, and is an indispensable basis for social operations.

DePIN Concept: Operating Large-Scale Daily Resources with Cryptocurrency

If you have a basic understanding of how blockchain works, DePIN is the same concept to the infrastructure as miners and node maintainers are to the blockchain network. Miners and node maintainers obtain tokens as rewards by collaborating to calculate data and maintain network security; DePIN obtains tokens by participating in the operation of certain infrastructure, achieving both self-benefit and altruistic effects.

Compared with the traditional top-down deployment model by centralized entities such as governments and large enterprises, this bottom-up approach is considered to be fairer and more efficient. Most of the infrastructure developed in the DePIN field is related to network, Bluetooth, communications, storage, energy, and computing power. \

How the DePIN track works: off-chain reward chain mechanism

The DePIN track can be said to be the closest solution to physical equipment at present. Therefore, it can be said that DePIN is a physical network that is decentralized to set up, operate and maintain. But how can these common infrastructures be networked? Tokenization? Or to put it in layman’s terms, how to “wind up” the chain?

According to a report from Cointelegraph, to implement DePIN, the following four indispensable basic elements are required:

No. 1 element of DePin track operation: Physical equipment infrastructure

As mentioned in the above classification, both physical resource networks and digital resource networks require a large amount of hardware to run, including vehicles for mobile networks, batteries for energy networks, transmission networks and solar panels, and Routers for wireless networks, and servers for cloud networks and other equipment.

No. 2 element of DePin track operation: Off-chain computing infrastructure

After having the device, it is also necessary to connect the data layer between the physical world and the blockchain world to calculate the user’s activities and workload in the real world as the basis for reward distribution, and this data can also be used for integration and reuse at a commercial level.

No. 3 element of DePin track operation: Blockchain underlying facilities

Each DePIN network needs to use blockchain as one of the underlying facilities to facilitate recording proof of work, accounting and allocating reward tokens. Community members can also use this network to conduct transactions or exchange each other’s services or products. For example, FileCoin and Helium are well-known DePIN blockchains.

No. 4 element of DePin Track Operation: Reward Token Mechanism

The token reward mechanism will encourage community members to provide their own hardware equipment or digital resources to contribute to the network. It can be regarded as a subsidy and reward for resources or work, and encourages members to continue to build and maintain DePIN.

In addition to the supply side of the network, we also need to be able to accurately find the demand side, that is, customers or consumers. The fees paid by users for using the goods or services provided by the DePIN network will flow into the network and become a part of the token economy, promoting the continued growth of the DePIN network, and rewards that are attractive enough will bring more suppliers and investors, forming a forward cycle.

Why is the DePIN track so popular?

In traditional infrastructure industries, such as energy or telecommunications companies, it usually takes a lot of time and money to build and maintain. Not only is the threshold for work high, it can easily lead to over-concentration of resources and the possibility of monopoly. Moreover, due to the high initial development costs and the closed nature of information and resources based on commercial considerations, it is difficult for individuals who later enter the industry to join the competition, which is detrimental to the upward growth of the entire industry.

DePIN attempts to outsource the business of establishing and maintaining infrastructure to multiple people, using tokens as rewards and work remuneration, allowing people to release part of their hardware or software resources to proactively provide services or products to others. Since there are no intermediaries and there is no need to consume a lot of human and space resources, these services or goods are often cheaper and iterate more quickly.

For example, decades have passed since the development of the Internet, but there are still billions of people around the world who have not used the Internet. One of the largest DePIN projects, Helium, invites the public to participate by installing official Hotspots equipment, allowing users to use WiFi at home to easily provide Internet hotspots within a certain distance without affecting the Internet speed. Users of this network can be rewarded with the cryptocurrency HNT. Encourage users to provide Internet services to people who have relatively no resources to use the Internet, or areas that have been abandoned by telecom operators and are difficult to reach.

Advantages of DePIN over traditional infrastructure

・Grow rapidly and offer lower costs: DePIN does not need to invest a lot of manpower and facility resources in a fixed space, but is more flexible and mobile. Through a decentralized reward mechanism, the scale of services or products can be expanded at any time by recruiting more operating members, and the threshold and risk of cost recovery are also lower.

・Encourage innovation and rapid iteration: Improving the quality of products or services will bring higher revenue opportunities, keep the interests of community members aligned, and have the motivation to continuously optimize the quality of products and services, unlike traditional enterprises that are subject to multiple interest considerations and constraints.

・Decentralized and censorship-resistant: In addition to being fully open and accessible without permission, decentralized DePIN is also censorship-resistant. No centralized entity has the authority to restrict users’ access or deprive others of their rights based on political, class or other special reasons.

DePIN sector overview

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According to Messari’s research report, we can roughly divide DePIN into two major categories and four major applications:

・Server network: Cloud storage, data database, computer computing power, CDN and VPN network.

・Wireless network: 5G, WiFi, Bluetooth, LoRaWAN (Internet of Things).

・Wireless sensor network: A network interconnected by automatic devices in space to collect real-time data of the physical world (such as temperature, sound, pressure, vibration, pollution). Applications include guidance or monitoring of the environment, transportation, and logistics.

・Energy network: Integrate various distributed energy sources through power and communication technologies to create a more flexible, efficient and secure energy transmission network.

According to the nature of the above goods and services, they can also be divided into two major items: Physical Resource Network (PRN) and Digital Resource Network (DRN). The former refers to products and services that focus on the production functions of hardware facilities, such as wireless sensing and energy, while the latter refers to the category of digital products or services provided by cloud, storage and computing power.

Conclusion

At this stage, DePIN is still in a concept-first stage. For this sector that is highly relevant to practical needs, the key to whether the project can truly be implemented is, just like running a company, whether it can cultivate mature technologies and propose effective solutions.

Decentralized theory and the growth flywheel may seem quite promising, but whether decentralized infrastructure can meet market demands, compete effectively with established Web 2 companies, and drive a paradigm shift in the market remains a question that needs practical validation.

In the next article, we will introduce several DePIN sectors that have garnered attention and are considered promising. We will observe their development status, assess whether the token incentive mechanisms have achieved the intended effects, and, most importantly, determine whether the associated tokens truly have investment potential.

Disclaimer：

1. This article is reprinted from [Crypto Wesearch]. All copyrights belong to the original author [Ka i]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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