Decentralised Physical Infrastructure (DePIN) is set to become a US$1+ trillion sector over the next decade. Retail users, both merchants and consumers, will benefit the most from this growth.
Projects like BitTorrent and Tor showed the power of decentralised resource-sharing systems. Emerging DePIN networks are building on this foundation. But their scope is much bigger now, thanks to blockchain, cryptography, and AI.
Today, a few giant corporations have disproportionate control over the world’s data, as well as hardware and computational resources. One, this is risky, as the recent Microsoft outage showed.
Two, it’s unfair to the grassroots entities who are the producers of monetisable data and consumers of hardware. They are the real source of value in this sense.
DePIN can fix this and catalyse a paradigm shift. Users can monetise excess computational or hardware resources or, say, their vehicles’ data. Merchants can accept crypto payments through blockchain-native PoS machines.
Through all these, retail entities can be more direct, autonomous participants in the phygital economies of the future. DePIN, the Great Democratiser (or access/opportunity equaliser), has thus also been one of the leading crypto narratives in 2024.
DePINs are here to thrive
Though still nascent, the DePIN ecosystem has both negative and positive forces working in its favour. On the one hand, the downsides of hardware and software monopoly are becoming increasingly visible even to average users.
There was no need for thousands of people and businesses to remain stranded for hours, losing hundreds of thousands of dollars. This situation would not arise if the world ran on decentralised infrastructure with in-built redundancy and resilience. That’s DePIN’s significance by negation — it is what legacy infra is not.
As for the positive side, it opens many unprecedented avenues to become valuable in its own right. While seeding torrent files to support peer-to-peer downloads has been possible for years, it does not bring any monetary gains for seeders. DePIN changes that enable incentives over and above goodwill or ideology.
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That also means DePINs make monetary incentives for resource contributions the norm and not a choice. Moreover, using DePIN networks makes individuals resistant to censorship and manipulation, especially in crisis times.
For instance, it’s pretty impossible to execute an internet blackout by shutting down a decentralised WiFi network. Because here, the supporting physical infra — modems, routers, etc. — are distributed across a wide geographical region and are not situated in a single, identifiable, and stoppable location.
At the same time, communities can become more self-sufficient and reduce living costs by sharing energy via decentralised grids. Smaller businesses can also hedge against depreciating local currencies by using stablecoins or crypto for day-to-day transactions.
The possibilities are endless. That’s why over 17 million DePIN devices are already in action worldwide, and the sector’s market cap has crossed US$24 billion within a year or two.
Further, AI’s rapid growth is a strong external catalyst for DePIN’s upcoming growth both on the demand and supply sides. From decentralised compute marketplaces to smart AI-powered sensors, these two are made for each other, so to speak.
Overall, DePIN is not merely here to stay but to thrive. But like any booming, there is a need for caution.
What is DePIN and what is not
Once, every crypto project had something to do with DeFi. Then, they fell for NFTs. AI was the next cool kid on the block. Many others came and went by in the past few years.
Now it’s DePIN’s turn. It has great promise, and existing projects are already showing decent results. Investors and VCs are very interested in this, as well. So naturally, every other project calls itself DePIN.
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While the attention and hype are great from a short-term adoption perspective, it’s important to define and recognise what is DePIN and what is not.
Simply put, a real DePIN project must build and provide some hardware devices: routers, PoS machines, storage systems, etc. ‘Physical infrastructure’ is in the sector’s name, after all. While this seems trivial and obvious, it’s not so in reality.
Digital-only projects offering decentralised computation, payment services, etc., often stake claims on the DePIN fame. And while they may have great products to offer, they are not DePINs.
Moreover, DePIN projects must implement distributed governance models based on hardware ownership. Network participants must receive substantial monetary incentives for their contributions.
DePIN is a fairly new paradigm and recognising its core differentiators from the get-go is important from a long-term growth and stability perspective.
Last but not least, it’s essential that retail users get a clear sense of why this matters to them and why they must care.
Although not a ‘number go higher’ game in the literal sense, more retail participation is the key to stronger, more robust DePIN networks. And unlike in legacy setups, it’s best if participants know their stakes as well as duties. Because autonomy without knowledge is incomplete.
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