Why DePIN Is Taking Off Now

The
first
wave
of
DePIN
initiatives,
around
2019,
focused
on
digital
infrastructure,
but
now
we’re
seeing
other
types
of
networks
emerging
(DePIN
stands
for
decentralized
physical
infrastructure
networks).
Projects
centered
on
data
or
service
networks
are
becoming
more
common.
Ultimately,
I
classify
DePINs
as
those
that
1)
use
blockchain-based,
decentralized
coordination
to
operate
infrastructure
and
2)
rely
on
or
impact
physical
infrastructure
like
servers,
sensors,
or
property.

Before
moving
on
to
the
drivers,
we
need
to
understand
that
DePIN
projects
are
almost
always
made
up
of
two-sided
marketplaces.
These
marketplaces
have
a
demand
and
supply
side.

So,
what
is
happening
on
both
sides
of
these
marketplaces?

Making
it
easier
to
supply
DePIN
allows
for
better,
more
diverse
supply,
which
fits
closer
to
the
diverse
demand
side.

I
see
two
main
drivers
behind
the
supply
side
coming
online:

Historically,
hosting
infrastructure
required
upfront
capital
that
only
large
centralized
entities
had
access
to.
With
cost
curves
coming
down,
it’s
feasible
for
almost
anyone
to
become
an
infra
provider.

Recent

studies
suggest
that
memory
costs
have
dropped
100x
over
the
past
two
decades,
and
compute
(GPU)
costs
have
decreased
by
100-300x.
Although
demand
for
these
resources
is
growing
(and
there’s
even
a
shortage),
the
entry
barriers
for
hosting
significant
compute
or
memory
have
drastically
lowered.
The
capital
required
to
build
infrastructure
is
shrinking,
enabling
more
people
to
participate,
run
nodes,
and
make
the
network
more
robust
without
key
points
of
failure.

The
design
of
utility
tokens
has
long
been
seen
as
a
dark
art.
Over
the
past
years,
know-how
has
been
improving
rapidly
to
deliver
more
robust
token
models.

DePIN
networks
often
rely
on
utility
tokens
due
to
their
network
effect,
as
these
tokens
align
incentives
among
stakeholders
with
different
economic
interests.
Sound
token
design
is
critical
for
creating
the
right
game
theory
and
incentivizing
behaviors
that
support
the
network,
rewarding
contributions
appropriately.
Utility
tokens
also
help
kickstart
the
initial
network
effect,
and
more
token
engineers
are
now
using
scenario
analysis
and
statistics
during
design.
This
should
lead
to
more
robust
designs
capable
of
withstanding
time
and
market
volatility.

Historically,
DePIN
projects
have
been
demand-constrained,
meaning
that
services
and
applications
were
live
but
saw
low
take
rates
for
a
variety
of
reasons.
Increasing
demand
finally
makes
DePIN
businesses
viable,
kickstarting
the
flywheel
of
improvements.

I
see
three
main
drivers
behind
the
demand
side
coming
online:

Let’s
be
honest:
Many
Web3
apps
today
are
unusable
to
anyone
who
hasn’t
spent
significant
time
in
crypto.
Account
abstraction
and
AI-enabled
UX
should
solve
this.

Concerns
around
data
protection
are
proving
beneficial
for
the
adoption
of
DePIN,
which
foundationally
improves
this
due
to
its
decentralized
nature.

While
the
privacy
paradox
is
a
well-documented
reality,
since
the
diffusion
of
AI
across
society,
users
are
increasingly
concerned.
Particularly
around
data
management,
privacy
and
security
are
a
growing
concern.
We
see
evidence
that
users
are
increasingly
looking
for
alternative
solutions
that
prioritize
the
protection
of
personal
information.
DePIN,
with
its
decentralized
approach,
inherently
enhances
privacy
and
security,
making
it
a
more
attractive
option
for
individuals
and
businesses.
The
increasing
sensitivity
around
this
topic
after
decades
of
apathy
creates
a
nice
tailwind
for
DePIN.

It’s
estimated
that
around
350
million
terabytes
of
data
are
created
EVERY
DAY.
Humanity
is
generating
an
unprecedented
amount
of
data
that
needs
to
be
stored
in
memory
and
processed
with
computers,
something
DePINs
are
pretty
good
at…

We
are
creating
more
data
than
ever
before.
It
is

estimated
that
90%
of
all
data
today
has
been
generated
in
the
past
two
years.
With
Gen
AI,
data
has
genuinely
become
the
oil
of
the
21
century,
so
we
need
to
make
sure
we
store
it
well.
Previously,
many
companies
and
individuals
were
agnostic
whether
it
was
stored
in
bare
metal
servers
or
the
cloud;
now
there’s
more
of
a
decision
process
regarding
data
storage.
With
DePIN
maturing,
it’s
finding
itself
more
and
more
a
viable
alternative
to
the
more
established
options
for
storage
and
handling
of
data.

DePIN
has
a
lot
going
for
it,
which
explains
the
excitement
among
users,
investors,
and
the
entire
community.
I
firmly
believe
that
DePIN
will
soon
redefine
how
economically
important
infrastructure
is
organized
in
society,
positioning
itself
at
least
on
par
with
traditional
infrastructure.

Note:
The
views
expressed
in
this
column
are
those
of
the
author
and
do
not
necessarily
reflect
those
of
CoinDesk,
Inc.
or
its
owners
and
affiliates.