DePINs To Bring Billions Of Dollars To Crypto Space. But What Is DePIN In The First Place?

DePINs are blockchain-based digital resource networks that provide decentralized physical infrastructure for sharing and monetizing underutilized resources. They may soon become the next big thing in the crypto space.

DePIN network

Once in a while, the crypto space gets ignited with a new buzzword that may (or may not) be more than a buzz. DePINs most likely don't fall into the fleeting trend category. The new approach to decentralized infrastructure may be a game changer for many industries relying on internet connection. DePINs also provide a massive opportunity to earn crypto online – if you're patient enough to wait until the idea takes off for real.

The topic of DePINs has been circulating in the crypto bubble for a while but has remained unnoticed by many, even in the Web3 space. Recently, though, it has caught a bit of traction on X when Meltem Demirors shared a post speculating about a near future with "dozens of multi-billion dollar protocols and companies across the DePIN stack."

Demirors, a veteran of digital asset investing and a crypto expert at Oxford University, believes that the DePIN ecosystem will provide a fertile ground for a new category of structured credit products connecting investors to operators offering hardware for the decentralized networks.

What is DePIN in crypto?

DePIN, short for decentralized physical infrastructure networks, is a relatively new concept that applies blockchain's decentralization principles to real-world infrastructure and systems, including data centers, wireless networks, energy grids, supply chains, transportation systems, etc.

A DePIN system enables the sharing of hardware resources, such as internet connections, storage space, or computing power, through a decentralized network based on the blockchain architecture.

Here's a simple analogy. Imagine you have a neighborhood lemonade stand, but instead of selling lemonade, you're selling something the whole neighborhood can use, like a super-fast wi-fi connection. You have the equipment (router, cables), great transmission speeds, and a good deal with the internet provider, but you're – quite obviously – unable to use it to the fullest.

So, why not earn some token rewards for sharing wi-fi?

How exactly does DePIN work?

DePINs are built on the backbone of DeFi (Decentralized Finance), creating a peer-to-peer marketplace for trading resources.

People with underutilized resources can connect their physical assets, like a wi-fi router or a computer, to the DePIN network. Smart contracts, self-executing programs stored on the blockchain, manage the entire process, defining the terms of resource sharing, including usage fees and uptime guarantees.

Simultaneously, individuals or businesses seeking resources can use a DePIN app to find what they need. When a user taps into a resource, a small fee in cryptocurrency is automatically deducted based on the smart contract's terms.

This fee is transparent and reflects factors like resource type, usage duration, and network demand. The network then securely distributes this fee to the resource provider, rewarding them for sharing their assets.

DePINs create a win-win scenario: resource providers earn digital assets for contributing to a shared infrastructure, while users gain access to resources at potentially lower costs.

Governed by secure and transparent smart contracts, this system eliminates the need for a central authority, fully relying on decentralized infrastructure.

DePIN crypto
Source: Meltem Demirors/X

DePIN networks are sometimes divided into digital resource networks (DRN) and physical resource networks (PRNs), which is not exactly correct. DePINs don't have entirely separate digital and physical resource networks functioning independently. These terms are more like two sides of the same coin, representing different aspects of a single DePIN ecosystem.

Key advantages of decentralized physical infrastructure networks

DePINs offer several advantages for various stakeholders by optimizing the usage of physical infrastructure resources, unlocking low-cost capital, and providing earning opportunities with token incentives. Here are key benefits to consider.

Monetization of idle assets

A DePIN allows network participants to earn rewards in cryptocurrency by sharing underutilized resources like idle computers or fast wi-fi, creating passive income and maximizing infrastructure value.

Efficient resource sharing

DePIN distributed networks eliminate centralized control, enabling direct, cost-effective resource sharing between users needing extra storage, processing power, or internet bandwidth.

Transparency and trust

DePIN smart contracts operating on the blockchain infrastructure manage resource sharing, ensuring clear terms of service, pricing, and dispute resolution, fostering trust without intermediaries.

Empowering individuals

In the DePIN environment, users control their resources, choose what to share, and set prices based on market demand, promoting a more democratic approach to infrastructure management.

Cost reduction

By cutting out intermediaries and leveraging peer-to-peer networks, decentralized physical infrastructure networks can lower costs for both providers and users, offering a cheaper alternative to traditional services.

Scalability and flexibility

DePIN networks grow organically as more users and resources join, adapting to changing needs and creating a robust digital infrastructure ecosystem.

Real-world applications of DePIN decentralized networks

DePIN physical resource networks have innumerable potential applications in providing real-world services. With data storage and wireless connectivity as core features, the DePIN infrastructure allows users to optimize business operations and bypass centralized institutions, all in a flexible and cost-efficient manner.

Ultimately, DePIN applications will depend on the network's development. If the idea catches on, DePIN crypto projects will spring up like mushrooms and DePIN developers will be in high demand. Here are some of the many possible DePIN project use cases.

Enhanced cloud services

DePINs can create a distributed and competitive cloud market, offering resources based on real-time availability and pricing, potentially lowering costs.

Sharing economy

DePIN networks go beyond basic resources, facilitating a wide range of applications. This includes complex calculations, renting out unused IoT devices, providing access to specialized equipment, sharing solar panel energy, and granting access to electric vehicle charging stations, benefitting both car owners and businesses with unused charging capacity. The list goes on.

Content Delivery Networks (CDNs)

DePIN projects can decentralize content delivery (providing web-based media over the internet or other media, like television broadcasts), leveraging geographically distributed storage for faster, more reliable service compared to traditional CDNs.

Internet of Things

DePINs support a robust IoT ecosystem, enabling devices to securely share data and access processing power, enhancing applications in smart cities and industrial automation.

Remote work

A DePIN network provides remote workers with secure, on-demand access to computing power and storage, beneficial for those with demanding workloads or limited traditional infrastructure.

Data democratization

DePINs create a marketplace for data storage and processing, allowing data monetization and encouraging data collection and sharing.

Examples of DePIN projects

The concept of a decentralized physical infrastructure network is inspiring numerous projects. Many have already been launched, and more are coming to fruition. Here are some neat examples of DePIN projects currently in operation.

Koii

Koii is a decentralized platform that rewards valuable content and supports creating decentralized applications (dApps). By utilizing underused consumer hardware, it delivers scalable and efficient services, ensuring fair compensation for contributors.

Fog Works

Fog Works offers secure, private, and efficient data storage solutions. Using blockchain technology and peer-to-peer networking, it creates a distributed storage ecosystem. Users can share their unused storage capacity and earn rewards in DataMall Coins ($DMC), the network's native token.

Helium

Helium Network is a well-established project that uses DePIN principles. It allows users to share their internet connection by installing special Helium hotspots. These hotspots provide internet access to others in the vicinity, and the user earns cryptocurrency rewards for sharing their bandwidth.

Streamr

Streamr is a decentralized real-time data network and a marketplace for real-time data. It lets users buy and sell data streams from various sources, such as sensors, weather stations, or financial markets.

Artificial intelligence (AI) can boost DePIN performance, while DePINs can shield us from AI big tech

While decentralized physical infrastructure networks are still a nascent technology with limited current availability, they offer a glimpse into a future where digital resources are more efficiently shared and monetized, providing extra earning opportunities for crypto users.

Leveraging blockchain technology, DeFi architecture, smart contract automation, and IoT integration, DePINs have the potential to revolutionize infrastructure access and utilization, creating a more collaborative and resource-efficient global network.

Adding artificial intelligence to the mix may provide an even bigger boost to the emerging ecosystem, resulting in a real paradigm shift. Essentially, AI involves developing machines that can learn and perform tasks typically requiring human intelligence.

DePIN networks could use this potential for optimizing resource utilization and pricing based on real-time demand and usage patterns. AI can also make it easier to analyze and optimize the utilization of shared computing power within a DePIN network, ensuring efficient performance for tasks demanding high processing power.

Benefits go both ways, with DePIN networks providing physical resources for AI technologies. A few months ago, Lee Sokolin, the founder of Generative Ventures, offered an interesting take on the matter in a piece for CoinDesk.com.

He hinted that DePIN creates a welcoming space for AI applications with its decentralized systems that mitigate serious risks related to the concentration of power among a few potent actors.

Sokolin warns that AI agents may become "fundamentally centralized and custodied with a single provider, creating massive personal risk across data, privacy and finance." One possible solution to this challenge lies in the web3 as a "counterweight to this danger," providing "self-custody of information, and self-custody of our AI agents."

DePIN projects contribute to a world "where multiple successful open-source models exist, and some are run well on decentralized infrastructure." Thus, "we expect that crypto custody and control of AI agents becomes a core value proposition of Web3," Sokolin concludes.