DePIN: Building a Decentralized Value Network through Dual Curve Superposition

Introduction

DePIN is gradually achieving large-scale interaction between the physical world and Web3, and is gradually disrupting the operational model of traditional infrastructure. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, it promotes crowdsourced development through cryptoeconomic incentives. Analyzing most DePIN projects, it can be found that an important characteristic of DePIN's business model includes hardware revenue as the primary growth curve, with monetization of data services layered on top, forming a secondary growth curve. This is one of the key factors that enable DePIN to lead the current cycle of growth, while also demonstrating how DePIN-type projects can create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralization physical infrastructure network ( DePIN ) is defined in the 2023 Messari report as "deploying real-world physical infrastructure and hardware networks using cryptoeconomic protocols." This concept suggests an application scenario full of imaginative space: common infrastructure around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, and the data storage and computing devices behind the operation of the Internet, will no longer be controlled by centralized entities and institutions, but will be divided into equally sized units, held by individuals or large-scale miners. Furthermore, physical infrastructure of the same type will be highly standardized and scaled, forming a carpet-like coverage.

Through decentralization, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall system's security and resilience. Moreover, from energy production to data processing, various facilities have the potential to transition to a decentralized model. The total market size of the related industries involved in DePIN has already surpassed $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN field is estimated to be around $2.2 trillion, and it is expected to reach $3.5 trillion by 2028.

1.1 DePIN Track Division

The DePIN track covers six subfields: computing, AI, wireless communication, sensors, energy, and services. From the perspective of the supply chain, DePIN can be divided into:

• Upstream: hardware manufacturers and supply-side users as "miners".

• Midstream: project platform, responsible for data verification and token settlement blockchain, and layer two protocol on-chain serving DePIN; as well as modular service components ( used for developing and managing DePIN networks, such as platform interfaces, data analysis, and standardized services ), SDK toolkit developed for DePIN, API interfaces, etc.

• Downstream: Connect to the demand-side dApp applications and interfaces.

Besides IoTeX and the former Helium(, which has now migrated its mainnet to Solana), most DePIN projects rarely manage to cover every aspect of DePIN business. They typically choose Solana or IoTeX as the settlement layer for their token economy. AI and cloud computing projects in the subfield focus more on on-chain settlement and the development and management of project platforms, while the underlying hardware devices schedule idle electronic equipment through middleware, such as smartphones or computers equipped with high-performance consumer-grade GPUs.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja's data, the number of DePIN projects that have currently gone live has reached 1,215, with a total market capitalization of approximately $43 billion. Among them, the total market capitalization of projects that have issued tokens and are listed in the DePIN sub-section on Coingecko exceeds $25 billion.

In October of last year, this number was only 5 billion USD, and in less than a year it has increased fivefold, demonstrating the rapid growth of the DePIN industry. This indicates that the market's demand for and recognition of decentralized physical infrastructure networks is continuously rising. With more projects going live and the expansion of application scenarios, the DePIN industry is expected to become an important area where blockchain technology integrates with real-world applications.

2.Inspirations from the DePIN Business Logic

The prototype of DePIN can be traced back to the IoT + Blockchain ( concept from the last cycle. Projects like Filecoin and Storj have transformed centralized storage into a decentralized operating model through cryptoeconomic models, and have been practically applied in the Web3 ecosystem, such as on-chain NFT storage and front-end and back-end resource storage for DApps.

The Internet of Things + Blockchain only reflects the characteristics of Decentralization ) "De" (, while DePIN emphasizes more on the construction of physical infrastructure and the scalable interconnected network. In DePIN, "PI" stands for Physical Infrastructure ), and "N" represents Network (, which is the value network formed after the DePIN hardware reaches a certain coverage scale.

The most typical example is Helium, which was established in 2013 and only confirmed in 2018 to use blockchain as an incentive for decentralized deployment of the Internet of Things. So far, Helium has almost met all the elements of DePIN: node economy, miner model, value network, crowdsourced incentives, and is a leading project in the field of DeWi ) decentralized wireless communication (. In addition, at the end of last year, Helium Mobile launched a $20 communication package service in cooperation with T-Mobile, aimed at traditional users. When users transmit data using the Helium network, they not only receive token rewards but also enjoy reliable communication services. At the same time, Helium has also helped T-Mobile solve the signal coverage problem in remote areas of the United States, creating a win-win situation for all three parties. The large number of traditional users it serves has the potential to drive DePIN out of its niche and is expected to accelerate the large-scale adoption of blockchain technology and the Web3 network.

Helium and Filecoin both fall under the category of DePIN, but the difference between the two is that Helium places more emphasis on hardware, enabling it to support the growth of data services on the second curve through hardware revenue, building an independent ecosystem while reaping Alpha and Beta returns. Although Helium was involved in false advertising last year and faced issues such as the obscurity of programming languages leading to development difficulties, a series of actions at the end of the year once again opened up the growth of Helium's second curve; and as the largest DePIN project that has emerged first, it undoubtedly brings us some insights into the DePIN ecosystem.

3. The Explosive Growth of DePIN is Based on the Dual Curve Theory

The "Second Curve" is a concept in management and innovation theory, originally proposed by management scholar Charles Handy). It refers to the need to introduce new innovations or changes when an organization, product, or business reaches the peak of its traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the successful experience of previous DePIN projects, it can already be seen that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with the monetization of the data value network layered on top of the first curve, serving as the guiding principle for the second curve of development.

Product development and operational capabilities are key to ensuring growth on the first curve; to initiate growth on the second curve, two capabilities are needed: first, the organizational capability of a decentralized system, and second, the service capability on the demand side.

In the DePIN ecosystem, the project team must first ensure the smooth operation of the data value network under the premise of having the capability to organize and support large-scale data transmission through a hardware network. Only then can the demand side smoothly connect, ultimately providing high-quality, standardized data services. This will complete the double exponential growth of the business and create a positive cycle within the project ecosystem.

( 3.1 The value of hardware is the first curve of value creation

In the first growth curve, the business will experience rapid growth in the early stages, then gradually reach its peak. The growth momentum of the first curve of the DePIN project comes from the revenue and profits generated by hardware sales.

Traditional infrastructure, especially in areas such as data storage and communication services, has a centralized service provider or entity with a linear business logic: in the early stages of the business, investment is required to build infrastructure, and once the facilities are complete, services are provided to end users )C端(. Therefore, developing such businesses often requires the participation of large enterprises to bear the high costs in the initial stages of operation, including hardware purchases, land leasing, deployment, and hiring of maintenance personnel.

The DePIN project decentralizes the supply side and turns it into a crowdsourced model to establish a hardware network.

Therefore, the first step in dismantling centralized infrastructure is the key to achieving the first curve of growth for the DePIN project.

The DePIN project team must first work hard to promote itself, spread its narrative, and attract participation from supply-side users through a series of operational means, including the presale of "mining machines," purchasing to receive airdrops, etc.; transferring the huge infrastructure costs to be borne by supply-side users, achieving a lightweight launch at a low cost. Supply-side users also become "shareholders" of the project team by holding hardware, while helping the project team deploy the hardware network with the expectation of earning money from mining in the future.

Not only that, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are jointly completed by the project party and miners, meaning that the device provider is only responsible for the research, development, and sale of the devices, while the updates and maintenance are carried out by the supply-side users. In the process of collaboratively maintaining and building the hardware network, the interaction with the project party and middleware has strengthened the sense of community identity among miners ) and supply-side users ###, as well as their recognition of the DePIN project.

If a DePIN project can smoothly run through narrative marketing, mining machine sales, and community operations; then, the project's own first growth curve elements will have been gathered, ultimately forming the first curve of increasing network coverage scale ------ increasing token incentives ------ attracting more miners to join.

The following is the current data on the number of active nodes. Hivemapper, Helium, and Natix rank in the top three, all having deployed over 100,000 nodes worldwide.

Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have all exceeded 100,000, with Helium and Hivemapper performing exceptionally well in their business.

Helium

• Helium is a decentralized wireless network, whose main services include Helium Hotspot, providing low-power wide-area network ( LoRaWAN ) coverage; Helium Mobile, a mobile communication service launched in partnership with T-Mobile and TEF.

• The $20 communication service package launched in partnership with T-Mobile on January 25 has grown from 0 to 93,000 subscribers in 5 months.

• Collaborating with one of Mexico's telecommunications giants, Telefónica (TEF), to enter the Mexican market with a population of 126.7 million further enhances Helium's revenue sources and market influence.

Hivemapper

• Hivemapper is a decentralized mapping platform that aims to create a global, real-time updated map ecosystem through blockchain technology and cryptocurrency incentive mechanisms. Hivemapper's main business includes the HiveMapper Dashcam------a dashcam that allows users to collect geographic data while driving by installing this device.

• This device is priced at $549. Based on the current number of node deployments, it can be roughly estimated that Hivemapper has already generated over $60 million in revenue solely from hardware sales.

• As of now, the map data collection network established by Hivemapper has covered most areas of Europe and the United States. Hivemapper's data service revenue has also seen significant growth.

• In terms of hardware revenue, there are other projects that have found alternative paths.