Onchain and offchain: How DePINs leverage the best of both worlds
Decentralized physical infrastructure networks could minimize costs, boost expansion, and enhance efficiency
As a mix of both blockchain and the physical space, decentralized physical infrastructure networks—or DePINs—have become a rising crypto narrative.
These unique projects capitalize on blockchain technology for incentivizing people to develop and keep physical infrastructure. Essentially, DePINs can be likened to the Internet of Things (IoT)—a network of physical devices, vehicles, appliances, and other physical objects that can collect and share data—except that they are powered by blockchain.
Andrew Law, the Head of APAC Growth of DePIN project IoTEX, explained in an X post that DePINs “[offer] the most real-world implementations for blockchain use case to date”.
Decentralized Physical Infrastructure network (DePIN) is offering the most real-world implementations for blockchain use case to date.
— Andrew 📍🇺🇸 (@dr_andrewlaw) April 20, 2023
Here's our opinions on why DePIN will become one of this decade’s most important crypto thesis 🧵👇
For these networks to function, they are backed by participants who offer hardware resources and are compensated with crypto rewards in return.
Chloe Phung, the co-CEO of U2U Network, told Cointelegraph, “DePINs reduce reliance on centralized providers, making services more accessible and secure. By distributing resources, DePIN enhances resilience and security while incentivizing participants through token rewards.”
Traditionally, real-world infrastructures such as electrical grids and data networks are under the ownership and management of centralized authorities. This is where DePINs come into the picture.
DePIN projects aim to offer an alternative through peer-to-peer (P2P) networks that enable individuals to provide their actual physical resources and gain fractionalized control in the wider network, as noted by The Block.
Blockchain technology enables activity to be coordinated across thousands or millions of devices in a permissionless manner. According to Wes Levitt, Theta Labs’ head of strategy, the technology allows this to be achieved in a way that does not require the devices to trust one another.
IoTEX head Law also shared in the same thread on X, “DePIN projects [make up] hardware, middleware, blockchain, and token.”
How does DePIN work?
— Andrew 📍🇺🇸 (@dr_andrewlaw) April 20, 2023
Each DePIN projects made up of hardware, middleware, blockchain & token.
Hardware layer: physical infra network
Middleware layer: off-chain data compute infra
Blockchain layer: smart contracts based dapps
Token model: supply boost & demand utilities
There are two broad types of DePINs: digital resource networks (DRNs) and physical resource networks (PRNs).
DRNs refer to networks that have fungible providers of digital resources. These providers offer resources such as bandwidth, storage, or computing power. As they operate digitally, these resources are not tied to a location or linked to location-based information.
As for PRNs, these are location-based DePINs. Network providers offer actual hardware resources associated with energy, connectivity, mobility, and other sectors. By nature, these resources are non-fungible and location-based. They are localized services that may not be portable at times.
At the time of writing, one of the top DePIN projects based on market cap is Filecoin, which mainly focuses on decentralized data storage.
According to its documentation, Filecoin is a “peer-to-peer network that allows anyone to store and retrieve data on the internet”. The continuous and reliable storage and retrieval of data are ensured through economic rewards that are built in.
With Filecoin's services, users may pay for file storage on providers, which are computers that are in charge of storage and of proving that this was done correctly as time passed. On top of allowing people to store data, Filecoin also rewards participants for storing the files of other individuals.
Another top DePIN project by market cap is Render Network, which boasts itself as the “world's first decentralized GPU rendering platform.” GPU refers to Graphics processing unit, and the platform is on a mission to “democratize high-end GPU rendering and compute”.
As Render Network's services mainly focus on GPU power, it allows GPU owners to participate by loaning out power to creators who need more of this resource. This offers GPU owners an avenue to monetize their “idle GPUs” through the network.
While Filecoin and Render Network's services are both innovative and revolutionary, there are several other DePIN projects that are rising in the crypto space.
Web3 investing firm MV global revealed in a report last September that DePINs could be crypto’s next big use case. They shared in an X post that the report “highlights their potential to onboard thousands of new users to the crypto space by decentralizing real-world infrastructure like networks, data, & energy markets.”
DePINs are Web3’s next big use case!
— MV Global (@buildwithMV) September 9, 2024
MV Global's latest report highlights their potential to onboard thousands of new users to the crypto space by decentralizing real-world infrastructure like networks, data, & energy markets.
Read the full report here https://t.co/vRS49noaWF pic.twitter.com/3RNmCTkQh0
These innovative projects have the capacity to turn industries into infrastructures that are decentralized—all while minimizing cost, boosting expansion, and enhancing efficiency. While these projects are still relatively new in the crypto space, it could just be a matter of time for DePINs to see exponential growth.
