“Decentralized Physical Infrastructure Networks (DePINs) are reshaping traditional infrastructure models, providing an opportunity analogous to today’s gig economy” — Kuleen Nimkar, Solana Foundation DePIN lead
TL;DR
- DePIN extends blockchain decentralization into tangible physical infrastructure.
- Enables permissionless, autonomous, real-time, community-governed, and self-sovereign interactions in physical assets.
- Operates as a peer-to-peer network of crowdsourced and non-portable computer hardware for Web 3.0.
- DePIN comprises 3 primary components: a physical facility controlled by a provider, middleware or protocols for blockchain connectivity, and a public ledger or blockchain that oversees transactions.
- Tokens serve as incentives for hardware deployment, rewarding participants who offer hardware to a DePIN network.
- DePINs are categorized into Physical Resource Networks (PRNs) and Digital Resource Networks (DRNs).
DePIN or “decentralized physical infrastructure networks” is an extension of the ethos of blockchain’s decentralization into tangible physical infrastructure. It is a permeation of the digital assets architecture into the physical realm — enabling permissionless, autonomous, real-time, community-governed and self-sovereign interactions inside a network of physical components, such as sensors, devices, and machines, connected via blockchain technology.
Consider it like a peer-to-peer network of crowdsourced & non-portable computer hardware for Web 3.0. Imagine a sharing economy like Uber or AirBNB but without any central control and more inclusive governance. DePIN Service-providers are rewarded by the network itself and as more hardware is added into the network, a DePIN becomes more secure and self-sustaining.
How does it work?
DePIN establishes a link between physical infrastructure and the blockchain. In simple terms, there are 3 primary components to DePINs including a physical facility under the control of a provider, a middleware facilitating the connection to the blockchain, and a public ledger overseeing this integration for transactions.
DePIN Network Flywheel
The following diagram illustrates the entire DePINs creation to incentivization lifecycle. The protocol’s Tokens serve as incentives for individuals who deploy hardware to serve others. Network participants earn rewards for offering either new or existing hardware to individuals or businesses who have a need for the hardware. Moreover, due to the absence of intermediaries, the goods and services are frequently more affordable and expedient.
DePIN Sector Map
DePINs categorize into two distinct types based on the hardware and resources involved, as well as the nature of the goods and services offered by the network.
- Physical Resource Networks (PRNs): These networks incentivize individuals to allocate or deploy location-dependent hardware to provide tangible, non-fungible goods and services in the real world. Examples include mobility solutions, energy distribution systems, and connectivity infrastructures.
- Digital Resource Networks (DRNs): In contrast, DRNs incentivize individuals to direct or deploy hardware to offer fungible, digital resources. These resources typically include storage capacities, bandwidth allocation, or computing power within digital environments.
The Potential
In the current market, there are over 600 projects working in the DePIN and DePIN-adjacent space garnering a market cap of over $20 Billion and generating over $15 Million in on-chain ARR (as per a Messari report). The next wave of big-ticket opportunity is in the DePIN space with top VCs lining up their coffers for a flurry of investments in the DePIN sector.
According to the data from Messari, the valuation of the DePIN market is expected to surge to $3.5 trillion within the next four years and more than $10 trillion in the next decade and $100T in the decade after that.
We will study this in details in the 2nd part on the same sector.
