Fred

Introduction: What is DePIN?#

DePIN stands for Decentralized Physical Infrastructure Network. It incentivizes users to share personal resources through token rewards, aiming to build an infrastructure network spanning storage space, communication bandwidth, cloud computing, energy, and more.

In simpler terms, DePIN decentralizes infrastructure, traditionally provided by centralized corporations, by crowdsourcing it from a global user base.

According to CoinGecko, the current market capitalization of the DePIN sector has reached $52 billion, surpassing the oracle sector's $50 billion, and is trending upwards. This includes early entrants like Arweave and Filecoin, as well as Helium, which took off in the last bull market, and the recently spotlighted Render Network, among others.

Some readers might wonder: these projects have been around for a while, and Helium was already a hot topic in the last bull market. So, why is DePIN gaining renewed attention?

The reasons can be summarized as follows:

1. Infrastructure development has significantly improved compared to a few years ago, paving the way for the DePIN sector.

2. At the end of 2022, Messari introduced the new concept of DePIN, labeling it as "one of the most important investment areas in crypto for the next decade." This new definition and expectation reignited the narrative around this sector.

3. While people once pinned hopes for Web3's mainstream adoption on social media and gaming, the onset of a bear market has shifted focus. DePIN, closely linked to Web2 users, has naturally become a significant choice for Web3 builders.

So, is DePIN just old wine in a new bottle, or is it a fresh avenue for Web3's mainstream breakthrough? This article will delve deep into DePIN, exploring its necessity, tokenomics, current industry status, representative projects, advantages, and the challenges it faces.

Why is DePIN Necessary?#

So, why is DePIN needed and what problem does DePIN solve compared to traditional ICT infrastructure?

Status of the Traditional ICT Industry#

In the conventional ICT (Information and Communication Technology) sector, infrastructure can be primarily divided into the following: hardware, software, cloud computing & data storage, and communication technology.

Among the top ten companies globally by market capitalization, six belong to the ICT sector: Apple, Microsoft, Google, Amazon, NVIDIA, Meta, dominating half of the landscape.

According to Gartner's data, the global ICT market size reached $4.39 trillion in 2022. Both data centers and software have shown growth trends in recent years, impacting various aspects of our lives.

Challenges in the Traditional ICT Industry#

However, the current ICT sector faces two significant challenges:

1）High barriers to entry, which limit robust competition, and lead to price monopolization by industry giants

In areas like data storage and communication services, companies need to invest heavily in hardware purchases, land leasing for deployment, and hiring maintenance personnel. These high costs mean that only the industry giants can participate. For instance, in the cloud computing and data storage sectors, AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud together hold a market share of nearly 70%. This results in price monopolization by these giants, and the high costs are eventually transferred to consumers.

To illustrate, the pricing for cloud computing and data storage is considerably high:

According to Gartner's data, in 2022, the total expenditure on cloud services by businesses and individuals reached $490 billion, and it's expected to continue growing in the coming years, with projections surpassing $720 billion by 2024. Also, 31% of large enterprises spend over $12 million annually on cloud services, while 54% of small to medium-sized businesses spend more than $1.2 million, as per data from RightScale. With the increasing investment in cloud services, 60% of businesses report that their cloud costs exceed their expectations.

From just the spending patterns in the cloud computing and data storage sectors, it's evident that as prices are monopolized by industry giants, the financial burden on users and businesses intensifies. Moreover, the capital-intensive nature of the sector limits full market competition, potentially stifling innovation and development.

2）Centralized Infrastructure Resources Have Low Utilization Rates

The low utilization rate of centralized infrastructure resources is a significant challenge in today's business operations, especially evident in the cloud computing environment where companies typically allocate substantial budgets.

There's a concerning trend where, on average, 32% of a company's cloud budget is wasted, according to a recent report by Flexera (2022). This means that after spending on cloud services, a third of the resources remain idle, leading to significant financial losses.

This misallocation can be attributed to various factors. For instance, companies often overestimate their resource needs to ensure continuous service availability. Moreover, data from Anodot indicates that in over half of the cases, cloud wastage occurs due to a lack of understanding of cloud costs, with companies getting lost amidst complex cloud pricing and myriad packages.

On one hand, monopolization by giants results in high prices, and on the other, a significant portion of a company's cloud expenditure is wasted. This double dilemma of IT costs and IT utilization is detrimental to a healthy business environment. However, every cloud has a silver lining, and this situation provides fertile ground for DePIN's growth.

Facing the high costs and wastage dilemma of cloud computing and storage, the DePIN sector offers solutions. In terms of pricing, decentralized storage (like Filecoin and Arweave) is several times cheaper than centralized storage. Regarding the wastage issue, some decentralized infrastructures are adopting tiered pricing to cater to different needs. For instance, the decentralized computing sector's Render Network uses multi-tiered pricing strategies to efficiently match GPU supply and demand. The advantages of decentralized infrastructure in addressing these challenges will be detailed in the subsequent project analysis section.

DePIN's Token Economic Model#

Before delving into the current state of the DePIN track, let's first understand its operational logic. The core question is: Why are users willing to contribute their resources to DePIN projects?

As mentioned in the introduction, the core logic of DePIN is to incentivize users to provide resources, including GPU power, hotspot deployment, storage space, etc., to contribute to the entire DePIN network through token incentives.

In the early stages of DePIN projects, tokens often have no actual value. Therefore, the act of users participating in the network to provide resources is somewhat similar to venture capitalists. The supply side selects promising projects from numerous DePIN projects, then invests resources to become "risk miners", profiting from the increase in token quantity and the potential appreciation of token prices.

What differentiates these providers from traditional mining is that the resources they provide may involve hardware, bandwidth, computing power, etc. Moreover, their token income often correlates with network usage, market demand, and other factors. For instance, low network usage can lead to reduced rewards, or the network might be attacked or become unstable, resulting in wasted resources. Therefore, risk miners in the DePIN track need to be willing to bear these potential risks and provide resources, playing a crucial role in the stability of the network and the development of the project.

This incentive mechanism can create a flywheel effect, forming a positive cycle when things are going well. Conversely, it can also easily lead to a withdrawal loop when developments are unfavorable.

Attracting Supply-side Participants through Tokens: By employing a sound tokenomics model, early participants are drawn to contribute to network construction and provide resources, receiving token rewards in return.

Attracting Builders and Network Consumption Users: As the number of resource providers grows, some developers begin to join the ecosystem to create products. Once the supply side can offer certain services and given that DePIN offers lower prices compared to centralized infrastructure, consumers are also drawn into the fold.

Forming Positive Feedback: As the number of consumer users increases, this demand incentivizes supply-side participants with higher revenues, creating a positive feedback loop, thus attracting more participation from both supply and demand sides.

Under this cycle, the supply side receives more valuable token rewards, while the demand side benefits from cheaper and more cost-effective services. The growth of the project's token value aligns with the increase in participants from both the supply and demand sides. As the token price rises, it attracts more participants and speculators, leading to value capture.

Through the token incentive mechanism, DePIN first attracts providers and then draws in users, achieving the project's cold start and core operational mechanism, allowing for further expansion and development.

Current State of the DePIN Industry#

From the earliest established projects, such as the decentralized network Helium (2013), decentralized storage Storj (2014), and Sia (2015), it's evident that the initial DePIN projects were primarily focused on storage and communication technology.

However, with the continuous development of the Internet, IoT (Internet of Things), and AI, the requirements and demands for infrastructure innovation have been increasing. Observing the current state of DePIN's evolution, projects in this domain mainly concentrate on computation, storage, communication technology, and data collection & sharing.

From the top 10 projects in market capitalization within the DePIN sector, most belong to the Storage and Computing domains. Additionally, there are some commendable projects in the telecommunications field, including industry pioneers like Helium and emerging stars like Theta. We will delve deeper into these projects in the subsequent analysis.

Representative Projects in the DePIN Industry#

Based on the DePIN market capitalization rankings on Coingecko, this article will focus on analyzing the top five projects: Filecoin, Render, Theta, Helium, and Arweave. First, let's take a look at the decentralized storage projects, Filecoin and Arweave, which are two projects that many are familiar with.

Filecoin & Arweave——Decentralized Storage Track#

As mentioned at the beginning regarding the challenges in the traditional ICT industry, the high pricing of centralized cloud storage on the supply side and the low resource utilization rate on the demand side have posed challenges to the interests of users and businesses. Additionally, there are risks of data breaches. In response to this, Filecoin and Arweave offer decentralized storage solutions at a lower price, providing a unique service to users.

Let's start with Filecoin. From the supply side, Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through token rewards (more storage space directly correlates with more block rewards). Within about a month of its testnet launch, its storage space reached 4PB, with Chinese miners (storage providers) playing a significant role. Currently, the storage space has reached 24EiB.

Notably, Filecoin is built on top of the IPFS protocol, a widely recognized distributed file system. Filecoin decentralizes and secures data storage by storing user data on nodes within the network. Moreover, Filecoin leverages the advantages of IPFS, giving it strong technical prowess in the decentralized storage sector. It also supports smart contracts, allowing developers to build various storage-based applications.

In terms of consensus mechanisms, Filecoin uses Proof of Storage, including advanced consensus algorithms like Proof of Replication (PoRep) and Proof of Spacetime (PoSt) to ensure data security and reliability. In simple terms, PoRep ensures nodes replicate client data, while PoSt ensures nodes consistently maintain storage space.

Currently, Filecoin has established partnerships with many well-known blockchain projects and companies. For instance, NFT.Storage uses Filecoin to provide a straightforward decentralized storage solution for NFT content and metadata. The Shoah Foundation and the Internet Archive use Filecoin to back up their content. Notably, the world's largest NFT marketplace, OpenSea, uses Filecoin for NFT metadata storage, further promoting its ecosystem's growth.

Next, let's look at Arweave. Its incentive mechanism for the supply side is somewhat similar to Filecoin, incentivizing users to provide storage space through token rewards, with the reward amount depending on the volume of stored data and its access frequency. However, Arweave is a decentralized permanent storage network. Once data is uploaded to the Arweave network, it's stored on the blockchain forever.

So, how does Arweave incentivize users to provide storage space? At its core, it uses a "Proof of Access" work-proof mechanism, aimed at proving data accessibility within the network. In layman's terms, it requires miners to provide a randomly selected previously stored data block as an "access proof" during the block creation process.

Currently, official solutions include permanently storing files and creating permanent profiles, and web pages.

To facilitate a quick understanding of the differences between Arweave and Filecoin, a table has been created to help you understand.

From the aforementioned table, it's evident that Filecoin and Arweave have distinct differences in terms of storage methods, economic models, and consensus mechanisms. This allows them to have their respective advantages in different application scenarios. However, due to its lower storage costs, Filecoin currently holds a significant lead in market performance.

Overall, with the proliferation of big data and AI applications, the volume of data generated is growing exponentially. Consequently, the demand for data storage is also on the rise. Given the high pricing of centralized storage, the need for decentralized storage is becoming increasingly prominent. As can be seen from the following graph, the price of decentralized storage is significantly lower compared to centralized storage.

Under the same condition of storing 1TB for a month, the price of decentralized storage is on average less than half of Google Drive and one-tenth of Amazon S3.

In addition to the price advantage, decentralized storage is more secure. Data is distributed and stored across multiple nodes, reducing the risk of single point failures, and it also has higher resistance to censorship.

In terms of data privacy, users in decentralized storage retain absolute ownership and control over their data. Users can access, modify, or delete their data stored in the network at any time. In centralized storage, users entrust their data to the service provider, so the service provider might have some control over the data, and users need to comply with the provider's terms of use and privacy policy.

On the downside, decentralized storage faces many technical challenges, including the efficiency of data storage and retrieval, and the reliability of nodes. Compared to the high availability and performance guarantees of centralized storage, the availability and performance of decentralized storage might be affected by the participants in the network. This can result in some fluctuations, impacting user experience.

Helium——Decentralized Wireless Networks#

After understanding the decentralized storage track, let's take a look at the highly regarded decentralized wireless network project, Helium. Established in 2013, it is a veteran and pioneer in the DePIN track.

Why is decentralized wireless networking so crucial? In the traditional IoT industry, due to infrastructure costs being hard to cover with revenue, there hasn't been a dominant network provider for IoT devices, and the market remains fragmented. The demand exists, but the supply is challenging, providing fertile ground for Helium's development in IoT.

Given that the most significant bottleneck is infrastructure costs, "crowdfunding" user participation on the supply side to share costs becomes a natural advantage for DePIN in this domain. Through token incentives, Helium attracts global users to purchase its network equipment to establish the network. Its technical prowess gives it a significant advantage in the Internet of Things (IoT) sector. Last August, the number of hotspots exceeded 900,000, with 600,000 monthly active IoT hotspots, 20 times the 30,000 hotspots of traditional IoT network leader The Things Network. (Even with today's active hotspot count dropping to 370,000, there's still a clear advantage.)

After making progress in the IoT sector, Helium aims to further expand its network business landscape by venturing into the 5G and WiFi markets. However, as the data from the following chart shows, Helium currently excels mainly in the IoT domain, while its performance in 5G remains average.

(Source: Helium official Website)

Why does Helium excel in the IoT domain but seems lackluster in the 5G sector? Let's analyze this from market and regulatory perspectives.

In the IoT domain, Helium employs LoRaWAN technology, a low-power wide-area network technology characterized by low power consumption, long transmission distance, and excellent indoor penetration. This kind of network typically doesn't require specific authorization, making it an economical choice for large-scale IoT deployments.

For instance, in agricultural scenarios, farmers only need to monitor soil moisture and temperature to determine if they exceed certain thresholds to implement smart irrigation and crop management. Similarly, in smart city scenarios like intelligent lampposts, trash bins, and parking sensors, there are many promising developments.

Moreover, the IoT network market, with its broad coverage but minimal data transmission, struggles to generate revenue, and no industry giants have emerged. Helium seized this opportunity, combining web3 technology with IoT networks, ingeniously addressing the high capital threshold issue. By involving everyone, the heavy initial costs of IoT construction are distributed among all users, enabling a lightweight start. Currently, indoor and outdoor positioning devices and smart farms like Abeeway and Agulus have started using Helium. As of last August, the number of hotspots exceeded 900,000.

On the other hand, Helium's foray into the 5G market over the past year has been underwhelming, primarily due to regulatory challenges and market ceiling constraints.

From a regulatory perspective, in the U.S., frequency allocation and licensing are strictly regulated by the Federal Communications Commission (FCC). Frequencies like 600MHz and 700MHz low bands, 2.5GHz and 3.5GHz mid-bands, and 28GHz and 39GHz bands all require rigorous scrutiny for authorization. For instance, T-Mobile, which has received authorization, deploys 5G on the 600MHz band, while Verizon uses the 700MHz band. As a newcomer, to reduce deployment costs and address regulatory challenges, Helium opted for the unlicensed CBRS GAA band. Compared to mid-bands, its coverage is slightly smaller and doesn't show a clear advantage over U.S. carriers.

Regarding the market ceiling, it's worth noting that 5G is a domain strictly regulated by national policies. Most network operators worldwide are state-owned enterprises, with only a few private companies closely tied to their respective governments. Thus, from a broader market perspective, it's challenging for Helium to replicate its 5G market success in the U.S. overseas.

Additionally, the opacity of collaborative equipment is a supply-side experience issue. Since Helium's equipment is open-source, different collaborating manufacturers vary in performance, price, and installation procedures. The lack of transparency in performance and pricing is a significant concern for suppliers participating in Helium, and there are instances of vendors using second-hand equipment to cut corners. How to optimize the supply-side experience and balance the transparency of open-source equipment with performance and pricing remains a challenge for the Helium project.

Interestingly, on March 27th of this year, Helium began migrating from its Layer1 blockchain to Solana. The reasons for the migration can be summarized as follows:

The core focus of the Helium team is on networking. After assessing the importance of maintaining Layer1, they decided to entrust the maintenance of the underlying blockchain to those who excel at it, freeing the team to focus on building the Helium network.

The choice of Solana was mainly due to its ecosystem. Solana boasts numerous high-quality projects and developers. Helium's HNT token is natively compatible with other innovative projects in the Solana ecosystem, providing more use cases for token holders.

Furthermore, Solana's latest state compression feature allows for the minting of a vast number of NFTs at a very low cost, enabling Helium to mint nearly a million NFTs on Solana for just $113, saving a significant amount of money. These NFTs can serve as network credentials for Helium and validate hotspots. They can also integrate the entire ecosystem's features, including token gating and access permissions for hotspot owners, making the process highly efficient and convenient.

In terms of future planning, there's a lot of potential collaboration between Helium and projects like Solana Mobile Stack and Solana's upcoming Saga phone. It's a win-win situation for Solana, which aims to launch a phone, and Helium, which aspires to evolve into a 5G service provider.

In the long run, Helium's exploration in the IoT domain is an innovative journey from 0 to 1, offering immense value in addressing IoT demands. Although numerous challenges lie ahead, with the proliferation of IoT devices and the continuous expansion of application scenarios, Helium's decentralized network solution might find broader applications. In future domains like smart agriculture and smart cities, it's poised to unleash its vast potential.

Render Network——Decentralized Computing#

Render Network is a decentralized GPU rendering platform. Rendering refers to the process of converting 2D or 3D computer models into realistic images and scenes. Render Network has been a topic of discussion during the Apple Vision Pro launch event and during the hype of the metaverse and AR/VR.

Some readers might wonder why, when editing videos and creating animations, personal computers are not sufficient and there's a need to rely on Render Network. The reason is that for small projects like short videos or micro-films, the computational power required is relatively low. However, for many large-scale projects, the computational resources needed for rendering are immense. Typically, there's a reliance on centralized cloud service providers like AWS, Google Cloud, and Microsoft Azure, and the prices offered by these giants are often not cheap.

Focusing on what customers care about most, the price, Render Network has adopted a multi-tiered pricing strategy to efficiently match the supply and demand of GPUs.

Rendering services are quantified in OctaneBench units and time, adjusted according to OctaneBench4 and standardized to 1 Euro. This pricing model is based on the current cost of GPU cloud rendering services on centralized platforms like Amazon Web Services (AWS). Specifically, 1 Euro worth of RNDR is equivalent to 100 OctaneBench4 per hour.

Compared to Tier1, Tier2 offers 2 to 4 times the total OctaneBench workload of Tier 1 RNDR tokens, with 200-400% more computational power. Tier 2 rendering jobs have a higher priority in the rendering queue than Tier 3, allowing accelerated parallel rendering services. Tier3 provides 8 to 16 times the OctaneBench workload. However, Tier 3 services have the lowest priority in the rendering queue and are not recommended for time-sensitive rendering tasks.

(Source: Render Network Knowledge Base)

In simple terms, the pricing formula for each tier is fixed, but the pricing unit, OctaneBench, fluctuates based on market performance. The cost and performance of Tier1 are comparable to centralized cloud rendering services like AWS. In contrast, Tier2 and Tier3 achieve lower prices by having less stringent speed requirements. For price-sensitive users, Tier3 is an option, while efficiency-seeking users might prioritize Tier1, and those in between can opt for Tier2.

Furthermore, Render Network emphasizes the efficient utilization of idle GPU resources. Most GPUs, when idle locally, don't have their resources fully utilized. Meanwhile, artists and developers are vigorously expanding the scale of cloud rendering and computational tasks. The decentralized rendering network provides an efficient two-way market for global GPU computation supply and demand, representing a highly efficient resource-matching method.

Theta Network——Decentralized Video Networks#

Theta Network's co-founder Steve Chen was also the co-founder of YouTube and possesses a strong industry background. The core function of this project is to use a blockchain-based optimized content distribution network, significantly reducing the cost of video content transmission and enhancing the efficiency of content distribution.

To better understand, let's compare it with the traditional Content Distribution Network (CDN):

In the traditional distribution network, all video viewers connect directly to the POP servers (network nodes distributed globally) for video viewing. Most platforms, such as Netflix and Facebook, currently obtain services through centralized CDNs. However, for those geographically distant from POP servers, the video stream is often affected. Theta Network's model, on the other hand, allows users to contribute their bandwidth and computing power, becoming Caching nodes, to distribute videos closer to the viewer.

This ensures that the final video audience gets a better experience, while also rewarding users who provide bandwidth and computing power with tokens, and reducing the cost for video platforms. With the continuous increase in video content consumption, and the rise of industries such as online live streaming and game live streaming, Theta Network is expected to be applied in more scenarios. Currently, in the decentralized video streaming field, Theta Network will also face competition from projects like Livepeer and VideoCoin.

Of course, in addition to the top 5 projects in market value analyzed above, there are many other noteworthy projects, such as IoTex, which provides the underlying infrastructure for IoT projects and offers SDKs for DEPIN track developers. They recently launched the Beta version of the data platform DePINscan to help analyze DEPIN track data.

In addition, this year's Wanxiang Blockchain Week Hackathon champion project, Ketchup Republic, aims to create a web3-based public review, directly handing the traffic fees purchased by merchants to users, providing better traffic and experience for merchants and consumers...

The noteworthy projects emerging from the DEPIN track are sprouting up like mushrooms after the rain. Everyone's desired breakthrough may give birth to a new peak in the DEPIN track. However, due to the cost requirements of the combination of software and hardware, the peak might come a bit slower. But a late spring is still spring.

Advantages of DePIN#

Looking at the mechanisms of various DePIN projects, the most essential core is resource integration: incentivizing users to share resources through tokens, allowing resources to flow efficiently to those in need. DePIN, compared to centralized traditional infrastructure, is like DeFi relative to CeFi, to some extent weakening the role of middlemen, making resources flow more freely between suppliers and demanders.

Transition from Capital-Intensive Industries to P2P/P2B Models#

The mechanism presented by DePIN projects is essentially a revolutionary market transformation. Its decentralized nature means that the entry threshold for businesses will be significantly reduced, no longer subject to the monopoly of a few centralized giants. This groundbreaking change will empower small and medium-sized enterprises and startups with greater participation and provide an opportunity to compete equally with industry leaders.

In the field of infrastructure construction, the problem of oligopoly in the centralized market was notably present. Especially in traditional storage and computing fields, this is a clear capital-intensive industry. Giants like AWS, Azure, and Google Cloud dominate pricing, and users often lack bargaining power, are forced to accept high prices, and even lack real choices.

However, the emergence of DePIN has brought new vitality to this status quo. Whether it's Filecoin, Arweave, or Render Network, by incentivizing users with tokens, and allowing users to provide resources to form a network, it realizes the transition from a capital-intensive industry to a P2P or P2B model. This greatly reduces the entry threshold for businesses, breaks price monopolies, and gives users more affordable choices. DePIN incentivizes users to share resources and establishes a free-competition ecosystem, making the market more open, transparent, and competitive.

Reuse of Idle Resources, Promoting Better Social Development#

In traditional economic models, many resources are idle and do not realize their potential value. This resource wastage not only has a negative impact on the economy but also exerts considerable pressure on the environment and society, including idle computing power, storage, and energy. For instance, according to a report by Flexera, in 2022, the effective utilization rate of cloud purchases by enterprises was only 68%, implying that 32% of cloud resources were wasted. Considering Gartner's prediction that cloud spending will reach nearly $500 billion in 2022, this means that roughly $160 billion in cloud spending is wasted.

However, the emergence of DePIN offers a new solution to this dilemma. Many users possess a lot of idle resources, whether it's storage, computing power, or data. The key is how to mobilize these resources. Through incentive mechanisms, DePIN encourages users to share and utilize their resources, maximizing resource utilization. This includes not only resources like data storage and computing power but also environment-related resources. For example, the React Protocol connects batteries to the electricity market in community networks, helping stabilize the grid by connecting batteries and sharing users' excess electricity. On one hand, it contributes to the supply of clean energy, and on the other hand, it provides a way for users with limited resources to make money, truly a win-win. This move not only reduces resource wastage but also brings more sustainable development to society.

Eliminating Middlemen, More Efficient Money Flow#

In addition to the transformation of decentralized storage, computing, and network models and the reuse of idle resources, some emerging DePIN projects have shown their vision and characteristics of becoming the web3 version of Meituan, Dianping, Didi, and other O2O projects.

For instance, Ketchup Republic aims to use the location relationship between consumers and merchants (using Bluetooth) to help merchants attract offline traffic. Merchants can configure the token incentive method for users themselves, setting marketing parameters based on location, frequency, distance, etc. Compared to the merchant-platform-user incentive model of web2's Meituan and Dianping, in Ketchup Republic, the marketing cost paid by merchants goes directly into the pockets of users, reducing marketing cost attrition.

These emerging DePIN projects aim to replace web2 infrastructure projects, allowing users who provide data to be directly paid by merchants, thereby eliminating intermediaries.

This means that DePIN, by establishing a decentralized ecosystem that directly connects suppliers and demanders, achieves direct value transfer. Money and resources can flow more quickly, thereby increasing the efficiency and transparency of transactions. This mechanism not only reduces transaction costs but also provides more opportunities and flexibility for market participants.

Limitations and Challenges of DePIN#

The DePIN track covers a wide range of categories, including storage, computing, data collection and sharing, communication technology, etc., and these existing markets all present varying degrees of competitive status. The development of DePIN also faces many limitations and challenges:

Experience Level: Lack of Standards in the Early Industry, Poor Developer and User Experience#

The DePIN industry is still in its early stages of development, lacking a complete infrastructure, and each project needs to be developed independently. Furthermore, the understanding and usage threshold for user participation is relatively high. Users need to learn and hold tokens and also need to make some hardware purchases and configurations. These factors mean that the user experience of DePIN projects on the market is generally mediocre. Companies need to aggregate and simplify the thresholds for user participation and use to improve network usability to have more chances of breaking the circle.

It's worth noting that some companies are starting to build infrastructure for the DePIN track. For example, Filecoin announced the launch of Filecoin Data Tools (a set of computing and storage technologies based on its network) to enhance the developer experience and provide a comprehensive solution for data service needs. In terms of infrastructure, IoTex is also working on a move-to-earn SDK and other toolkits, hoping to achieve some standards and consensus at the DePIN level to promote the industry's just-right development.

Competitive Level: Lack of Competitive Moats#

The lack of competitive moats poses a challenge to the long-term stable development of the network. For users as resource providers, once more choices appear in the market, they might easily switch to other networks. For example, in the 5G track, Pollen has entered the scene, and some miners from the Helium community have also started deploying Pollen mining machines. As a decentralized mobile network provider, how to enhance its irreplaceability and competitive barriers is a long-term exploration process.

Moreover, preventing cheating is also crucial for sustained development. For instance, how to avoid cheating behaviors encountered in the Helium project, such as cluster mining cheating, and GPS location modification cheating in geographic data-related projects, is also a vital part. For example, Helium dropped from a peak of 600,000 monthly active hotspots to the current 370,000 monthly active hotspots. How to face and reverse the decline and provide better services is an urgent problem to solve.

Current projects mostly attract users from the token incentive perspective, such as adjusting token incentive amounts from multiple dimensions such as coverage and availability. However, there has not been a consistently effective solution yet. How to continuously attract user participation and form a positive flywheel effect still has a long way to go.

Expansion Level: Regulatory Compliance Restrictions#

Since the DePIN field involves infrastructure and will impact users in the web2 world, regulatory compliance becomes an unavoidable issue. For instance, in the communications field, 5G technology is subject to strict regulatory requirements. Many countries' network operators are operated by state-owned enterprises, and private enterprises also maintain close ties with the government, so obtaining authorization may face some challenges. Even if some countries have opened up certain frequency bands, such as the CBRS GAA band opened by the United States, there is no significant advantage compared to other operators due to frequency restrictions.

On the contrary, in the IoT field, since there is no mature giant solution, it has left room for Helium to play. The current DePIN is still in its early stages. On the one hand, in areas where web2 has not yet found a solution, such as IoT networks, new innovations can be tried; on the other hand, in tracks where web2 has relatively mature solutions, such as 5G and data security, they still need to grow with the development of regulations. The speed of this growth is unknown and full of changes.

Construction Level: Talent Barrier#

When communicating with some DePIN track project parties, a common pain point and challenge everyone faces is the scarcity of talent.

The DePIN field requires talents with comprehensive skills, who understand both the Internet of Things and the operation of the web3 market. However, such talents are relatively scarce in the current industry.

To some extent, the steady development temperament of the Internet of Things and the radical innovation style of web3 also become somewhat contradictory qualities that are hard to have in talents. Most talents with IoT experience may prefer to develop in traditional industries, while talents who understand IoT and also know the web3 market and operations are even rarer. The difference between the two makes team recruitment and collaboration a challenge.

In summary, in the short term, the DePIN field faces many challenges, including product experience, moat establishment, regulatory compliance, and talent shortages. However, in the long run, whether from the perspective of lowering thresholds, innovation, or utilizing idle resources and money flow, the emergence of DePIN will have a profound impact on the market. The market changes it brings will affect the supply chain, industrial structure, and the evolution of the entire economic ecosystem. With the continuous development and maturity of DePIN, we have reason to believe that it will become a key force that can bring real change to society, enterprises, and individuals.