DePIN has come to the world, providing the opportunity to create challenging projects that reward actions in the physical world. What is this technology and how does DePIN work?

Theoretical studies in cryptocurrencies have long predicted that cryptographic tools currently implemented in blockchain will be used on the Internet and will impact the physical world sooner or later. At the end of the 20th century, Nick Szabo noticed that smart contracts could automatically manage physical objects. It has been more than 25 years, and blockchain technology has become an integral part of our lives.

This is primarily due to cryptocurrencies: Bitcoin (Bitcoin) continues to break records and is supported by a large physical infrastructure. At first glance, this confirms an actual physical presence in our world.

However, the boundaries of decentralized technologies continue to expand with the emergence of solutions such as DePIN.

What is DePIN and why does blockchain need it?

DePIN stands for Decentralized Physical Infrastructure Network. Blockchain participants use the public ledger and cryptocurrency to build and maintain specific real-world infrastructure projects. Simply put, DePIN involves using the DePIN blockchain to operate and sustain decentralized equipment networks that can serve a common purpose.

This allows the network to be built on decentralized, horizontal connections rather than the hierarchical approach typically seen in large infrastructure projects such as bridges or roads. Building and managing physical infrastructure networks is expensive and complex, so they have historically been the domain of large companies or governments with capital and resources.

In return, DePIN encourages voluntary cooperation among participants. People can participate in DePIN networks using their own devices or purchase specialized devices for specific tasks. Options range from simple hard drives to weather stations. However, DePINs are usually built around capabilities available to the general public.

Max Thack, co-founder of Peaq, explained to crypto.news that DePIN uses tokens to incentivize people to use connected devices to provide services to other people:

“Let's imagine DePIN focusing on smartphones like the Roam Network. Smartphones, owned by ordinary people, are the hardware component, and the data on local call quality they collect is the commodity. Telecom companies looking to improve their services buy this data from the Web3 marketplace, where they play Smart contracts play a role, enabling the exchange of value between the supply and demand sides.

Max Thack, co-founder of Peaq

What are DePIN options?

There are two types of DePINs: Physical Resource Networks (PRN) and Digital Resource Networks (DRN).

PRNs are decentralized networks where service providers provide hardware resources (such as sensors or Internet access), and these resources are linked to a specific location. Their contribution to the network depends on the location, and therefore they are not fungible.

DRNs are networks in which service providers provide resources determined by their function, not their location. Here, location doesn't matter. Examples of these resources include computing power, bandwidth, and storage.

Advantages and disadvantages of DePIN

DePIN could theoretically completely transform how we manage and interact with physical infrastructure. Using blockchain and Smart contractsThis model increases the efficiency and transparency of systems, allowing the community to make decisions independently.

DePIN can be considered a kind of "industrial". DAO", where all participants have equal opportunities and are guaranteed independence of the infrastructure. The system is flexible and can be scaled horizontally. With success in attracting enthusiastic users, the creation of a decentralized physical infrastructure can be significantly accelerated.

The pricing model in DePIN crypto systems is also easier and fairer since infrastructure assets are publicly owned, and the cost of services is determined not by company benefits but by availability. Rewarding participants in the form of tokens allows users to receive regular passive income for the benefit of the community.

However, significant disadvantages should be considered:

• Exposure to hacks and errors.
• High volatility of symbols.
• Technical knowledge is needed to maintain decentralized infrastructure.

However, with DePIN, blockchain powers real-world DePIN use cases and value exchange, and is inherently linked to real-world supply and demand, making this sector uniquely positioned to achieve sustainable, healthy growth.

“People won't stop using navigation apps, ordering food, or using the web because Bitcoin declines. DePIN combines web3 with real value rather than speculation and offers it an opportunity to deliver on its promise of changing the world.

Looking to the future: What will happen to DePIN in five years?

According to Messari analysts, in 2023, the DePIN ecosystem has grown to more than 650 projects, and the number of nodes has increased by 600,000. Researchers note key trends in the development of DePIN in 2024.

Experts believe that tokens will contribute to the widespread adoption of projects like BONK Airdrop to Solana Saga smartphone users. Analysts also consider Asia to be the region with the most significant potential for rapid development of decentralized infrastructure, and expect some of the most impactful projects in this sector to emerge here from 2024 to 2025.

The first development in the field of DePIN appeared about ten years ago. During this time, the number of projects has increased significantly. The market value of the sector is more than $20 billion, excluding RWA and blockchain oracles, according to experts from Messari.

Speaking about the future of DePIN, Thake expects it to become an industry staple along with the full support suite, from DePIN crowdsourced data for training models to decentralized computing and Web3 federated learning marketplaces for AI agents.

“Some of the most exciting applications of the DePIN model will be in the energy industry, especially when it comes to green energy, which requires flexible and decentralized grids, while most legacy grids follow the centralized model. People will soon be earning by harvesting solar energy and contributing to the electricity grid.”

However, DePIN projects are not yet popular even among participants in the cryptocurrency industry, let alone the widespread adoption of this concept. Implementing the decentralized infrastructure may take some time as DePIN has issues to resolve. However, experts are confident that this system will play a major role in shaping the future and changing the principles of operation of physical infrastructure.