The main conclusions:
DePIN offers a new approach to developing and maintaining real-world infrastructure through the use of blockchain technology and tokenized economic incentives.
DePINs are divided into two categories: Physical Resource Networks (PRN) and Digital Resource Networks (DRN).
DePIN presents a unique solution model for many common problems in the cloud industry.
What is DePIN in cryptocurrency?
DePIN (Decentralized Physical Infrastructure, decentralized networks of physical infrastructure) is a new approach to the management of infrastructure networks, manifested in the decentralization of management using blockchain technology. By decentralizing ownership and sharing resources across multiple nodes in networks, resilience is increased, innovation is encouraged, and inclusivity is enhanced.
DePIN forms networks of crowdsourcing providers that offer real services to users through the use of blockchain technology for accounting, for which they are rewarded in the form of cryptocurrency. Statistics show that in 2023, the DePIN market will expand from approximately $10 billion to $25 billion.
DePIN can be implemented as DeFi platforms that use a digital ledger to provide financial services such as credit, loan, etc., without the need for traditional intermediaries.
How DePIN works and their types
DePIN creates a connection between physical objects and the blockchain. The middleware collects data about the physical resource and transmits it to a distributed database that serves as an administrator and money transfer system for suppliers and users.
DePIN facilitates the continuous expansion of the distributed infrastructure platform through incentives. The mechanism works as follows:
Providers are willing to register inactive physical assets to the decentralized network in order to be rewarded.
DePIN makes these resources available to users who are attracted by the relatively low cost compared to centralized alternatives.
The network receives income from commissions.
As the network expands with more members, the native token gains value. This increases the rewards received by the providers as well as the investors' returns. The growing value proposition, in turn, attracts more providers to provide their services, which is an additional resource for the network.
DePIN uses blockchain technology to improve security, efficiency and transparency in physical systems such as renewable energy networks and supply chain operations. Decentralized physical infrastructure networks can offer immutable records of product provenance in the management of transport systems, ensuring authenticity and transparency from production to supply. Blockchain implementation can reduce supply chain costs by up to 15%.
Similarly, blockchain technology enables peer-to-peer (P2P) trading in the power sharing space. This could decentralize and democratize access to resources, allowing, for example, homes with solar panels to sell excess energy to nearby households.
DePINs enable autonomous real-time interaction within the physical infrastructure using technologies such as smart contracts and Internet of Things (IoT), increasing system responsiveness and adaptability to human requirements.
DePIN is divided into two categories:
PRNs (Physical Resource Networks) are decentralized networks where ISPs provide hardware resources based on location (e.g. sensor installation). This equipment also acts as a resource for network connectivity, energy or geospatial data.
DRN (Digital Resource Networks) or digital resource networks are networks of interchangeable digital resources that do not depend on location. Providers provide services such as computing power, shared bandwidth, or storage facilities.
Physical Resource Networks (PRNs) and Digital Resource Networks (DRNs) work within DePIN to distribute and manage resources such as wireless communications and digital storage to democratize their ownership and access.
Examples of DePin projects
Let's consider several DePIN projects:
Theta Network is a decentralized video delivery network that provides a wide range of blockchain-enabled solutions to the challenges faced by the traditional video streaming sector. The Theta Network uses available redundant computing resources and bandwidth to function as an efficient video streaming ecosystem. The foundation of Theta Network innovation is the THETA token, which is required to vote on changes to the protocol, and the TFUEL token, which is used to secure all network operations.
IOTA is a scalable open source distributed ledger designed to seamlessly transfer value and data between humans and machines. The project was created for the next generation of the digital revolution called "Internet of Everything". IOTA guarantees seamless transactions, tamper-proof data, and low resource requirements. Its network can enable the Internet of Things (IoT) without major infrastructure investment. MIOTA is a token that powers the project's digital economy.
Filecoin is a decentralized data storage network that aims to create a global P2P marketplace for information. Filecoin allows users to buy and sell digital storage in a safe, transparent and efficient way. FIL is the token of the Filecoin ecosystem.
Each of the projects is unique, they create more sustainable and independent decentralized networks of physical infrastructure. Their number is growing rapidly: in 2023 it has doubled. This shows that DePIN continues to evolve and has huge potential to change the way physical infrastructure is managed.
Problems and prospects of DePIN
Despite the significant prospects of DePIN, the transition to decentralized infrastructure networks is associated with some difficulties:
Profitability. Since DePIN is a new technology, the number of users and providers is still quite small. To attract and retain them, rewards are needed, which should be large enough, but not exceed the income from the implementation of the projects.
Security. An increase in the number of participants leads to an increase in the risks of social engineering. Criminals manipulate the management system, and also merge the data of participants. Such cases lead to network failure and reduced trust. At the same time, this problem can be solved by introducing smart contract audits. These checks help identify and fix vulnerabilities that hackers can exploit.
Technological complexity. DePIN is a rather difficult ecosystem to understand, especially for beginners. In order to use the capabilities of decentralized networks of physical infrastructure to the full, you will have to spend a lot of time on mastering all the necessary knowledge about this technology.
DePIN has significant advantages:
Efficiency of use of resources. DePIN incentivizes institutions with excess computing resources to offer them to other users. Unlike centralized providers, they bypass complex pricing models to provide computing resources to meet the dynamic needs of audiences.
Cost reduction. Decentralized physical infrastructure networks are a unique approach to data storage and computing. It effectively turns the empty digital fields of the Internet into data processing space. This approach challenges the traditional pricing models of cloud storage giants. DePIN introduces a more cost-effective way to store and process data, potentially lowering costs for users or forcing traditional providers to rethink their pricing strategies.
Access to data. Decentralized networks of physical infrastructure allow users to decide where their data is stored, who has access, and under what circumstances it can be shared or deleted. This change empowers customers and restores a sense of privacy and control that has been somewhat lost in the era of centralized cloud services.
DePIN needs revision of the current regulatory framework, establishment of new technical standards and constant maintenance and support. Despite these obstacles, the benefits of decentralized physical infrastructure networks, including increased efficiency, sustainability and social equity, make them an attractive option for investment. DePIN revenues are expected to reach $3.5 trillion by 2028.
Visnovok
The DePIN concept revolves around the decentralization of control and operations, a move away from traditional centralized models that often suffer from inefficiencies and increased vulnerability to failure or attack. Decentralized physical infrastructure networks are a universal technology that uses unused or idle physical resources.
DePIN can touch every aspect of the physical infrastructure to be reformed through decentralization. Such projects as Power Ledger facilitate the exchange of distributed energy resources between users. Bittensor provides a platform for machine learning models in an iterative ecosystem, rewarding them with tokens for the informational value they bring to the network. New niches such as artificial intelligence, decentralized computing, mobility, mapping and bandwidth sharing are just a smattering of what DePIN will penetrate.
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