DePIN: Building a Decentralized Value Network with Dual Curves

DePIN is gradually achieving large-scale interaction between the physical world and Web3, and is gradually disrupting the operational model of traditional infrastructure. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, and leveraging cryptoeconomic incentives to promote crowdsourced development. Analyzing most DePIN projects reveals that an important characteristic of DePIN's business model includes hardware revenue as the first growth curve, and on this basis, the monetization of data services forms the second growth curve. This is one of the key factors that enables DePIN to lead the current cycle of growth, while also showcasing how DePIN-type projects can create a tremendous wealth effect in the process of building a decentralized infrastructure network, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralization physical infrastructure network ( DePIN ) was defined in 2023 as "deploying real-world physical infrastructure and hardware networks using cryptoeconomic protocols." This concept suggests an application scenario full of imaginative possibilities: common infrastructures around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, as well as the data storage and computing devices that support the operation of the internet, will no longer be controlled by centralized entities and institutions, but will be divided into equally sized units, held by individuals or large-scale miners. Furthermore, the same type of physical infrastructure will be highly standardized and scaled, forming a blanket coverage.

By adopting a decentralized approach, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall security and resilience of the system. Moreover, from energy production to data processing, various facilities have the potential to transition to a decentralized model. The relevant industries involved in DePIN currently have a combined market size exceeding $5 trillion. Therefore, it is predicted that the potential market size in the DePIN field is estimated to be around $2.2 trillion, expected to reach $3.5 trillion by 2028.

1.1 DePIN track division

The DePIN track covers six subfields: computing, AI, wireless communication, sensors, energy, and services. From the perspective of the supply chain, DePIN can be broken down into:

• Upstream: Hardware manufacturers and supply-side users acting as "miners".

• Middle Layer: A project platform, responsible for data validation and token settlement blockchain, and an on-chain layer two protocol serving DePIN; as well as modular service components ( used for developing and managing the DePIN network, such as platform interface, data analysis, and standardized services ), SDK toolkit for DePIN development, API interfaces, etc.

• Downstream: Interfaces and dApp applications that connect to the demand side.

Except for a few projects, most DePIN projects rarely manage to cover every aspect of the DePIN business. They usually choose Solana or IoTeX as the settlement layer for their token economies. AI and cloud computing projects in the subfield focus more on on-chain settlement and the development and management of project platforms, while the underlying hardware devices schedule idle electronic equipment, such as mobile phones or computers equipped with high-performance consumer-grade GPUs, through middleware.

1.2 Overview of DePIN Industry Development

According to statistics, the number of DePIN projects that have been launched has reached 1,215, with a total market value of approximately $43 billion. Among them, the total market value of the projects that have issued tokens and have been listed in the DePIN sub-category on Coingecko exceeds $25 billion.

In October of last year, this figure was only 5 billion dollars, and in less than a year, it has increased fivefold, demonstrating the rapid growth of the DePIN industry. This indicates that the market's demand for and recognition of decentralized physical infrastructure networks is continuously increasing. With more projects launching and the expansion of application scenarios, the DePIN industry is expected to become an important area for the integration of blockchain technology and real-world applications.

2. Insights from DePIN Business Logic

The prototype of DePIN can be traced back to the IoT + Blockchain ( concept from the last cycle. Some projects have transformed centralized storage into a decentralized operating model through cryptoeconomic models, and have been practically applied in the Web3 ecosystem, such as on-chain NFT storage and front-end and back-end resource storage for DApps.

The Internet of Things + blockchain only reflects the characteristics of Decentralization ) "De" (, while DePIN emphasizes the construction of physical infrastructure and the scaled interconnection network. In DePIN, "PI" stands for Physical Infrastructure ), and "N" represents Network (, which is the value network formed after the DePIN hardware reaches a certain coverage scale.

The most typical example is Helium, which was founded in 2013 and only confirmed in 2018 that it would utilize blockchain as an incentive for the decentralized deployment of the Internet of Things. So far, Helium has almost met all the elements of DePIN: node economy, miner model, value network, crowd-sourced incentives, and it is a leading project in the field of DeWi) decentralized wireless communication(. In addition, at the end of last year, Helium Mobile launched a $20 communication package service in collaboration with T-Mobile, targeting traditional users. When users transmit data using the Helium network, they not only receive token rewards but also enjoy reliable communication services. At the same time, Helium has also helped T-Mobile solve the signal coverage problems in remote areas of the United States, creating a win-win situation for all three parties. The large number of traditional users it serves is likely to drive the breakout of DePIN and accelerate the large-scale adoption of blockchain technology and the Web3 network.

The Helium case demonstrates how DePIN projects can support the growth of data services on the second curve through hardware revenue, building an independent ecosystem while garnering Alpha and Beta returns. Despite Helium's involvement in false advertising last year and facing issues such as the rarity of programming languages leading to development difficulties, a series of actions at the end of the year has reopened the growth of Helium's second curve; as one of the largest DePIN projects to emerge, it undoubtedly brings us some insights into the DePIN ecosystem.

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3. The Explosive Growth of DePIN is Based on Dual Curve Theory

The "Second Curve" is a concept in management and innovation theory, originally proposed by management scholar Charles Handy). It refers to the need for an organization, product, or business to introduce new innovations or changes when it reaches the peak of its traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the previous successful experiences of DePIN projects, it can already be seen that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with the monetization of the data value network overlaying the first curve, serving as the guiding ideology for the second curve of development.

Product R&D and operational capabilities are key to ensuring growth along the first curve; to initiate growth along the second curve, two capabilities are required: first, the organizational capability of a decentralized system, and second, the service capability on the demand side.

In the context of the DePIN ecosystem, it is necessary for project parties to first ensure the smooth operation of the data value network under the premise of having the capability to organize and undertake large-scale data transmission hardware networks, so that the demand side can successfully connect and ultimately provide high-quality, standardized data services. This will ultimately achieve dual exponential business growth and form a positive cycle within the project ecosystem.

( 3.1 The value of hardware is the first curve of value creation.

In the first growth curve, the business will experience rapid growth in the early stages, then gradually reach its peak. The growth momentum of the DePIN project's first curve comes from the revenue and profits generated by hardware sales.

Traditional infrastructure, especially in areas such as data storage and communication services, has a centralized service provider or entity with a linear business logic: early in the business, investment is needed to build infrastructure, and after the facilities are complete, services are provided to end users )C end (. Therefore, developing such businesses often requires the participation of giant companies to bear the high costs in the early stages of operation, including hardware purchases, land leasing, deployment, and hiring maintenance personnel at various stages.

The DePIN project splits the centralized supply side and turns it into a crowdsourced form to complete the establishment of the hardware network.

Therefore, the first step in dismantling centralized infrastructure is key to achieving the first curve of growth for the DePIN project.

The DePIN project team must first strive to promote itself, disseminate its narrative, and attract supply-side user participation through a series of operational methods, including pre-sales of "mining machines" and airdrops for purchases. This transfers the huge infrastructure costs to the supply-side users, achieving a low-cost lightweight launch. Supply-side users also become "shareholders" of the project team by holding hardware, while helping the project team to deploy the hardware network with the expectation of earning money from future mining.

Moreover, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are carried out jointly by the project party and miners, meaning that the device provider is only responsible for the research and development and sale of the devices, while the updates and maintenance are completed by the supply-side users. In the process of collaboratively maintaining and building the hardware network, the interaction with the project party and middleware strengthens the community identity of miners ) and supply-side users ###, as well as their recognition of the DePIN project.

If a DePIN project can smoothly execute narrative marketing, mining machine sales, and community operations; then all the elements of the project's own first growth curve will have been gathered, ultimately forming the first curve of increasing network coverage scale -- increasing token incentives -- attracting more miners to join.

Currently, the active node data shows that Hivemapper, Helium, and Natix rank in the top three, each having deployed over 100,000 nodes worldwide.

Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have all exceeded 100,000, with Helium and Hivemapper performing exceptionally well in their business.

Helium

• Helium is a Decentralization wireless network, its main business includes Helium Hotspot, providing low-power wide-area network ( LoRaWAN ) coverage; Helium Mobile, is a mobile communication service launched in cooperation with T-Mobile and TEF.

• The $20 communication package service launched in collaboration with T-Mobile on January 25 increased from 0 to 93,000 subscribers in 5 months.

• Collaborating with one of Mexico's telecom giants, Telefónica (TEF), to enter the Mexican market with a population of 126.7 million, further enhances Helium's revenue sources and market influence.

Hivemapper

• Hivemapper is a decentralized mapping platform aimed at creating a global, real-time updated map ecosystem through blockchain technology and cryptoeconomic incentives. Hivemapper's main business includes the HiveMapper Dashcam--a dashcam that allows users to collect geographic data while driving by installing this device.

• This device is priced at 549 dollars. Based on the current number of node deployments, it's roughly estimated that Hivemapper has already achieved over sixty million dollars in revenue from hardware sales alone.

• As of now, the map data collection network established by Hivemapper has covered most areas in Europe and America. Hivemapper's data service revenue has also seen significant growth.

In terms of hardware revenue, other projects have also found new ways to achieve good growth. For example, Jambo has excelled in sales in the African market by focusing on mobile phones. OORT has technological barriers in cloud computing and edge computing, achieving success through its innovative model.