DePIN: Definition and Benefits of Emerging Trend in Crypto Space

Today's digital era constantly evolves and changes various aspects of our lives. However, one fundamental element - our physical infrastructure - has not kept pace with fast development. This sector is of great importance for social progress and includes integral components such as transport systems, communication networks, and energy networks. 

Historically, they have been driven by centralized parties. Although their management and control methods are quite effective, they have some issues. These are stagnation of innovation, susceptibility to system failures, and other significant barriers to entry into the market. This is where a new approach emerged, implying the creation of decentralized networks of physical infrastructure. The new technology is called DePIN.

This concept is an innovative framework based on DeFi (decentralized finance) methodology. It allows the creation of decentralized projects that reward participants for real actions in the physical world.

In this article, we will explore the topic of DePIN and its numerous benefits in the context of digital and crypto industries. Let’s begin!

So, what is DePIN? This term means the decentralized physical infrastructure network. It is a decentralized network of participants who, using a public registry (blockchain) and cryptocurrency, create and support a specific infrastructure project. Simply put, DePIN involves using blockchain to run and maintain decentralized networks of equipment such as sensors, network devices, physical data storage, wireless infrastructure, energy networks, and more. 

Building and operating physical infrastructure networks is expensive and complex and has historically been in the hands of large corporations or states. It is because these infrastructures have the capital and resources. DePIN has come to change this approach to a more transparent system and collective ownership of resources. 

The decentralized nature of blockchain, in contrast to CeFi, allows the building of a network based on horizontal connections and not in a hierarchical order, as is usually the case with large infrastructure projects.

DePIN is trying out a long-proven system of rewards for work done in the world of cryptocurrencies to encourage participation in physical infrastructure networks. For active contributions to the project, participants receive project tokens (or, theoretically, another cryptocurrency). 
The DePIN flywheel demonstrates how DePIN encourages people to build physical infrastructure networks for other people and machines to use. In this case, people can participate without huge upfront investments like traditional business models. 

Let's look at the diagram below. Tokens attract people to deploy hardware that offers services to other people. Supply-side people make money by providing new or existing equipment to people seeking the goods or services that equipment provides. Since no intermediaries exist, goods and services are often cheaper and faster.

DePIN offers voluntary cooperation of participants. Individuals participate in DePIN networks using either their own equipment or purchasing specialized equipment designed specifically for a specific job. The range is very different: from simple hard drives to weather stations. However, as a rule, DePINs are currently built around opportunities available to the general public.

There are two types of DePIN: 

• PRN (physical resource networks): PRNs are localized, decentralized networks where providers provide hardware resources on-site (for example, installing a sensor or distributing the Internet). These resources are location-specific, and their contribution to the network varies by location. So, they are not fungible.
• DRN (digital resource networks): DRNs are networks whose providers provide resources based on their function rather than location. Examples of such resources are computing power, bandwidth, and data storage.

The DePIN field has more than doubled in the last six months. According to a dashboard from EV3, a venture capital firm, the DePIN market expanded from about $10 billion to approximately $25 billion in 2024. The statistics show the promising future of this trend and the possibility of profiting from this sector.

DePIN operates on a “token economy” model. This means connecting the demand and supply sides to form a self-propelling cycle. Tokens are used to reward users for installing hardware, providing services or goods in the real world, and compounding on-chain and off-chain data. 

Here are the main components and participants of projects that implemented the DePIN technology.

The supplier provides some resources for the network by operating and deploying hardware equipment, receiving a nominal fee for doing so. The requester pays tokens to use the network's services, enhancing the turnover and value of the tokens. As the network expands, more parties from both the supply and demand sides join in, creating an extended ecosystem.

A decentralized physical infrastructure network is a serious competitor to the traditional infrastructure model. Below, we outline the main distinctions between them.

The DePIN approach differs from traditional infrastructure models by offering enhanced security, accessibility, resilience, and scalability through decentralized architecture and distributed ownership. This modern technology promises incredible innovation and inclusivity in the digital ecosystem.

The following are the main reasons why end users may choose DePIN over centralized infrastructure models for their computing, wireless connectivity, data storage, artificial intelligence, and services marketplace.

DePIN enables everyone to become a user and a creator of the network through token rewards. There is no expensive equipment or professional technology, reducing costs and physical infrastructure thresholds. Certain DPIN crypto services, such as decentralized data storage, provide users with low-cost alternatives to traditional analogs. 

Moreover, DePIN is a permissionless environment. There is no centralized party that can check users or disable services.

This modern technology creates more diversified network services and resources through decentralization. Data stored on public blockchains is affordable to everyone and cannot be deleted or modified. This improves network efficiency and quality and eliminates centralized bottlenecks and failures. 

In 2023, AWS (Amazon Web Services) experienced global outages that impacted the internet operations of several companies in the US. Food delivery apps could not close orders, smart home devices were unresponsive, websites would not load, and users couldn’t log into their accounts. DePIN will not experience these single-point troubles. Why? These networks are operated by independent nodes spread across the world.

There is growing mistrust of how big tech companies handle the sensitive data they collect from customers. Users who are worried about misusing their personal information can rely on reliable crypto DePIN service providers. Such networks are created with privacy-preserving technologies. DePIN uses blockchain technology to make network data and transactions more transparent and verifiable. This enhances network security and privacy and prevents data tampering and leakage.

The DePIN model allows network participants to capture value and revenue from network growth through the token economy, creating a new value network and revenue stream. DePIN uses crypto incentives to attract infrastructure providers and end customers. 

For instance, one of the wireless providers, Helium, enables people to receive cryptocurrency tokens when they give their location data. Cryptocurrency rewards not only stimulate the influx of new users but also help identify areas that require better network coverage and improved quality of service.

The advantages of DePIN are, above all, verification of rights and economies of scale. Additionally, with globally distributed digital resources, it quickly provides products and services to in-demand parties in other areas.

In addition to the above advantages, there are also several significant disadvantages that are worth considering:

• High volatility of tokens;
• Maintaining a decentralized infrastructure requires participants to have technical knowledge;
• Competition with big tech companies;
• Legacy issues.

The industry's lack of regulation may also contribute to the use of crypto DePIN projects for illegal purposes, such as storing illegal content.

Our team at Peiko has extensively researched blockchain networks to determine their suitability for DePIN development. Below, we mentioned some of the popular platforms for building DePIN solutions:

It is an excellent blockchain platform for DePIN solutions. Solana offers high throughput and relatively cheap transaction costs. This makes it particularly well-suited for DePIN initiatives. 

The extensive throughput capabilities of Solana are crucial for top DePIN crypto projects, where rapid processing and management of significant data volumes are essential. Solana's architecture includes features like storing state akin to dedicated memory storage, further enhancing its suitability for data-intensive projects like DePIN.

This platform is designed for the IoT (Internet of Things) and offers DLT (distributed ledger technology) to handle DePIN requirements effectively. 

IOTA can verify transactions simultaneously with the help of its DAG (directed acyclic graph) architecture. This enhances scalability and fastens transactions. Moreover, IOTA transactions incur no fees and boast one of the lowest energy footprints among public DLTs, making them ideal for DePIN applications.

The COSMOS network provides an expanding ecosystem of interconnected applications and services, facilitating secure communication between blockchains through hubs, the Tendermint consensus algorithm, and the Inter-Blockchain Communication (IBC) protocol. 

Each COSMOS app operates as its own blockchain, offering flexibility in the functionality of blockchain and validator sets aimed at unique requirements. DePIN-based projects on COSMOS can be built vertically or horizontally, with the ability to introduce core technological alterations or new features, benefiting from seamless and secure communication between blockchains via the IBC protocol.

The nascent DePIN industry, which includes more than 250 projects, generated approximately $8 million in revenue in 2023. According to CoinGecko data as of January 26, 2024, here are the top 8 DePINs by market capitalization:

Let’s consider some popular projects in detail.

It is a platform for decentralized data storage that applies the IPFS (Interplanetary File System). This solution is one of the oldest examples of implementing the DePIN concept, which appeared in 2014.

Users who want to store their data in Filecoin pay a fee to the network miner for the use of space. However, the cost is constantly changing as miners compete with each other by offering low prices for their services. The more space they provide to users, the higher their reward for their work in the form of the FIL cryptocurrency.

As of April 2024, the coin of this project, FIL, is trading at $8.56.

This decentralized wireless network built on Solana provides Internet access at a lower cost than some providers in countries like the US or Canada. Data is transmitted through access points that use Helium LongFi technology. The miners responsible for the nodes earn HNT tokens. Subscribers earn MOBILE tokens, which can be used to renew their tariff plan.

The number of access points exceeded 984,900 units at the time of this article's preparation. Nodes operate in more than 170 countries, but the largest number are located in the United States and Europe.

Examples of some other top DePIN crypto projects:

• Arweave: Decentralized file storage service.
• Power Ledger: Peer-to-peer energy trading platform.
• Hivemapper: Decentralized mapping service.
• DIMO: Network for vehicle data monetization.
• Render: Decentralized GPU (graphic processing unit) rendering platform.
• PowerPod: Shared EV (electric vehicle) charging network.

By applying blockchain technology and incentivizing participation, DePIN initiatives promote resilience, accessibility, and innovation in the crypto space. As the adoption of DePIN continues to grow, we can expect to see more great projects that will attract users and bring value.

While blockchain technology impacts positively enhanced security and privacy in the digital realm, its implementation is not without hurdles. Specific issues must be solved to integrate DePINs successfully into existing systems. Below are some of them:

• Regulatory compliance: DePINs operate on decentralized networks, which may pose regulatory challenges as they often bypass traditional centralized authorities. Navigating regulatory frameworks and establishing compliance with data protection laws can be time-consuming and sometimes challenging.
• Scalability: This remains a significant challenge for DePIN implementation, particularly as the number of users and transactions increases. For widespread adoption, the network should be capable of handling rising demand while maintaining speed and efficiency. 
• Interoperability: It is crucial to establish good interoperability between different DePINs and existing systems. This will help ensure seamless integration and widespread adoption of modern technology. 
• User adoption: Encouraging users to adopt DePINs may be challenging, especially if they are accustomed to traditional identity verification methods. Educating users about the benefits of DePINs and addressing any concerns about privacy and security is essential for broader adoption.
• Security: While DePINs offer enhanced security and privacy compared to traditional identity verification methods, they are not immune to security threats. Include robust security measures, such as encryption and multi-factor authentication, to safeguard user data from unauthorized access.

Overcoming these challenges will be critical for the successful implementation of DePINs and realizing their full potential to revolutionize digital identity verification.

DePIN has a rare commodity in the cryptocurrency sector: real-world utility. Its services, such as wireless communications and cloud computing, are poised to draw demand from diverse industry areas, comprising gaming, media, or PoW (proof-of-work) mining. Notably, many DePINs can compete with centralized technology enterprises, not the established financial organizations and central banks that decentralized finance is aiming to supersede.

DePINs are not reinventing the wheel. They are making decentralized open markets for the same services that traditional tech firms provide. Let’s consider the prospects of DePIN technology: 

• Research of new business scenarios: The development of the DePIN direction will contribute to researching additional business scenarios and models. Projects can utilize both Web3 and Web2 technologies to unite together diverse manufacturers, services, and device ecosystems on a “neutral territory.” Such a combination will lead to more innovative and sustainable business models.
• Focus on expanded adoption: DePIN can bring a decentralized physical infrastructure network to the population. With time, DePIN is forecasted to become a user-centric app layer. This will drive wider adoption of blockchain technology, allowing everyone to receive more decentralized and efficient services.
• Integrating IoT needs: The thriving of DePIN will depend in part on understanding IoT requirements. With the development of the Internet of Things, DePIN is projected to better meet the worldwide demand for IoT services (sensor networks, location data) and drive the development of the field.
• International collaboration: To build a worldwide, decentralized network, the DePIN technology may reinforce international collaboration and create a global network ecosystem. This will allow better responses to global requests, simplify the exchange of experience and technology, and promote the development of DePIN in a more transparent way.
• Clearer industry rules: As DePIN progresses, the requirement for industry rules will become more essential. Regulators and governments can emphasize compliance with DePIN and develop a more explicit regulatory framework in this area. This will lead to the long-term promotion of the technology and its stable growth.
• Optimization of the token reward model: This model is one of the main mechanisms used in the projects that implemented the DePIN technology. In the next years, the reward model can be optimized to engage more users to participate and create a profitable cycle. Token incentives form the basis for the sustainable development of DePIN.

As an innovative and forward-looking technology, DePIN has ample growth opportunities and demonstrates impressive potential for the future.

At Peiko, our team comprises seasoned experts providing top blockchain development services. We deliver solutions that end-users like due to their modern and user-friendly design, great performance, and enhanced security. Visiting our site, you can see our portfolio, which includes many successful cases like Riabu or Bitcoin Additional, and reviews from satisfied business owners.

For example, Bitcoin Additional is one of the best blockchain projects we worked on. It is a functional and convenient crypto wallet that operates with diverse coins, includes the synchronization of users’ contact books, and provides an offline payment function. 
The main task was to make this solution extra-secure, as a cryptocurrency wallet should be to be trusted among users. 

So, we implemented industry-leading security standards to safeguard users' assets. To achieve this, we integrated robust processes throughout the application life cycle to swiftly identify and rectify vulnerabilities. We also conducted routine security audits to ensure the integrity of the source code.

Bitcoin Additional has now amassed thousands of users, attesting to its reliability and security standards.

With Peiko as your development partner, you can be assured that your project will be in capable hands and backed by a team of dedicated professionals.

Whether you're aiming to integrate DePIN technology into your established systems, want to create a DePIN cryptos project, or, for example, need decentralized exchange development services, we will help you every step of the way.

Now, you have received the answer to “What is DePIN?” in the crypto landscape. DePIN blockchain projects are pushing the boundaries of traditional infrastructure models, offering excellent scalability, efficiency, and interoperability. Implementing decentralized infrastructure may take some time as DePIN faces challenges that have yet to be resolved. Still, this modern technology has all chances to modify the future of diverse industries, from finance to supply management, healthcare, and others.

If you need an innovative blockchain solution that attracts users, the Peiko team is here to help you, just contact us. Let's collaborate and implement your vision to life!