Opportunities and Challenges in the DePIN Track

DePIN stands for Decentralized Physical Infrastructure Network, which builds infrastructure networks by incentivizing users to share personal resources through tokens, covering areas such as storage space, communication bandwidth, cloud computing, and energy. It crowdsources the infrastructure that was originally provided by centralized companies and distributes it to numerous users worldwide.

The current market value of the DePIN field has reached $5.2 billion, surpassing that of the oracle field, and is showing a continuous upward trend. From the early Arweave and Filecoin, to the Helium of the last bull market, and the recently well-known Render Network, all belong to this field.

The DePIN track has recently garnered attention again, mainly for three reasons:

1. The infrastructure has improved compared to a few years ago, empowering DePIN.

2. At the end of 2022, Messari proposed the new concept of DePIN, believing it to be "one of the most important areas for crypto investment in the next decade," bringing new narrative heat;

3. The new narrative of Web3 breaks the circle by shifting from social and gaming to exploring other possibilities, with DePIN, closely connected to Web2 users, becoming an important option.

This article will analyze DePIN from five perspectives: why DePIN is needed, the token economic model, the current state of the industry, representative projects, advantages analysis, as well as limitations and challenges.

Why is DePIN needed?

Current Status of Traditional ICT Industry

Traditional ICT infrastructure mainly includes: hardware, software, cloud computing and data storage, communication technology.

Among the top ten companies by global market value, six belong to the ICT industry, accounting for half of the market. In 2022, the global ICT market size reached 439 billion USD, with data centers and software showing a growth trend, impacting various fields.

The dilemmas of the traditional ICT industry

1. The industry has high barriers to entry, restricting full competition, and pricing is monopolized by giants.

High costs mean that only giant companies can participate, such as AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud in the fields of cloud computing and data storage, which together account for nearly 70% of the market share. The high costs are ultimately passed on to consumers.

The costs of cloud computing and data storage are expensive: total spending on cloud services by enterprises and individuals reached $490 billion in 2022, and is expected to exceed $720 billion by 2024. 31% of large enterprises spend more than $12 million annually, while 54% of small and medium-sized enterprises spend over $1.2 million. 60% of enterprises report that cloud costs are higher than expected.

2. Low utilization rate of centralized infrastructure resources.

On average, 32% of company cloud budgets are wasted, with one-third of resources idle. Reasons include: overestimating demand to ensure service availability; a lack of understanding of cloud costs, getting lost in complex pricing.

The DePIN track is expected to solve these problems. Decentralized storage ( such as Filecoin and Arweave ) is several times cheaper than centralized storage; some projects adopt tiered pricing to match different needs, such as Render Network efficiently matching GPU supply and demand through a multi-tiered pricing strategy.

The Token Economic Model of DePIN

The core logic of DePIN is to incentivize users to provide resources, such as GPU computing power, deploying hotspots, storage space, etc., to contribute to the network.

Early tokens have no actual value; users participate similarly to venture capital. The supply side selects promising projects, and investment resources become "risk miners," profiting through an increase in the number of tokens and appreciation in price.

These providers differ from traditional mining, offering resources such as hardware, bandwidth, and computing power, with income related to network usage, market demand, and other factors. There are risks such as reduced rewards due to low network usage or resource wastage due to network instability.

This incentive method creates a flywheel effect, with a positive cycle during good development and an easy withdrawal cycle during downturns.

DePIN Token Economic Model Operation Process:

1. Token attraction for supply-side participation: Attract early participants to provide resources through a good token economics model and offer token rewards.

2. Attract builders and consumer users: As resource providers increase, developers join to build products, attracting consumers at low prices.

3. Forming positive feedback: Increased consumer participation leads to more supply-side revenue, creating positive feedback and increasing participation from both sides.

In this cycle, the supply side receives more token rewards, the demand side enjoys cheaper services, the value of the project tokens is consistent with the growth of participants, attracting more participants and speculators, forming value capture.

Through token incentives, DePIN first attracts suppliers, then attracts users, achieving a cold start and core operating mechanism, and further expanding development.

Current Status of the DePIN Industry

Early DePIN projects mainly focused on storage and communication technologies, such as Helium(2013, Storj)2014, and Sia(2015.

With the development of the Internet, the Internet of Things, and AI, the requirements for infrastructure and the demand for innovation have increased. Currently, DePIN projects mainly focus on computing, storage, communication technology, and data collection and sharing.

The top 10 projects by market capitalization are mostly in the Storage and Computing sectors, with excellent projects like Helium and Theta also in the telecommunications sector.

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Representative Projects in the DePIN Industry

) Filecoin & Arweave - Decentralized Storage Track

Filecoin and Arweave offer lower prices through decentralized storage, addressing the issues of high pricing and low resource utilization in traditional storage.

Filecoin:

• Decentralized distributed storage network, token incentives for users to provide storage space
• Built on the IPFS protocol, supports smart contracts
• Adopting the Proof of Storage consensus mechanism
• Collaborating with multiple well-known projects, such as NFT.Storage, OpenSea, etc.

Arweave:

• Decentralized Permanent Storage Network
• Use the "Proof of Access" work verification mechanism
• Provide permanent storage for files, create permanent profiles and web pages, and more solutions.

Compared to centralized storage, decentralized storage has significant price advantages. 1TB/month storage cost:

• Decentralized storage is, on average, less than half of Google Drive.
• is one-tenth of Amazon S3

Advantages:

• Low price
• High security, multi-node distributed storage reduces single point of failure risk
• Strong anti-censorship
• Users have absolute ownership and control over their data.

Disadvantage:

• Technical challenges: issues such as storage retrieval efficiency, node reliability, etc.
• Availability and performance may be affected by network participants, with fluctuations.

Helium - Decentralized Wireless Network

Helium was established in 2013 and is a pioneer in the DePIN sector. It incentivizes users to purchase devices through tokens to form a network and achieve network supply.

Advantages:

• Outstanding performance in the IoT field, using LoRaWAN technology
• The number of hotspots once exceeded 900,000, with 600,000 monthly active IoT hotspots, far surpassing traditional IoT networks.

Challenge:

• The 5G market is underperforming, facing a dual dilemma of compliance and market ceiling.
• The performance and pricing of cooperative devices are not transparent, affecting the experience of providers.
• Need to optimize the supply-side experience, balancing open source and device performance price transparency.

Noteworthy: On March 27, 2023, Helium began migrating from its own Layer 1 blockchain to Solana for reasons including:

1. The team focuses on network construction and entrusts the maintenance of the underlying blockchain to a professional team.
2. Choose Solana considering ecological factors, compatible with other innovative projects.
3. Utilize Solana's latest state compression feature to mint a large number of NFTs at a low cost.
4. Future collaborations with projects such as Solana Mobile Stack and Saga phone.

In the long term, Helium's exploration in the IoT field has high value and has huge potential in areas such as smart agriculture and smart cities.

Render Network - Decentralized Computing

Render Network is a decentralized GPU rendering platform that provides solutions for the high rendering demands of large projects.

Features:

• Multi-tiered pricing strategy, efficiently matching GPU supply and demand.
• The price is based on OctaneBench units and time quantification, referencing costs from platforms like AWS.
• Three-tier pricing: Tier 1 is comparable to services like AWS; Tier 2 and Tier 3 achieve lower prices by reducing speed requirements.

Advantages:

• Make full use of idle GPU resources
• Provide an efficient two-way market for global GPU computing supply and demand

Theta Network - Decentralized Video Network

Theta Network uses a blockchain-based optimized content delivery network to reduce video content transmission costs and improve distribution efficiency.

Features:

• Users contribute bandwidth and computing power to become Caching nodes.
• Distribute videos closer to the viewer's location

Advantages:

• Audience gains a better quality experience
• Users providing bandwidth and computing power will receive token rewards.
• Reduce video platform costs

Other projects worth noting:

• IoTex: Providing underlying infrastructure for IoT projects
• DePINscan: Provides SDK and data analysis platform for DEPIN developers
• Ketchup Republic: Creating a web3-based public review platform that directly gives merchant traffic fees to users.

![New Infrastructure Wave: Analyzing the Opportunities and Challenges of the DePIN Track](