Author: Cynic & Shigeru, CGV Research
TL;DR
——The concept of DePIN: The concept of decentralized physical infrastructure network (DePIN) is explored, highlighting the intersection of digitalization and decentralization. DePIN combines physical hardware and blockchain technology, representing a new era of integration of digital technology and the physical world. The article emphasizes the importance of DePIN in the redistribution of data, power and control, foreseeing a more democratic, fair and transparent future.
——The "chicken and egg" problem faced by DePIN: One of the main challenges faced by DePIN in its development process is discussed: the "chicken and egg" problem. This problem describes a dilemma: in order to build a strong decentralized network, a large number of hardware devices are required to participate, but in order to attract these devices, an already established and well-running network is required. The article emphasizes that in order to attract early participants, the network needs to provide some form of incentives.
——How DePIN works: DePIN's working principle is introduced, including its decentralized nature that relies on individual hardware devices and the use of blockchain technology to manage and protect the network. As an open, transparent and tamper-proof digital ledger, blockchain records all transactions and interactions on the network, ensuring that all nodes follow the rules of the network. In addition, DePIN uses an incentive mechanism, usually based on cryptocurrency, to encourage nodes to participate and contribute their resources.
——Industries where DePIN is applicable: The application potential of DePIN in industries such as telecommunications, energy, data storage, IoT, and supply chain is explored. For example, in the telecommunications industry, DePIN provides a decentralized solution that allows devices to communicate directly without going through a central node. In the energy industry, DePIN provides a decentralized power grid solution that allows individual nodes to exchange electricity directly.
——The singularity of the DePIN market explosion: The impact of increased technological maturity on the DePIN market explosion was discussed, mainly including the progress of blockchain technology and IoT technology: high-throughput blockchain solutions, enhanced security and privacy protection, the development of cross-chain technology, and the growth and maturity of IoT devices, all of which provide DePIN with more nodes and data, enhancing its network effect, etc.
1. The connotation of DePIN
As technology advances, we are at the intersection of digitization and decentralization. Decentralization is more than just a technological trend; it represents a redistribution of power, control, and data ownership.
In this context, the Decentralized Physical Infrastructure Network (DePIN) came into being, providing us with a new perspective on the interaction between the physical world and the digital world. This interaction is not only at the data level, but more importantly at the level of power and control.
Through DePIN, we can envision a more democratic, fair, and transparent future where everyone can participate and benefit.
DePIN, or Decentralized Physical Infrastructure Network, is an emerging technology concept that combines physical hardware and blockchain technology. These networks, also known as Proof of Physical Work (PoPW), Token Incentivized Physical Infrastructure Networks (TIPIN) and Edgefi Networks, represent a new era of merging digital technology with the physical world.
In this era, data is no longer a passive number, but an entity closely connected to the physical world. Through DePIN, we can see a decentralized future where data, power, and control are redistributed and everyone can participate and benefit from it.
For example: WiFi hotspots in wireless networks or solar home batteries in energy networks. These networks are built in a decentralized manner by various contributors around the world. In return, these individuals and entities receive financial compensation and network ownership through token incentives.
2. Analyzing the intrinsic value of DePIN from the perspective of the “chicken and egg” problem
In the evolution of technology, we often encounter a series of challenges, among which the "chicken and egg" problem is the most classic one. This problem describes a dilemma: in order to achieve a certain goal, you need to have A first, but in order to have A, you need to achieve that goal first. In the context of DePIN, this problem becomes particularly prominent.
In order to build a strong decentralized network, we need a lot of hardware devices to participate. But in order to attract these devices, we need a network that is already established and running well.
2.1 Why is the “chicken and egg” problem so critical in DePIN?
The value of a decentralized network lies in its participants. The strength and stability of a decentralized network is directly related to the number and quality of its nodes. More nodes means higher redundancy, better data distribution, and higher system resilience.
However, for most owners of hardware devices, joining a new, unproven network is risky. They may need to invest time and resources with no clear guarantee of returns. Therefore, in order to attract these early participants, the network needs to provide some form of incentive.
2.2 How does DePIN solve the problem?
DePIN’s solution is to provide incentives for early participants. These incentives can take many forms, from cryptocurrency rewards to special rights within the network.
For example, a DePIN might offer additional cryptocurrency rewards to its early nodes, or provide them with greater weight in network decision-making. This incentive system encourages more hardware devices to join the network, thereby accelerating the growth and stability of the network.
In DePIN, incentives are not just about solving the "chicken and egg" problem. They are also key to ensuring the health and stability of the network. A healthy DePIN requires its participants to continuously provide and maintain its resources. To ensure this, the network needs to provide sufficient incentives to encourage this behavior. This may include providing cryptocurrency rewards, providing special rights within the network, or other forms of rewards.
2.3 Design Challenges and Opportunities
Although DePIN provides a solution to the “chicken and egg” problem, it does not mean that it does not have other challenges. For example, how to ensure that the incentive system is fair? How to prevent malicious actors from exploiting the incentive system? How to ensure the long-term stability and health of the network?
These issues require deep thinking and solutions from the designers and operators of DePIN. But at the same time, DePIN also provides us with a unique opportunity to rethink how to build and operate the network. Through innovative incentive systems and decentralized design principles, DePIN shows us a more fair, transparent and democratic future.
3. Working principle of DePIN
DePIN works on the basis of decentralization and blockchain technology. First, DePIN relies on individual hardware devices, which are also called nodes. These nodes can be personal computers, dedicated servers, or IoT devices. Together, these devices form a decentralized network without any central node or authority. This decentralized nature makes DePIN more secure and transparent.
Secondly, DePIN uses blockchain technology to manage and protect the network. Blockchain is an open, transparent and tamper-proof digital ledger. It records all transactions and interactions on the network and ensures that all nodes follow the rules of the network.
In addition, in order to encourage nodes to participate and contribute their resources, DePIN uses an incentive mechanism. This mechanism is usually based on cryptocurrency, and nodes can get rewards by participating in the network and contributing their resources.
Schematic diagram of DePIN flywheel effect
(Image source: IoTeX)
Compared with traditional physical infrastructure networks, DePIN (Decentralized Physical Infrastructure Network) has the following advantages:
——Joint ownership: DePIN encourages participants to jointly invest in the deployment and maintenance of infrastructure through a token reward mechanism. This bottom-up construction approach makes the network owned by all participants rather than controlled by only a few shareholders.
——Cost decentralization: Decentralized physical infrastructure networks effectively reduce operating costs and expenses by mobilizing the common resources of network participants.
——Decentralized features: Compared with traditional centralized infrastructure networks, decentralized networks provide higher security and resilience. The decentralized construction method makes the network less susceptible to the negative impacts that centralized control may bring, such as corruption, tampering, and hacker attacks.
——Open competition and innovation: DePIN brings innovation opportunities to all walks of life. It eliminates the entry barriers set by traditional infrastructure networks and encourages new participants to compete in markets that were originally dominated by a few large companies.
4. Which industries is DePIN best suited for?
With the rapid development of technology, the concept of decentralized physical infrastructure network (DePIN) is gradually becoming a reality. This network model that combines physical hardware and blockchain technology has brought countless opportunities to all walks of life.
4.1 Telecommunications Industry
The telecommunications industry is DePIN's preferred field. Traditional telecommunications networks rely on centralized base stations and switches to transmit data. However, with the increase in IoT devices and the promotion of 5G technology, this centralized model is becoming less and less suitable. DePIN provides a decentralized solution that allows devices to communicate directly without going through a central node. This not only improves the efficiency and resilience of the network, but also reduces the cost of maintenance and upgrades.
4.2 Energy Industry
The energy industry is also an ideal area for DePIN. With the development of renewable energy technology, more and more households and businesses are beginning to produce their own electricity. However, the traditional power grid is centralized and not suitable for this decentralized energy production model. DePIN provides a decentralized power grid solution that allows individual nodes (such as households, businesses or small power plants) to exchange electricity directly. This not only improves the efficiency of the power grid, but also provides new economic opportunities for participants.
4.3 Data Storage Industry
With the explosive growth of data volume, data storage has become a huge challenge. Traditional cloud storage solutions rely on centralized data centers, which not only increases costs but also poses security risks. DePIN provides a decentralized storage solution that allows individual nodes to provide storage space and receive corresponding rewards. This model not only reduces storage costs, but also improves data security and reliability.
4.4 Internet of Things Industry
The Internet of Things is another ideal area for DePIN. As the number of devices increases, traditional centralized networks become increasingly unstable and unreliable. DePIN provides a decentralized network solution that allows devices to communicate directly without going through a central node. This not only improves the efficiency and resilience of the network, but also provides new functions and services for devices.
4.5 Supply Chain Industry
Supply chain management is a complex process involving multiple participants and a large amount of data exchange. Traditional supply chain solutions rely on centralized databases and applications, which increases costs and complexity. DePIN provides a decentralized supply chain solution that allows individual participants to exchange data directly without going through a central node. This not only improves the efficiency and transparency of the supply chain, but also provides new economic opportunities for participants.
4.6 Transportation Industry
With the development of autonomous driving technology, the transportation industry is facing a huge change. Traditional traffic management systems rely on centralized control centers and sensor networks. However, this model may no longer be applicable in the future autonomous driving world. DePIN provides a decentralized traffic management solution that allows vehicles to communicate directly without going through a central node. This not only improves the efficiency and safety of traffic, but also provides new services and functions for vehicles.
DePIN provides countless opportunities for all walks of life. Through a decentralized approach, DePIN not only improves efficiency and resilience, but also provides new economic opportunities for participants. As technology advances and the market develops, we can expect DePIN to play an increasingly important role in the future.
5. The singularity of the DePIN market explosion:
In the wave of technology, innovation is the key force driving progress. Especially in the field of DePIN, the improvement of technology maturity is not only a milestone, but also a turning point. It marks the transition of DePIN from theory to practice, from concept to reality. The key technological advances behind the singularity will jointly shape the future of DePIN and pave the way for its market explosion.
5.1 Improvement of Technology Maturity
5.1.1 Advances from blockchain technology
——High-throughput blockchain solutions: With the emergence of a new generation of blockchain protocols, such as sharding technology and side chains, the processing speed and throughput of blockchain networks have been significantly improved. This enables DePIN to handle more transactions and data, increasing its usefulness and efficiency.
—— Enhanced security and privacy protection: By introducing advanced technologies such as zero-knowledge proof and homomorphic encryption, the security and privacy protection capabilities of the blockchain network are enhanced. This provides DePIN with a more secure and reliable data exchange and storage environment.
—— Development of cross-chain technology: The development of cross-chain technology enables different blockchain networks to communicate and exchange data with each other. This provides DePIN with wider interoperability, enabling it to integrate more resources and services, etc.
The mainstream DePIN underlying public chain technology in the market (Image source: Messari)
5.1.2 Advances from IoT Technology
IoT technology: The growth and maturity of IoT devices will provide DePIN with more nodes and data, thereby enhancing its network effect. According to Gartner, the number of IoT devices worldwide will reach 25 billion by 2025. This growth will provide DePIN with more nodes and data, thereby enhancing its network effect.
——Popularization of smart sensors and devices: As the cost of IoT sensors and devices decreases, their application in various fields becomes more and more common. This provides DePIN with a large number of data sources and nodes, enhancing its network effect.
——The development of edge computing: The development of edge computing technology enables data processing to be performed close to IoT devices, reducing the delay and cost of data transmission. This enables DePIN to process and analyze data from IoT devices more efficiently.
——Improved IoT security: With the advancement of IoT security technology, such as stronger encryption methods and security protocols, the security of IoT devices and networks has been improved. This provides DePIN with a more secure infrastructure and data source.
5.2 Policy and regulatory support
If the government and regulators can formulate friendly policies and regulations to encourage the development of DePIN, this will create favorable conditions for its widespread application, including but not limited to:
- Innovative tax incentive policies: The government can implement tax incentives for DePIN projects, such as providing tax reductions or tax credits to companies and individuals that deploy environmentally friendly technologies or renewable energy facilities in the DePIN network.
- Simplify the licensing and approval process: The government can simplify the licensing and approval process for DePIN projects, especially for projects that cross borders or involve multiple administrative regions. This will lower the barriers to project launch and operation and accelerate the pace of innovation.
- Establish a DePIN Innovation Fund: The government can set up a special fund to support DePIN-related R&D and innovation projects. These funds can be used to finance start-ups, research institutions or public-private partnership projects.
5.3 Support from Enterprises and Industries
If mainstream businesses and industry leaders can support and adopt DePIN, it will provide a huge boost to it.
——Strategic investment from industry giants: Imagine if tech giants like Google and Amazon start investing in DePIN projects or establishing partnerships with DePIN startups. Such actions will not only provide financial support for DePIN, but also increase its visibility and credibility within the industry.
Supply Chain Integration: Large manufacturing and retail companies can improve efficiency and transparency by integrating DePIN technology into their supply chain management. For example, using DePIN-based solutions to track products from production to delivery.
Energy management innovation: Energy giants can optimize energy distribution and trading by adopting DePIN technology. For example, a decentralized energy trading platform can be established to allow users to directly trade renewable energy.
5.4 Expansion of technical cooperation and partnership
Cooperation and integration with other technologies and platforms, such as 5G and edge computing, will provide more possibilities for DePIN applications. For example:
——Integration of 5G and DePIN: Combining the high speed and low latency characteristics of 5G networks, DePIN can achieve faster data transmission and real-time communication. For example, building a DePIN-based intelligent transportation system that uses 5G networks to achieve instant communication and data sharing between vehicles, improving road safety and traffic efficiency.
——Integration of edge computing and DePIN: By integrating edge computing technology into DePIN, data can be processed instantly at the location where it is generated, reducing dependence on centralized data centers. This is particularly useful for application scenarios that require rapid response, such as security monitoring and emergency response systems in smart cities.
——Synergy between IoT devices and DePIN: IoT devices can act as nodes in the DePIN network to collect and transmit data. By combining with DePIN, more secure and efficient data management can be achieved. For example, in the agricultural field, data collected by IoT devices can be analyzed through DePIN to optimize crop planting and resource allocation.
——Integration of artificial intelligence (AI) and DePIN: Combined with artificial intelligence technology, DePIN can achieve smarter data analysis and decision support. For example, in the field of healthcare, patient data collected through DePIN can be combined with AI for in-depth analysis to provide personalized treatment plans.
5.5 Globalization and strengthening of cross-border cooperation
The concept and application of DePIN are not limited by region. The global vision and cross-border cooperation will bring it a larger market and more opportunities. For example:
——Global Disaster Response Network: Imagine a global DePIN system for disaster response. When an earthquake, flood or other natural disaster occurs, this decentralized network can quickly mobilize global resources, including drones, sensors and communication equipment, to provide real-time data and support for rescue operations.
- International clean energy grid: DePIN can be used to build a cross-border clean energy sharing network. For example, using solar energy in the Sahara Desert and wind energy in Northern Europe, through a decentralized energy grid, energy can be distributed around the world, optimizing energy use and reducing waste.
——Global Healthcare Monitoring System: Deployment of a DePIN-based healthcare monitoring system around the world can track the spread of infectious diseases in real time, monitor public health conditions, and share important medical data around the world, thereby more effectively responding to global health crises.
In short, the explosion of DePIN requires the joint efforts of multiple factors. Technology, policy, economy, community and market will all play a key role.
6. Some typical projects of DePIN
As the DePIN concept becomes more popular, many projects are beginning to explore this area. Below are some examples of projects that have successfully applied the DePIN concept and how they use this new technology to innovate and provide value.
6.1 Helium
Helium is a decentralized wireless network designed to provide internet connectivity to low-power devices. Helium's network is made up of hotspots deployed by individuals and businesses. These hotspots not only provide wireless coverage, but also verify other hotspots in the network. In this way, Helium creates a decentralized, self-verifying network. Participants can earn Helium tokens as rewards by deploying hotspots and verifying network activity.
6.2 HiveMapper
HiveMapper is a decentralized mapping network that creates 3D maps using video data. HiveMapper allows anyone to upload video data and use that data to create and update 3D maps. In this way, HiveMapper creates a decentralized, community-driven mapping platform. Participants can earn rewards by providing video data.
6.3 Render
Render is a decentralized cloud computing platform designed for 3D rendering, machine learning, and other computationally intensive tasks. Render allows users to provide unused GPU power as part of the network. These GPU resources are pooled together to power tasks that require a lot of computing power. Participants can earn Render tokens as rewards by providing GPU resources.
6.4 Filecoin
Filecoin is a decentralized storage network that aims to provide users with secure and reliable data storage services. Filecoin allows anyone to provide unused storage space as part of the network. These storage resources are pooled together to provide services to users who need storage space. Participants can receive Filecoin tokens as rewards by providing storage space.
These projects are all successful applications of the DePIN concept. They not only demonstrate the potential of decentralized technology, but also provide new economic opportunities for participants. With the advancement of technology and the development of the market, we can expect more DePIN projects to emerge in the future, providing us with more innovation and value.
Conclusion
As we delve deeper into DePIN, we realize that this is not only a breakthrough in technology, but also a challenge to the existing social and economic structure. DePIN shows a future vision based on decentralized power, data transparency, and broad participation. In this vision, every participant has the opportunity to influence the development of the network. This decentralized feature can not only promote technological innovation, but also promote social equity and justice.
Therefore, DePIN not only marks a major advancement in the field of technology, but also heralds a shift in the way human society is governed. It represents an evolution from centralized control to decentralized governance, and a transition from closed systems to open networks.
Driven by DePIN, we can anticipate a future of a more connected, intelligent, and human digital world.
About CGV (Cryptogram Venture)
CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. It has invested in and incubated the licensed Japanese yen stablecoin JPYW in the early stage. At the same time, CGV FoF is the LP of funds such as Huobi venture, Rocktree capital, and Cryptomeria Capital. Since 2022, CGV has successfully initiated and organized two consecutive Japan Web3 Hackathons (TWSH), and has received joint support from institutions and experts such as the Ministry of Education, Culture, Sports, Science and Technology of Japan, Keio University, SONY, and SoftBank. At present, CGV has branches in Hong Kong, Singapore, New York and other regions.
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