DePIN Tech Shows Promise, But Implementation Faces Several Hurdles, Moody’s Says

The
DePIN
sector,
which
stands
for
decentralized
physical
infrastructure,
could
help
existing
networks
scale
and
innovate,
but
several
risks
including
unclear
regulations
could
stifle
growth,
said
the
Wall
Street
credit
ratings
agency
Moody’s
Ratings
on
Tuesday
in
its
inaugural
report
about
the
sector.

“By
linking
together
established
pieces
of
a
system’s
backbone
with
the
building
blocks
of
distributed
ledger
technology
(DLT),
DePIN
has
potential
to
improve
network
reliability
and
efficiency
while
lowering
operational
costs
and
optimizing
resources
and
industry
collaboration,”
the
authors
of
the
report
said.

“However,
there
are
significant
obstacles
to
widespread
adoption,
including
regulatory
and
interoperability
issues,
cybersecurity
risks
and
the
need
for
substantial
investments
in
infrastructure
and
skills,”
they
said.

Incumbent
network
operators
–
telecommunication
companies,
utilities
and
transportation,
to
name
a
few
–
face
ever-growing
user
demand
that
require
capital-heavy
infrastructure
developments,
the
report
said.
Leveraging
decentralized
models
could
help
them
alleviate
some
of
the
pressure
and
stay
relevant
as
artificial
intelligence
and
internet-of-things
(IoT)
disrupt
old
business
models,
the
report
added.

Part
of
DePIN’s
allure
is
issuing
their
own
digital
tokens,
which
can
help
projects
incentivize
participation
and
network
expansion.
Today’s
unclear
global
regulatory
landscape,
however,
makes
compliance
problematic
and
could
stifle
the
sector’s
growth.
Connecting
existing
infrastructure
with
blockchain
rails
could
also
open
new
attack
vectors,
creating
cybersecurity
risks.

DePIN
combines
blockchain
technology
with
real-world
networks
such
as
telecommunications,
file
storage
and
computing
capacity.
The
sector
has
become
one
of
the
hottest
corners
in
the
digital
asset
space
this
year.
The
fact
that
a
well-known
Wall
Street
traditional
finance
name
like
Moody’s
Ratings
covers
DePIN
underscores
the
increased
attention
the
sector
is
attracting.

“The
motivation
behind
writing
on
DePIN
is
to
bring
attention
to
a
realistic
need
for
industries
to
reassess
infrastructure
management
strategies
in
a
world
increasingly
driven
by
digital
transformation,”
Rajeev
Bamra,
SVP
and
Head
of
Strategy
of
Digital
Economy
at
Moody’s
Ratings,
told
CoinDesk
in
an
email.

The
sector’s
increasing
mindshare
is
reflected
in
rising
venture
capital
funding,
with
investors
allocating
$583
million
in
private
investments
to
DePIN
projects
this
year
so
far,
already
surpassing
the
previous
record
year
of
2022,
according
to
a

report
by
digital
asset
market
maker
Wintermute.

Read
more:



Why
DePIN
Is
Taking
Off
Now

UPDATE
(Sep.
17,
21:10
UTC):

Adds
comment
from
Rajeev
Bamra,
lead
author
of
the
report.