Guide to DePIN, a key crypto narrative to follow in 2024

Guide to DePIN, a key crypto narrative to follow in 2024

A short guide to DePIN – a sector that promises to become a game-changer not only for web3, but also for traditional digital infrastructure services.

Digital infrastructure, despite being one of the most essential sectors of the internet-driven economy, is also one the most tightly held.  For example, a trifecta of tech titans – Amazon Web Services, Microsoft, and Google Cloud – holds the reins of a whopping two-thirds of the global cloud services. In many countries, wireless market is dominated by just a few major carriers (e.g. Verizon, AT&T, and T-Mobile in the United States).

Monopolies and oligopolies are numerous in many physical infrastructure, SaaS, PaaS, and related economy sectors. Even the seemingly decentralized world of blockchain is still largely dependent on centralized services. Case in point: over 38% of Ethereum nodes are currently hosted on AWS (data from ethernodes), which introduces a non-negligible single point of failure risk to the blockchain.

Since the rise of web3, numerous initiatives have been working on a decentralized infrastructure. These projects leverage blockchain to construct and operate both hardware and software in a permissionless, trustless, and programmatic manner. Named DePIN (decentralized physical infrastructure), this sector is progressively reaching a scale where it could make a real impact, which naturally puts it at the forefront of the crypto trends.

According to a recent report released by the blockchain research firm Messari in collaboration with the DePIN-focused VC firm EV3, DePIN has the potential to add +$10 trillion to global GDP over the next decade and +$100 trillion in the decade after that. The sector added over 600,000 nodes in 2023, growing steadily and becoming more efficient.

DePIN also proves to be one of the most resilient web3 sectors. While the crypto market fell 70-90% from its all-time high in the last bear market, DePIN tokens lost only 20-60%. This shows that their growth was driven more by utility than speculation – a noteworthy exception in the web3 world 😅

DePIN overview

DePIN’s prime mission is to allow users, device owners, and businesses to collectively own, use, and monetize digital infrastructure. It incentivizes network development by engaging participants through token-based protocols and offers users resilient and cost-effective solutions.  

The Messari report suggests a classification of the DePIN sectors into six main segments: computing, services, data sales, wireless, sensors, and energy.

Main DePIN sectors:

Compute 💻

The oldest and the most successful DePIN business model, represented by popular protocols like Filecoin ($FIL) and Arweave ($AR). These DApps offer users storage and computing services provided by a decentralized network of contributors. More specialized Render ($RENDER, $RNDR) focuses on artists looking to render notoriously compute-heavy 3D media with GPUs in a decentralized network.

Services 🚗

While not exactly physical infrastructure, the gig economy platforms play an important role in our digital lives, and its decentralized version emphasizes local ownership and control. For example, Teleport aims at uberizing Uber with a rideshare app promising fair prices and more transparency for both users and drivers. Braintrust ($BTRST) connects freelance talents and employers searching for long-term engagements.

Data Sales and AI 🤖

A diverse sector that monetizes data in a number of innovative ways. Hivemapper ($HONEY) is creating a world map by coordinating users who take dashcam photos or train the platform’s AI to recognize map features correctly, while Natix leverages edge AI to collect anonymized insights from people’s smartphones. This sector holds exceptional potential when synergized with AI, a domain voracious for vast datasets for training.

Wireless Services (DeWi) 🛜

Nowadays the wireless services market is even larger than compute, generating over $1.5 trillion of global annual revenues across mobile, fixed, and WiFi services. Its web3 alternatives include Helium ($HNT) and WiFi Map ($WIFI), which provide public network coverage through independent nodes acting as hotspots.

Sensors 📱

The ubiquity of smartphones, able to measure all kinds of conditions, allows to gather important information in a decentralized way, while the blockchain is perfect for decentralized data storage and incentive programs. Silencio ($NOISE) is one of the projects exploring this synergy: it incentivized people to measure real-life noise levels in order to create a noise map and raise awareness for this important ecological issue.

Energy 🔋

This sector is the least developed one so far, notably due to the regulatory difficulties. It is now represented mostly by the protocols decentralizing energy supply, such as GlowGreen or Daylight.

Adjacent Sectors

DePIN is also related to real-world assets (RWA) and blockchain infrastructure networks, such as oracles and RPC nodes, making these sectors a part of DePIN’s broader impact.

DePIN’s impact on the crypto markets 📈

As an emerging sector with big potential, DePIN can exert a significant influence on the dynamics of the overall crypto market: the blockchains that DePIN projects choose to build on will benefit from accrued activity and other possible synergies.

As it happens, one of the most preferred blockchains for DePIN is… Solana. Yes, the same Solana that keeps surprising us with its unparalleled growth and which does not cease to cumulate hype, despite much scepticism.

Several key DePIN projects like Hivemap are built on Solana, while others like Render or Helium have migrated to it at the end of 2023. Others choose new names, such as customizable rollup builder Caldera (used by a DeWi Andrena), or Ethereum L2 Eclipse (used by Daylight). What’s more, specialized DePIN-specific blockchains like IoTex (used by Wifi Map) or Peaq (used by Silencio) are also gaining traction.

Technical infrastructures are notoriously difficult to build; it is a lengthy and capital-intensive process, which explains the sector’s pronounced oligopolistic (or even monopolistic) tendencies. Building a decentralized digital infrastructure is not easy either, particularly during the early stages before the network effect kicks in. However, the potential of a well-crafted DePIN protocol is great.  

Of course, not all of the current 650+ DePIN projects will survive. On the contrary: most will have to quit, just like the AI x Mobility startup 2blox (also cited in Messari’s report), which recently announced its liquidation due to “hurdles more significant than they had anticipated”. Luckier ones will be bought by bigger companies. And the most successful could hit it big 🚀

In a time where digital giants seem to control so many aspects of our lives, DePIN can step in as a game-changer, bringing the decentralization philosophy to the foundations on which our digital life is built. This might be a key narrative for the crypto space in 2024, and it is definitely worth monitoring.

Stay tuned 😉