Cryptocurrencies have given rise to a collaborative economy and enabled the next generation of the Internet, which is built around blockchain technology.
Decentralized Public Infrastructure Networks or DePIN, acronym for “Decentralized Public Infrastructure Networks”, are networks composed of hardware equipment that operate in a decentralized manner to allow anyone to connect and become an infrastructure provider.
Technology blockchain is one of the substantial players in the field of DePINs, which has enabled the evolution of this new type of decentralized physical infrastructure. Likewise, the cryptocurrencies, and Tokens They play a crucial role in DePINs, introducing incentives that motivate users and companies to connect to provide infrastructure.
Although the DePIN sector is in full development, CoinMarketCap pointed out that in recent years the construction of this type of networks has been advancing considerably, especially since the arrival of the blockchain, which is why they represent one of the key issues for the crypto industry in the second half of 2023. The cryptocurrency price analysis and monitoring platform estimates that this year we could see a more significant development in the projects that are part of this interesting sector.
DePIN, a key issue for the blockchain industry
The birth of cryptocurrencies completely transformed the way we view and interact with the financial world. Today, people can access peer-to-peer networks to transfer value without intermediaries. Likewise, it is possible to access financial services, such as loans, without having to go to a bank. All this is thanks to cryptocurrencies and the industry that has been built around them, which have improved and revolutionized a wide range of services, making them more accessible to everyone through blockchain technology and decentralization.
These same revolutionary technologies are also giving rise to a new generation of the web, known as Web3, where a complete ecosystem of decentralized services and a new digital economy are being built that seek to transform the Internet, open the doors to new business models that benefit all parties involved and create a more secure, transparent and free hyperconnected world.
However, one reality that exists today is that, just like the Internet today, many of the crypto industry's project and application websites require centralized infrastructure platforms like Amazon Web Service (AWS) and Google Cloud to function. Therefore, a failure like the one AWS suffered at the end of 2021 can have a major impact on these platforms.
In December 2021, AWS services were affected by a bug that left several cryptocurrency exchanges and platforms out of service for several hours. Users of these platforms were unable to access their accounts or their crypto funds, which caused chaos. Fortunately, Amazon fixed the bug and crypto exchanges were able to restore services to their customers shortly after. But the service interruption suffered by AWS once again highlighted the clear need for build a new infrastructure around decentralization.
DePINs serve this need, as they function as a distributed network of computers where individuals or businesses can connect hardware devices as nodes to contribute to the network. As mentioned at the beginning, these networks are currently using tokenization to incentivize users to connect and serve as infrastructure providers.
How a DePIN works and its financial incentives
A DePIN works by combining technologies such as blockchain and economic incentives to encourage the construction and operation of decentralized physical infrastructures. These infrastructures can cover areas such as energy, transportation, communications, water, among others.
In a DePIN, participants contribute resources such as time, knowledge, capital, and labor to build and maintain the infrastructure. These contributions are then rewarded through economic incentives in the form of tokens or cryptocurrencies. These economic incentives aim to align the interests of participants and encourage cooperation and collective construction of the infrastructure. Just as in blockchain networks, where miners, or stakers, are rewarded for maintaining resources that allow these networks to function.
Economic incentives in a DePIN are based on or generated by a huge variety of mechanisms. One of them is the issuance of tokens, which are distributed among participants as a reward for their contribution. These tokens can have economic value and be exchanged in secondary markets. In addition, participants can also receive additional incentives based on the quality of their contribution, productivity, innovation or the impact generated. In short, each DePIN can adjust or create mechanisms according to the reality and objective of its infrastructure.
However, the common point in all these incentive processes is tokenization. Tokenizing a DePIN is what allows for the creation of a transparent and auditable incentive system, where each contribution is recorded on the blockchain and tokens are distributed fairly. This fosters trust among participants and prevents the concentration of power in the hands of a few. In addition to economic incentives, a DePIN can offer other benefits to participants, such as preferential access to the services of the built infrastructure or the possibility of influencing the governance decisions of the network.
DePIN projects
One of the main projects that is part of the DePIN sector is HeliumHelium, a decentralized network that is focused on Internet of Things devices, was launched in 2019 as a solution to build a people-powered wireless network of decentralized nodes, where low-power devices can connect and share data with each other.
Through this project, its creators Amir Haleem, Shawn Fanning and Sean Carey, want to build the “The People's Network” to promote decentralization and ensure global connectivity.
Likewise, IoTeXIoTeX, which also focuses on the Internet of Things, is another of the blockchain industry projects that are part of the DePIN sector. IoTeX builds a decentralized network where users can regain control of their data. Its main objective is to build an open ecosystem where people and machines can interact to boost the open economy through the use of the IOTX token.
Also, the decentralized data storage network Filecoin Filecoin is part of the DePIN. This network works as a blockchain data cloud that allows data and information to be stored securely and forever. In 2014, Filecoin was introduced as an incentive layer for the InterPlanetary File System (IPFS) powered by the FIL token.
In addition to Helium, IoTeX and Filecoin, other projects in the crypto world that are helping to build the DePIN ecosystem are: Arweave, a censorship-resistant information storage platform; Storj, a decentralized cloud for file uploads and Both, which provides a marketplace for idle hard drive capacity in computers around the world.
But not all the projects that make up the DePIN sector are related to blockchain technology. The protocol Nostr, for example, which does not use the blockchain, is focused on building a new censorship-resistant communication standard that allows for the construction of social and messaging applications so that people can interact and communicate with each other in a private and decentralized way without using the blockchain or servers like AWS.
BitTorrent, developed by Bram Cohen in 2001, is a decentralized peer-to-peer communications protocol for file sharing on the Internet. This protocol incentivizes the distribution and sharing of files and content through the BTT token.
Main use cases
The DePIN sector is divided into different markets. According to Messari, in its report “The DePIN Sector Map”Published in January, server networks, wireless networks, power grids, and sensor networks, where data is monitored from different locations similar to Google Maps, are the main use cases for decentralized public infrastructure networks.
A $3,5 trillion market by 2028
The DePIN sector could see colossal growth over the next five years. According to rollup platform Eclipse, the DePIN market is valued at around $3.000 billion. However, projections suggest that it could reach a value of $2028 trillion by 3,5.
Likewise, CoinMarketCap noted in its report “Crypto Market Analysis H1 2023” that the expansion of the DePIN sector could be imminent this 2023, with projects such as Helium, IoTeX, Filecoin and Arweave building steadily.
