What is DePIN? Decentralized Physical Infrastructure Networking Explained

SHORT ANSWER: DePINs provide a medium for Web3 infrastructure services to be provided and taken, in a secure, transparent and democratized manner. 

If you look at the market, you see many centralized platforms that leverage a network to achieve a goal and make a profit. Some of the best examples of this model are rideshare companies like Uber and Lyft. The drivers that make up this network contribute physical resources, such as their car, chauffeuring and getting paid by the platform for their services. The Web3 versions of these platforms are called Decentralized Physical Infrastructure Networks (DePINs). DePIN has been one of the hottest narratives in the current cycle, drawing heavy interest from all members of the community. It is poised to be one of the largest applications of blockchain technology. 

What is DePIN? 

DePINs are protocols that build, maintain and operate physical infrastructure to support Web3 functionality. DePIN takes the ethos of decentralization and extends it towards physical infrastructure, seeking to bring power back to the community and reshape industries simultaneously. These networks are blockchain-based management systems for tangible infrastructure like data centers and wireless networks. The narrative of DePIN has been heavily discussed this year as the crypto market continues to heat up. DePINs boast several unique value propositions, such as providing an easy medium for supply and demand to enter the network, leading to faster scalability. DePIN-powered networks also create competitive advantages that benefit users who don’t necessarily care about Web3. This means that the average person can use devices native to them, such as their phone, to provide a valuable service and get compensated through token rewards. If the user experience is made seamless, DePIN has the potential to onboard many Web2 users to Web3, which has proved challenging. The power of Web3 can only be fully harnessed as more users enter the ecosystem. DePIN is shaping up to be a leading factor in onboarding the next generation of users to Web3.  

How Do DePINs Work? 

At a high level, a DePIN begins with token rewards incentivizing infrastructure and service deployment on the supply side. The incentivization mechanism of blockchains creates an outlet for tons of hardware and software providers to enter the network and be compensated fairly for their contributions. On the demand side, individuals seeking services like network storage can get a high-quality service cheaper than their centralized counterparts. This factor boosts network usage, leading to more infrastructure services offered, reducing capital expenses for many users and driving value. DePINs democratize value by allowing individuals and projects to access and provide these services otherwise reserved for large corporations with vast resources.

For example, Verizon spends billions of dollars annually on hardware for its wireless services. A user looking for a similar service can use DePIN wireless networks to receive an efficient service. As network adoption grows, user-generated fees increase, causing more supply and demand for service offerings. Supply-side growth attracts users and entrepreneurs looking to provide services and be rewarded for doing so. The attraction on the supply side increases network usage, which leads to increased value in the incentives provided while jointly attracting more users seeking services to the network. As network usage increases, token rewards become more valuable, and a relationship is created between network suppliers and users, where both parties feel like they are winning — which is why DePIN has been so successful. 

Common Use Cases of DePIN

DePIN can be separated into two categories: physical resource networks and digital resource networks.

• Physical resource networks decentralize hardware, including wireless networks, geospatial networks, the Internet of Things (IoT), mobility networks, environmental networks, rideshare and delivery networks and energy networks. 
• Digital resource networks are centered around storage networks, databases, content delivery networks (CDN) and machine learning. The Web3 ecosystem's need for infrastructure to support protocols will continue to grow. 

One of the most well-known DePIN protocols is the Helium network, which recently launched Helium Mobile — a physical network. Helium Mobile has a few functionalities. Users can use their mobile phones, sell their reception as hotspots and get rewarded for doing so. Users can also participate in mapping. Mapping is providing service data to the Helium network by using your phone's location.

For example, if you were mapping and came across a zone with poor cell reception, Helium will take that information and boost the rewards for providing reception in that area. This practice ensures that network participants are compensated well for providing a needed service and that users reap the benefits of a higher-quality wireless network. 

The Helium mobile ecosystem also provides customers with a phone plan for as low as $5 per month. The phone plan uses the coverage provided by participants in the network who are incentivized through community token rewards. Anyone can participate in the network by selling their hotspots and mapping easily, earning rewards. Helium’s ease of integration with Web2 hardware has been a large part of its success. Helium has crafted a seamless experience for users and service providers, creating a community where everyone wins. 

Pros and Cons of DePINs 

Let's explore DePIN’s advantages and disadvantages.

Advantages

• Community: DePIN empowers the community by democratizing value creation and access through token incentives, providing an efficient medium for exchange. 
• Enhanced security: DePINs are resilient to security threats because the networks are distributed without a single point of failure. For example, many companies rely on AWS for web services. If AWS is breached or goes down because of spiked volume, thousands of websites become unusable. It is much harder to breach a decentralized network, given that a majority (51%) of the network would need to be controlled and manipulated. That action would be capital-intensive and difficult to pull off. 
• Cost and development efficiency: The centralized infrastructure used by giants like Verizon can take billions of dollars and years to implement. By capitalizing on pooled community resources, the cost of achieving the same services is cut, leading to faster growth and innovation. 
• Scalability: Traditional infrastructure typically struggles with scalability as sudden spikes in demand and evolving market needs. DePINs thrive in their ability to quickly meet demand through a large supply contributed by the community. Decentralized networks make adapting and implementing resources easy, making them highly scalable. 

Disadvantages

• Regulatory bottlenecks: As blockchain technology is a relatively new concept, the ecosystem is still nascent. Many individuals, especially those in power, do not understand blockchains. This factor can prove difficult as projects navigate ambiguous compliance standards, which slow innovation and implementation. 
• Privacy concerns: Because most DePINs are public, anyone can view the transactions occurring, which benefits transparency and accountability but raises privacy concerns for some parties. 
• Barriers to entry: While DePIN seeks to onboard the next wave of Web3 users by leveraging hardware and software that Web2 users already use, it is still novel and requires some knowledge to navigate. Over time, the user experience will become increasingly seamless; however, mainstreaming blockchain literacy will be essential to successfully bring more users to Web3 ecosystems. 

The Future of DePIN 

DePINs have been a hot topic in the crypto ecosystem. DePIN harnesses the power of blockchain to democratize value creation and access through the power of communities. With the evolving landscape of blockchain technology, DePIN projects offer unique value propositions making them attractive to investors, users and participants. 

DePIN is likely to play a role in Web3’s growth as its use cases become increasingly necessary. The scalability and resilience of DePIN is what makes it so attractive. DePIN provides mediums for participants to provide in-demand Web2 and Web3 hardware and software and be rewarded through community tokens, helping to bridge the gap between Web2 and Web3 — a pressing problem. Users seeking services get the benefit of receiving a high-quality and swift delivery at a fair price. Service providers get compensated well. For these reasons, many believe that DePIN will play a large part in onboarding the next billion users into Web3.