TLDR: DePIN is an emerging crypto sector that stands for decentralized physical infrastructure networks. DePIN uses blockchain technology to create a distributed physical infrastructure and hardware network through token incentives in a permissionless, trustless way. In other words, it offers a playbook to give people a reward in the form of tokens for setting up infrastructure, contributing to it and maintaining it. This way, people participate as stewards of this infrastructure network, managing and governing it over time, and contributing to solve current problems in the traditional telecommunications infrastructure.
In order to understand the concept of decentralized physical infrastructure networks (DePIN), we first need to understand what physical infrastructure networks are. They refer to physical networks and facilities fundamental to the functioning of a modern industrial nation. They provide public services that are essential for an economy to run smoothly and grows. This encompasses transportation, energy and telecommunications.
Traditionally, deployment and management of physical infrastructure have been dominated by large corporations capable of handling significant capital requirements and logistical challenges. A 2021 industry report, for instance, states that telecommunications corporations often spend three to five years installing signal towers and building out their physical networks. Sometimes, it takes years for a telcom company to profit from the initial upfront investment of physical assets, and even up to 15 to 20 years for fiber optics. Corporations, therefore, are incentivized to maintain a near-monopoly on pricing, conditions and services offered to end-users worldwide. But what if there was another way?
Here is where DePIN comes into play.
In an increasingly digitized world, where we use phones and computers and any sort of object connected to the internet (what is known as the "internet of things" or IoT), telecommunication infrastructures have become indispensable and crucial for our interactions with the world. However, there is a big challenge: the high cost of building and maintaining network infrastructure. This issue impacts both investors financially and consumers directly. The telecommunications industry is dominated by large corporations who can handle large capital requirements. But higher costs result in increased prices and a reluctance to invest in areas that desperately need infrastructure, primarily due to profitability concerns.
Certain infrastructure elements, philosophically speaking, seem fitting for collective contribution. Internet access is one such example of a need that has arguably become inalienable, argue several of today's technologists.
“At this point, it is almost a fundamental right. To be human, you ought to have internet access,” said Kuleen Nimkar, who leads DePIN-focused efforts at the Solana Foundation. In developed countries, this is fairly easy to achieve. Not so much in less developed regions.
For instance, consider the situation of internet access in schools. According to UNICEF, there is no data about how many schools there are in the world and where they are located, and even less data about which of them are connected to the internet. The absence of education and internet access often results in exclusion, limited learning resources, and diminished opportunities for vulnerable populations. So through initiatives like Project Connect and Giga, UNICEF is trying to solve this problem by mapping the location and real-time internet connection of every school in the world. To address this, they are experimenting with non-fungible tokens (NFTs) to create a decentralized, open-source database of schools globally. But how do they plan to provide internet access to all these schools?
DePIN could offer incentives to governments, partners, schools and local citizens to address this issue. It would help minimize the digital divide, but also improve their economy.
From storage and computing businesses to virtual private networks (VPNs), wireless networks and everything in between, there are a ton of companies already building the next generation of physical infrastructure networks.
One notable example is Helium. The project started off as an internet-of-things (IoT) network that wanted to give coverage for IoT devices that serve real-world use cases, like cab-hailing services, rendering power and more. It's grown into a decentralized 5G network of more than 30,000 user-powered DIY telecommunications hubspots. The company achieved this by distributing tokens that reward participation.
“It turned out to be an exceptionally effective strategy where they managed to get thousands of devices on this network,” said Nimkar. “It went viral as people found out that they could operate a Helium router and get a supplemental source of income while also contributing to this network.” An arguably natural next step in an Airbnb and Uber-powered world that has normalized "gigging out" individual resources — albeit through a corporate-owned platform — the Helium Network signifies a paradigm shift in decentralized wireless infrastructure. It facilitates people-powered networks and incentivizes the community to keep the network alive.
Another exciting example is Hivemapper, a global decentralized map aiming to transform the mapping economy and the use of geospatial data. Participants in this network use dashcams on their vehicles to collect mapping data, receiving incentives in return. While this mirrors Google Maps' approach, the key difference is that instead of a large corporation overseeing it, individual users manage and are rewarded for their contributions. “It's weird in some ways that today most of us get mapping data from Google Maps, which is one organization that bought a bunch of cars that drive around to make a representation of the world that we all live in and share,” noted Nimkar. “This is less apparent to consumers because consumers just access Google Maps for free. But, if you're a business that wants to access that data, you are essentially paying a monopoly that raises prices consistently over time because they have no competition.”
Additionally, storage networks are reaping the benefits of DePIN. There are a few companies in the crypto world working on this. Names like Filecoin or IPFS are a couple of examples which you might have already heard of. Their primary function involves individuals worldwide offering hard drive space, enabling decentralized file storage. These networks operate as open-source cloud storage marketplaces, providing both protocols and incentive layers.
“It's weird ... that today most of us get mapping data from Google Maps, which is one organization that bought a bunch of cars that drive around to make a representation of the world that we all live in and share."
Making the world a better and more decentralized place never comes without its challenges. One of the biggest challenges is developing products that appeal to consumers.
As Nimkar says, “You can get a bunch of people to run routers or to have cameras or to operate storage networks. And that's great. Now there needs to be a buyer for the service." This is a common scenario for numerous crypto and blockchain-related solutions. There are incredible products and services being built, but the Web3 space seems to be failing at getting users and customers to use them.
“We are at a stage where we have to figure out how to productize this and sell it really effectively, because ultimately, you're competing with centralized organizations that have many years in the market and massive enterprise sales teams.” Nimkar remarked. He says this focus has drawn many DePIN projects to build on Solana, in order to leverage the speed, low cost and scalability of the chain to build a DePIN product that can compete with centralized alternatives.
However, governance also poses a significant challenge for these networks. The question is how to ensure their long-term functionality. Imagine a scenario where these networks grow, get a lot of usage, and thrive. Now there's this huge collective physical infrastructure network demanding crucial decision-making. This leads us to a familiar crossroads in the realm of decentralization. Should these decisions be made by the foundation team that originated the network? Or should they be made by the people who operate it now? These are questions that are difficult to answer today.
Should these decisions be made by the foundation team that originated the network? Or should they be made by the people who operate it now? These are questions that are difficult to answer today.
Despite these and other current challenges, such as scaling issues and cost of transactions in the network, there are numerous individuals and companies actively seeking solutions to make DePIN a tangible reality. Within the broader decentralized ecosystem, technologists in Web3 are working to pinpoint common challenges faced by DePIN projects, assisting them in developing open-source or readily accessible solutions.
“I can see a future in which being a contributor to deeper networks is a thing that many people will just do. And it won't necessarily be how they make their entire living, but it will be a meaningful supplemental source of income,” said Nimkar. “I could see it becoming a broad, socially accepted thing that a lot of people do, just like today a lot of people use or drive Uber services.”
The emerging playbook for physical infrastructure networks holds the potential to transform a traditionally centralized and intricate industry, positioning DePIN as one of many potentially disruptive real-world applications of blockchain technology. While its future is promising, only by overcoming these challenges can decentralization truly triumph in the realm of constructing and overseeing physical infrastructure networks.
This is not financial advice. If you don't want to spend money investing in crypto or Web3 — you don’t have to. The intent of this article is to help others educate themselves and learn.
Sabrina Bonini is a seasoned Web3 writer, educator, and speaker dedicated to empowering individuals and businesses in the Web3 space through effective content creation. With a mission to assist companies in crafting impactful writing content, she plays a pivotal role in helping the fast-evolving Web3 landscape communicate its message and drive adoption. Sabrina pays special attention to the education and empowerment of Spanish-speaking artists, women, and underrepresented groups, and is fully committed to helping make the blockchain ecosystem more diverse and inclusive.
