Decentralized Physical Infrastructure Network (DePIN)

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What are Decentralized Physical Infrastructure Networks (DePINs)?

Decentralized physical infrastructure networks (DePINs) are blockchain protocols that build, maintain, and operate physical hardware infrastructure in an open and decentralized manner.

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The DePIN industry covers infrastructure for data storage, wireless connectivitycomputing, energy, data collection, and more.

DePIN protocols have garnered crypto investor interest lately due to their potential to impact a wide range of industries, including the Internet, artificial intelligence (AI), energy, wireless communications, and more.

Techopedia Explains the DePIN Meaning

DePINs definition

A DePIN is a peer-to-peer (P2P) network that meets hardware demand through an open and decentralized marketplace. 

Cryptocurrencies are at the center of DePIN community building. DePINs use crypto token rewards to attract and incentivize real-world physical infrastructure operators to join their networks.

When the value of a DePIN’s token rises (as investor capital enters the network), it enables service providers to offer competitive pricing. It leads to growth in adoption and demand for DePIN’s services, which ultimately leads to a further rise in token price, attracting more investors, service providers, and users.

According to a report by crypto research firm Messari, DePINs can be classified into two groups:

  1. Physical Resource Networks (PRNs): DePIN protocols that incentivize service providers to deploy location-dependent hardware that supplies certain physical locations with energy, connectivity, and geospatial data use cases.
  2. Digital Resource Networks (DRNs): DePIN protocols that create location-independent back-end for the cloud and incentivize service providers to supply digital resources like computing, storage, and bandwidth.

How Do DePINs Work?

DePINs function through three key elements: off-chain network, blockchain, and protocols.

  • Off-Chain Network

A DePIN’s off-chain network mainly comprises its users and service providers. Users in need of GPU computing power, wireless connectivity, or data storage buy available resources from an open marketplace of service providers.

  • Blockchain

The blockchain brings end users and service providers together. It serves as a public ledger that handles payments and escrow contracts and ensures that all transactions are processed correctly and can be easily tracked. Any transactions between end-users and service providers are time-stamped and recorded on-chain.

  • Protocols

Finally, the encoded rules or protocol define the key features of how a DePIN functions. The rules will determine a DePIN’s security measures, the number of native crypto tokens in circulation, service provider eligibility, user-service provider interaction, and more.

Why are DePINs Needed?

DePINs facilitate an open market for hardware infrastructure that is currently dominated by centralized Big Tech corporations. These decentralized, open markets give power to the end-user by eliminating a centralized entity that can censor or shut down services at a whim.

Take the GPU market, for example. When decentralized computing marketplace Akash launched GPU computing capabilities in 2023, It pointed out the difficulty faced by individuals and small corporations while procuring high-performance GPUs, as they were typically reserved for bigger clients. 

Cost efficiency is a key value proposition of DePINs. Mature DePINs with strong service provider communities can offer competitive pricing and ease of access, making them a viable alternative to traditional counterparts.

Examples of DePINs

Let’s discuss the top three DePINs in the world by market capitalization, according to CoinGecko, as of 11 January 2024.

Filecoin (FIL) – Decentralized Data StorageRender (RNDR) – Decentralized ComputingTheta Network (THETA) – Decentralized Content Delivery Network

Filecoin (FIL) – Decentralized Data Storage

Filecoin is a peer-to-peer network that provides decentralized data storage services to its users. Anyone with the necessary hardware infrastructure can become a storage provider by staking FIL tokens as collateral.

Filecoin has other network participants called retrieval providers that focus on providing users with quick access to their data.

FIL token is the native cryptocurrency of Filecoin that is used as a payment token by users, for incentivizing storage providers and for ensuring honest behavior from service providers.

To put it in simple terms, the Filecoin protocol sets rules that allow users to interact with storage providers in a secure, trustless, and decentralized manner.

Render (RNDR) – Decentralized Computing

Render is a peer-to-peer GPU processing network that provides near real-time computing power for 3D rendering tasks, artificial intelligence (AI) and machine learning (ML) training, complex calculations, and more.

Service providers with idle computing power can contribute their used GPUs to the network and earn RNDR tokens for processing rendering needs.

GPU providers need to build their reputation over time to receive higher job volumes by completing tasks in a timely and accurate manner. Render users also have reputation scores that help the network reduce unintentional congestion from failed renders or malicious activity.

The RNDR token is the native cryptocurrency of the Render Network. The token was created on the Ethereum blockchain. In November 2023, Render migrated to the Solana (SOL) blockchain.

Theta Network (THETA) – Decentralized Content Delivery Network

Theta Network is a peer-to-peer blockchain protocol that provides decentralized data storage, content delivery, and computing services. The Theta Network is powered by service providers that share storage and bandwidth with end-users.

The Theta Network has a dual token system. The Theta Token (THETA) is a governance token used for staking. Theta Fuel (TFUEL) is an operational token that is used for payments to service providers.

Pros and Cons of DePINs

Pros

  • Open and decentralized marketplace
  • No single point of failure due to its decentralized nature
  • No censorship
  • Mature DePINs have the potential to offer competitive pricing

Cons

  • Vulnerable to hacks and bugs
  • Unfavorable token price volatility can adversely affect the DePIN ecosystem
  • Nascent DePINs can not compete with the service quality of traditional centralized entities.
  • Establishing and sustaining decentralized infrastructure demands specific technical expertise.

The Bottom Line

DePINs encapsulate why cryptocurrency and public blockchain technology are needed. DePINs offer alternatives to centralized corporations by creating an open and decentralized marketplace where user privacy is protected, censorship is restricted, and honest participation is rewarded.

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Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.