by Paul Veradittakit
Compilation: llamac, defillama 24
TLDR: Depin is a gradual convergence of a decentralized hardware layer with a new data economy owned by the community.
In recent years, decentralized physical infrastructure networks (DEPINs) have become one of the hot topics in the industry. The core idea of DEPIN is to bring the claims of blockchain applications (such as community ownership, public verifiability, and incentive compatibility) to physical devices and infrastructure such as WiFi sites, security cameras, and even servers. In this article, we'll first take a deep dive into some of Depin's core principles, then examine some of the most typical Depin projects, and finally, some of Depin's broader and far-reaching implications for the blockchain space.
DEPIN covers projects in a wide range of areas. Depin can be summed up in decentralized storage networks such as Arwe**e and Filecoin, decentralized WiFi-connected devices such as Helium, and community software applications such as Hivemapper. This is clearly stated in Messari's groundbreaking Depin report, published in January 2023, which divides Depin into four main areas: decentralized servers, wireless communications, sensor technology, and energy networks.
From the projects and domains depicted by Messari, we can see that the initial definition of Depin focuses on the physical nature of the project—the practical use of sensors, servers, and routers—to build a decentralized Internet architecture from the hardware level to the top. Since then, however, Depin's easy-to-understand philosophy has expanded to include more consumer-facing apps, such as Trip, which aims to create a decentralized Uber [3]. So, we need to think about how do we begin to understand the meaning of depin?
Therefore, our first task is to gain insight into the conceptual commonalities of these diverse projects, whether they were described in the initial Messari report or how the term has evolved over time. Many of these projects share certain commonalities, such as collective ownership, distributed infrastructure costs, and economies of scale that expand as more users join the ecosystem [4]. In fact, this can be summed up in Messari's Depin Flywheel Theory, which delves into how token incentives can be used to drive this process.
The aforementioned depin flywheel was originally conceived to include only physical infrastructure networks, such as Filecoin and Helium, where users provide resources (disk space or wifi connections) to the network, however, the flywheel is not limited to the realm of hardware infrastructure;There is a similar discussion about data infrastructure. This includes projects with the collection and coordination of consumer data as the core goal, using blockchain and tokens as a common interface to coordinate a new data-centric economic system. Examples of this include consumer-facing applications, such as the Sensor Network project and the decentralized Uber mentioned by Messari, as well as enterprise-oriented blockchain use cases in the chain or logistics management (although the focus on token financialization is relatively small here).
Therefore, a possible way to think of the depin concept as a development trend might be to closely align the decentralized hardware layer with a new community-owned data economy.
One of the oldest and most well-known Depin projects, Helium started in 2013 and is a company that aims to expand broadband infrastructure by letting users deploy LoRa gateways in a decentralized manner. In 2017, the network decided to capitalize on the momentum of cryptocurrencies and began offering cryptocurrency payments through its own L1 blockchain network.
Over the years, this approach has allowed Helium to become not only one of the typical exponents of Depin, but also a model for the crypto industry more broadly. Many people refer to it as the People's Network because it is a major project where people can clearly see how the token can be used to incentivize socially beneficial behaviors. However, over time, both the Helium network and the protocol have experienced liquidity and adoption issues, and the network has faced a steady decline in weekly revenue. Critics also point out that the network's use cases are exaggerated and the incentives are unsustainable.
In April 2023, Helium successfully completed the migration of its L1 blockchain to the Solana network, with the aim of expanding user reach and liquidity, and leveraging Solana's superior transaction processing capabilities to scale.
As a result, Helium in this case reveals some important opportunities and potential risks in the DEPIN space. Tokens do show great effectiveness when it comes to enabling real-world scenarios, but it can be difficult to maintain enough value and attractiveness over time. In addition, with the gradual convergence of L1 and L2 layers, it is true to justify the scalability, infrastructure, and liquidity of running a blockchain independently rather than with another widely adopted chain.
HiveMapper is another well-known Depin project on the Solana network that aims to create a decentralized Google Maps. Essentially, users of the project install dashcams in their cars and share real-time footage with Hivemapper in return for honey tokens. The company then uses all of this distributed data to build a decentralized map with an application API interface.
A key advantage of HiveMapper over Google Maps is that as a decentralized, token-incentivized network, it can quickly complete the token mapping process in a more cost-effective manner. As a result, HiveMapper can provide more affordable API services as a strategy to break the monopoly of the Google Maps market.
Hivemapper emphasizes the core flywheel concept of the Depin system, where we perform distributed, decentralized tasks in an efficient form with the help of tokens. Notably, in the earliest Messari research report (January 2023), Messari described HiveMapper as an important example of sensor networking. However, some may argue that this does not fully demonstrate the true innovation of Hivemapper.
In fact, HiveMapper's core competitive advantage stems from its accumulated data infrastructure – *decentralized data from the user network – and the ability to monetize this data infrastructure by providing API access. There is no doubt that this project makes use of sensors and dashcams to collect data;However, this is only the tip of the iceberg. We can imagine that even if this data is not generated by the sensor network, but is instead generated by other activities, such as user browsing behavior (such as the br**e browser), or even data generated by the user's interaction with the AI, the same overall pattern may still be valid. Depin uses token incentives to generate massive amounts of data in a decentralized way, such as through a decentralized hardware network, to create a new data economy.
The importance of the new data economy is increasingly evident in the case of Teleport, one of the decentralized Uber competitors on the Solana network[3]. Recently, the company released its app (October 2023) and participated in Solana's Breakpoint Conference[16], further cementing its position as a key component of the Shared Mobility Protocol (TRIP). The protocol aims to create a fair and autonomous market environment that eliminates the phenomenon of intermediaries or centralized front-ends charging excessive rides (often up to 40%)[17].
While the widespread adoption and staying power of Teleport and Trip still needs time to be proven, Teleport has undoubtedly become a case study that cannot be ignored, strongly demonstrating the importance of an open and decentralized data marketplace in the core value proposition of the Depin project.
Iotex is another key player in the Depin space, which highlights the different dimensions of how blockchain technology combined with decentralized hardware devices can generate social benefits, namely the security and privacy dimensions. IotEx's flagship product is UCAM, a home security camera that only users can access, and the data is protected by the encryption and immutable properties of the blockchain.
With the overall trend of Depin growing over the past year, IoTex aims not just to build specific smart devices, but to build an open network of IoT devices and popularize the concept of MachineFi. However, as the story of Helium shows, in the overall context of L1 scenario consolidation, it is becoming increasingly difficult to build an independent and professional network and channel liquidity in such an ecosystem, even if Depin has a strong consumer.
Depin's growth over the past year has had a considerable impact and impact on the entire blockchain ecosystem. One of the most important reasons for this is that Depin is a consumer-facing application layer, much like DeFi, gaming, and social, with the potential for mass adoption and the potential to drive consumer demand for the underlying chain or ecosystem.
As the example above shows, Solana appears to be a chain with significant activity in the Depin space, and there are other players such as IoTex seeking to build novel alternative solutions customized for DePin. As an application layer that interacts with mass users and IoT devices, there may be a need for high-performance and composable chains – chains that can carry the load needs of mass consumers, as well as chains that can be combined in a common language, such as Rust and WebAssembly, that can easily run on IoT devices.
In addition, the growth of the depin trend also has a downstream impact on decentralized governance. Since it is customary to launch a decentralized autonomous organization (DAO) coordinated by token-based voting after the token is issued, many well-known Depin projects seem to have a DAO governance module on their roadmap.
However, most of the most well-known DAOs at the moment, such as Uniswap, Compound, and MakerDao, deal almost exclusively with digital or financialized assets. But as the Depin project matures and gradually hands over governance to the DAO, there will be an increasing need for the purchase, use, and maintenance of physical devices (whether servers, sensors, or hard drives) for the DAO to orchestrate. As a result, depin may become a trend to expand the governance task of the DAO from digital assets to physical assets, and it may eventually be that DAOs operate and behave more like traditional companies. In the long run, this could be a turning point that marks the adoption of web3 in the real world.
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