DePIN: Dual Curve Overlay for Building a Decentralized Value Network

DePIN is enabling large-scale interaction between the physical world and Web3, gradually disrupting traditional infrastructure operating models. By integrating sensors, wireless networks, computing resources, and AI with blockchain technology, it utilizes cryptoeconomic incentives to drive crowdsourced development. Analyzing most DePIN projects reveals that their business models feature an important characteristic: hardware revenue serves as the primary growth curve, which is then augmented by monetizing data services to form a secondary growth curve. This is one of the key factors that allow DePIN to lead growth in the current cycle and demonstrates how DePIN-like projects can create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralized Physical Infrastructure Networks (DePIN) are defined in Messari's 2023 report as "using cryptoeconomic protocols to deploy physical infrastructure and hardware networks in the real world." This concept hints at a highly imaginative application scenario: common infrastructures around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, and the data storage and computing devices that underpin the operation of the internet, will no longer be controlled by centralized entities and institutions. Instead, they will be divided into equally sized units, held by individuals or large-scale miners. Physical infrastructures of the same kind are highly standardized and scaled, forming a carpet-like coverage.

Through decentralization, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall security and resilience of the system. Moreover, various facilities have the potential to transition to a decentralized model, from energy production to data processing. The combined market size of the related industries involved in DePIN has now exceeded $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN sector 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 sub-fields: 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".

• Middleware: project platform, blockchain responsible for data verification and token settlement, and on-chain layer two protocol serving DePIN; as well as modular service components for developing and managing the DePIN network (such as platform interface, data analysis, and standardization services), SDK toolkit developed for DePIN, API interfaces, etc.

• Downstream: Connect with the demand side dApp applications and interfaces.

Except for IoTeX and the former Helium (which has migrated its mainnet to Solana), most DePIN projects rarely manage to cover every aspect of DePIN business. They usually choose Solana or IoTeX as the settlement layer for their token economy. AI and cloud computing projects in this subfield tend to focus more on on-chain settlement and the development and management of project platforms, while the underlying hardware devices utilize middleware to schedule idle electronic devices, such as mobile phones or computers equipped with high-performance consumer-grade GPUs.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja's data, the number of DePIN projects that have been launched has reached 1,215, with a total market capitalization of approximately $43 billion. Among them, the projects that have issued tokens and are listed in the DePIN sub-section on Coingecko have a combined market capitalization of over $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 and recognition for decentralized physical infrastructure networks are continuously rising. With more projects being launched and application scenarios expanding, the DePIN industry is expected to become an important field for the integration of blockchain technology and real-world applications.

2. Insights from the DePIN Business Logic

The prototype of DePIN can be traced back to the IoT+Blockchain concept from the previous cycle. Projects like Filecoin and Storj have transformed centralized storage into a decentralized operating model through cryptoeconomic models, and have found practical applications in the Web3 ecosystem, such as on-chain NFT storage and the front-end and back-end resource storage of DApps.

The Internet of Things + Blockchain only reflects the characteristics of Decentralization ("De"), while DePIN emphasizes the construction of physical infrastructure and the large-scale interconnected network. In DePIN, "PI" stands for Physical Infrastructure, and "N" stands for Network, which refers to the value network formed after the DePIN hardware reaches a certain coverage scale.

The most typical example is Helium, which was established in 2013 and only confirmed in 2018 that it would use blockchain as an incentive method for decentralized deployment of the Internet of Things. To date, Helium has almost met all the elements of DePIN: node economy, miner model, value network, and crowdsourced incentives, making it a leading project in the field of DeWi (Decentralized Wireless Communication). Additionally, 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 can not only earn token rewards but also enjoy reliable communication services. At the same time, Helium has also helped T-Mobile address the signal coverage issues in remote areas of the United States, creating a win-win situation for all three parties. The large number of traditional users it supports has the potential to drive DePIN's breakout, likely accelerating the widespread adoption of blockchain technology and the Web3 network.

Helium and Filecoin both fall under the DePIN category, but the difference lies in Helium's greater emphasis on hardware, allowing it to support the growth of data services on the second curve through hardware revenue, building an independent ecosystem while reaping Alpha and Beta returns. Although Helium was involved in false advertising last year and faced issues such as the niche programming languages leading to development difficulties, a series of actions at the end of the year once again opened up Helium's second curve growth; and as the most scalable DePIN project that has emerged first, it undoubtedly offers us some insights into the DePIN ecosystem.

3. The explosive growth of DePIN is based on the dual curve theory

The "Second Curve" is a concept in management and innovation theory, initially proposed by management scholar Charles Handy. It refers to the need to introduce new innovations or changes when an organization, product, or business 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 DePIN project experience, 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 data value networks layered on top of the first curve, serving as the guiding ideology for the second curve of development.

Product research and development, and operational capabilities are key to ensuring the growth of the first curve; to initiate the growth of the second curve, two capabilities are required: first, the organizational capability of a Decentralization system, and second, the service capability for the demand side.

In relation to the DePIN ecosystem, it is necessary for the project party to ensure the proper operation of the data value network under the premise of having the capability to organize hardware networks that can accommodate large-scale data transmission. Only then can the demand side smoothly connect, ultimately providing high-quality, standardized data services. This will achieve a dual exponential growth in business, forming a positive cycle within the project ecosystem.

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

In the first growth curve, the business will experience rapid growth in the initial stage and then gradually reach its peak. The growth momentum of the first curve of the DePIN project comes from the revenue and profit generated by hardware sales.

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

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

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

The DePIN project team must first work hard to promote themselves, spread their narrative, and attract participation from supply-side users through a series of operational means, including the pre-sale of "mining machines" and airdrops for purchases; shifting the massive investment in infrastructure costs to be borne by supply-side users to achieve a low-cost lightweight launch. Supply-side users also become "shareholders" of the project team by holding hardware while helping the project team 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 side and miners, meaning that the device providers are only responsible for the research, development, and sales 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 side and middleware strengthens the community identity of the miners (supply-side users) and their identification with the DePIN project.

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

The following is the current data on the number of active nodes, with Hivemapper, Helium, and Natix ranking in the top three, each having deployed over 100,000 nodes worldwide.

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

Helium

• Helium is a decentralized wireless network, whose main services include Helium Hotspot, providing low-power wide-area network (LoRaWAN) coverage; Helium Mobile, a mobile communication service launched in collaboration with T-Mobile and TEF.

• The $20 communication package service launched in partnership 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 has further enhanced Helium's revenue streams and market influence.

Hivemapper

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

• This device is priced at 549 dollars, from the current node department.