DePIN: Constructing a Decentralized Value Network with Dual Curve Superposition

DePIN is achieving large-scale interaction between the physical world and Web3, gradually disrupting traditional infrastructure operation models. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, it utilizes crypto-economic incentives to drive crowdsourced development. Analyzing most DePIN projects reveals that their business models contain an important feature: hardware revenue serves as the first growth curve, upon which data service monetization is layered to form the second growth curve. This is one of the key factors that enable DePIN to lead current cycle growth, while also demonstrating how DePIN-type projects create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything World

Decentralization Physical Infrastructure Network ( DePIN ) is defined in the 2023 Messari report as "utilizing crypto-economic protocols to deploy real-world physical infrastructure and hardware networks." This concept heralds an application scenario filled with imaginative space: the infrastructure commonly seen around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, as well as the data storage and computing devices behind the operation of the internet, will no longer be controlled by centralized entities and institutions, but will instead be divided into equally sized units, held in the hands of individuals or large-scale miners. Physical infrastructures of the same type are highly standardized and scalable, forming a carpet-like coverage.

Through decentralization, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall system security and resilience. Moreover, from energy production to data processing, various facilities have the potential to transition to a decentralized model. The total market size of the related industries involved in DePIN has now exceeded $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN field is estimated to be around $2.2 trillion, expected to reach $3.5 trillion by 2028.

1.1 DePIN track division

The DePIN track encompasses six subfields: computing, AI, wireless communication, sensors, energy, and services. From the perspective of the supply chain, DePIN can be divided into:

• Upstream: hardware manufacturers and supply-side users acting as "miners".

• Middle Layer: A blockchain project platform responsible for data validation and token settlement, along with an on-chain layer two protocol serving DePIN; as well as modular service components ( used for developing and managing the DePIN network, such as platform interfaces, data analysis, and standardization services ), SDK toolkit for DePIN development, API interfaces, etc.

• Downstream: docking with the demand-side dApp applications and interfaces.

Except for IoTeX and the former Helium(, which has migrated its mainnet to Solana), most DePIN projects rarely cover every aspect of the DePIN business. They typically choose Solana or IoTeX as the settlement layer for their token economy. AI and cloud computing projects in this subfield tend to focus more on on-chain settlement and the development and management of project platforms, with underlying hardware devices scheduling idle electronic devices through middleware, such as smartphones or computers equipped with high-performance consumer-grade GPUs.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja data, the number of DePIN projects that have been launched has reached 1,215, with a total market capitalization of approximately $43 billion. Among them, the projects that have issued tokens and are listed in the DePIN sub-section on Coingecko have a total market value exceeding $25 billion.

In October of last year, this figure was only $5 billion, and in less than a year, it has increased fivefold, demonstrating the rapid growth of the DePIN industry. This indicates that the market's demand and recognition for decentralized physical infrastructure networks are continuously rising. With more projects coming online and the expansion of application scenarios, the DePIN industry is expected to become an important area for the integration of blockchain technology and real-world applications.

2. Insights Brought by the DePIN Business Logic

The prototype of DePIN can be traced back to the IoT + Blockchain concept from the last cycle, ( IoT + Blockchain ). Projects like Filecoin and Storj transform centralized storage into a decentralized operating model through cryptoeconomic models, and have practical applications in the Web3 ecosystem, such as on-chain NFT storage and front-end and back-end resource storage for DApps.

The Internet of Things + Blockchain only reflects the characteristics of Decentralization ( "De" ), while DePIN emphasizes the construction of physical infrastructure and the scaled interconnected network. In DePIN, "PI" stands for Physical Infrastructure (, and "N" represents Network ), which is the value network formed after the DePIN hardware reaches a certain coverage scale.

The most typical example is Helium, which was established in 2013 and only confirmed the use of blockchain as an incentive for decentralized deployment of the Internet of Things in 2018. So far, Helium almost meets all the elements of DePIN: node economy, miner model, value network, crowdsourced incentives, and is a leading project in the DeWi( decentralized wireless communication) field. In addition, at the end of last year, Helium Mobile launched a $20 communication package service in cooperation with T-Mobile, aimed at traditional users. When users transmit data using the Helium network, they can not only earn token rewards but also enjoy reliable communication services. At the same time, Helium also helps T-Mobile solve the signal coverage problem in remote areas, creating a win-win-win situation. The large number of traditional users that it serves has great potential to promote the breakout of DePIN, and it is expected to accelerate the large-scale adoption of blockchain technology and Web3 networks.

Helium and Filecoin both belong to the DePIN category, but the difference between them is that Helium places more emphasis on hardware, enabling it to support the growth of data services on the second curve through hardware revenue, thereby building an independent ecosystem while reaping Alpha and Beta returns. Although Helium was involved in false advertising last year and faced issues such as the rarity of programming languages leading to development difficulties, a series of actions at the end of the year reopened the growth of Helium's second curve; and as the largest DePIN project to emerge first, it undoubtedly provided us with some insights into the DePIN ecosystem.

3. The explosive growth of DePIN is based on the dual curve theory

The concept of "Second Curve" is found in management and innovation theory, originally proposed by management scholar Charles Handy(. It refers to the need for an organization, product, or business to introduce new innovations or changes when it reaches the peak of its traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the successful experience of previous DePIN projects, it is clear that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with the monetization of data value networks overlaying the first curve, serving as the guiding principle for the second curve of development.

Product research and development, as well as operational capabilities, are key to ensuring the growth of the first curve; to initiate the growth of the second curve, two abilities are required: first, the organizational capability of a decentralized system, and second, the service capability for the demand side.

In the context of the DePIN ecosystem, it is necessary for the project party to first ensure the smooth operation of the data value network under the condition of having the capability to organize and undertake large-scale data transmission through a hardware network. Only then can the demand side be smoothly connected, ultimately providing high-quality, standardized data services. This will ultimately achieve the dual exponential business growth, forming a positive cycle within the project ecosystem.

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) The hardware value of 3.1 is the first curve of value creation.

In the first growth curve, the business will experience rapid growth in the early stages, then gradually reach its peak. The growth momentum of the first curve of the DePIN project comes from the revenue and profits generated by hardware sales.

Traditional infrastructure, especially in areas such as data storage and communication services, has a centralized service provider or entity whose business logic is linear: in the early stages of business, investment is needed to build infrastructure, and after the facilities are in place, services are provided to end users (C端). Therefore, developing such businesses often requires the participation of giant enterprises to bear the high costs in the early stages of business operation, including hardware purchases, land leasing, deployment, and hiring of maintenance personnel at various stages. Citing BCG's dissection of the data value network, its traditional IoT operating model has created the data value chain shown in the left figure, where data is transmitted as a production factor in an independent and linear manner, and each ecosystem is completely independent.

The DePIN project splits the centralized supply side and turns it into a crowdsourcing model to complete the establishment of the hardware network.

Therefore, the first step in dismantling centralized infrastructure is the key to achieving the first curve of growth for the DePIN project.

The DePIN project party must first work hard to promote itself, spread its narrative, and attract participation from supply-side users through a series of operational means, including the presale of "mining machines" and airdrop incentives for purchases; transferring the huge infrastructure costs to be borne by supply-side users to achieve a low-cost lightweight launch. Supply-side users also become "shareholders" of the project party by holding hardware while helping the project party deploy the hardware network with the expectation of making money from future mining.

Moreover, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are jointly carried out by the project party and miners, meaning that the device providers are only responsible for the research, development, and sale of the devices, while the updates and maintenance are completed by the supply-side users. In the process of collaboratively maintaining and building the hardware network, the interaction with the project party and middleware has strengthened the community identity of miners ### and supply-side users (, as well as their recognition of the DePIN project.

If a DePIN project can smoothly execute narrative marketing, mining machine sales, and community operations, then the key elements of the project's own first growth curve have all been gathered, ultimately forming the first curve of increasing network coverage scale - increasing token incentives - attracting more miners to join.

The following is the current data on the number of active nodes. Hivemapper, Helium, and Natix rank in the top three, with each having deployed over 100,000 nodes worldwide.

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Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have exceeded 100,000, with Helium and Hivemapper showing very impressive business performance:

Helium

• Helium is a Decentralization wireless network, its main businesses include Helium Hotspot, providing low-power wide-area network ) LoRaWAN ( coverage; Helium Mobile, a mobile communication service launched in collaboration with T-Mobile and TEF.

• The $20 communication package service launched in collaboration with T-Mobile on January 25 increased from 0 to 93,000 subscribers in just 5 months.

• Collaborating with one of Mexico's telecom giants, Telefónica )TEF(, to enter the Mexican market with a population of 126.7 million, further enhances Helium's revenue sources and market influence.

Hivemapper

• Hivemapper is a decentralized mapping platform aimed at creating a global, real-time updated map ecosystem through blockchain technology and crypto-economic incentives. Hivemapper's main business includes the HiveMapper Dashcam - a driving recorder that allows users to collect geographic data while driving by installing this device.

• This device is priced at 549 USD. Based on the current number of node deployments, it can be roughly estimated that Hivemapper's revenue from hardware sales alone has exceeded 60 million USD.

• As of now, the map data collection network established by Hivemapper has covered most areas of Europe and America. Hivemapper's data service revenue has also seen significant growth.

• In terms of hardware revenue, there are also other projects that have achieved good growth by taking alternative paths. For example, Jambo has excelled in sales in the African market by marketing its mobile phones. OORT has technical barriers in cloud computing and edge computing, achieving significant hardware sales revenue through its innovative model. Ordz Game, as a project in the GameFi track, cleverly integrates