New Infrastructure Wave: Analyzing the Opportunities and Challenges in the DePIN Track

DePIN stands for Decentralized Physical Infrastructure Network, which builds infrastructure networks by incentivizing users to share personal resources through tokens, including areas such as storage space, communication bandwidth, cloud computing, and energy. It crowdsources infrastructure that was originally provided by centralized companies and distributes it to global users.

Data shows that the market value of the DePIN sector has reached $5.2 billion, surpassing that of the oracle sector, and is on a continuous upward trend. From Arweave and Filecoin to Helium during the last bull market, as well as the recently popular Render Network, all belong to this sector.

DePIN has recently garnered attention for three main reasons:

1. The infrastructure is more complete than it was a few years ago, paving the way and empowering the depin track;

2. Messari proposed the new concept of DePIN, considering it "one of the most important areas for crypto investment in the next decade," injecting a new narrative into the track;

3. Web3 breaks out from social and gaming to explore other directions, DePIN becomes an important choice for builders.

This article will analyze DePIN in depth from five perspectives: demand, token economic model, industry status, representative projects, advantages analysis, as well as limitations and challenges.

Why do we need DePIN?

Current Status of the Traditional ICT Industry

Traditional ICT infrastructure is mainly divided into: hardware, software, cloud computing and data storage, and communication technology. Among the top ten companies in the global market value, six belong to the ICT industry, occupying half of the market.

In 2022, the global ICT market size reached 4.39 trillion USD, with data centers and software showing a growth trend, impacting all aspects of our lives.

The Dilemma of the Traditional ICT Industry

The current ICT industry is facing two significant dilemmas:

1. The industry has a high entry barrier, which restricts sufficient competition and leads to pricing being monopolized by giants.

Companies need to invest a large amount of capital in hardware purchases, leasing land for deployment, and hiring maintenance personnel. The high costs result in only giant enterprises participating, such as AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud in the cloud computing and data storage sectors, which together account for nearly 70% of the market share. This leads to pricing being monopolized by these giants, with the high costs ultimately passed on to consumers.

Taking cloud computing and data storage prices as an example, the costs are quite high.

In 2022, the total spending on cloud services by enterprises and individuals reached $490 billion, and it is expected to exceed $720 billion by 2024. 31% of large enterprises spend more than $12 million annually on cloud services, while 54% of small and medium-sized enterprises spend more than $1.2 million. 60% of enterprises reported that cloud costs are higher than expected.

2. The utilization rate of centralized infrastructure resources is low.

Companies typically allocate a large budget for cloud services. However, an average of 32% of the cloud budget is wasted, meaning that one-third of the resources are idle, resulting in significant financial losses.

This misallocation of resources can be attributed to various factors, such as overestimating demand to ensure continuous service availability. More than half of cloud waste is due to a lack of understanding of cloud costs.

In the face of high prices for cloud computing and storage, as well as the dilemma of cloud waste, the DePIN track can effectively address this demand. Decentralized storage (, such as Filecoin and Arweave ), is several times cheaper than centralized storage; some decentralized infrastructure adopts tiered pricing to differentiate between different needs, such as Render Network efficiently matching GPU supply and demand through a multi-tiered pricing strategy.

The Token Economic Model of DePIN

The core logic of DePIN is to incentivize users to provide resources through tokens, including GPU computing power, deploying hotspots, storage space, and more, contributing to the entire network.

Early DePIN tokens often have no actual value. Users participating in providing resources are similar to venture capitalists, selecting promising projects to invest resources and becoming "risk miners", profiting by increasing the number of tokens obtained and the appreciation of prices.

These providers differ from traditional mining, as the resources they offer involve hardware, bandwidth, computing power, etc. Their income is related to factors such as network usage and market demand. They must bear the risks of reduced rewards due to low network usage or resource wastage caused by network instability.

This incentive mechanism creates a flywheel effect, forming a positive cycle during good development and easily leading to a withdrawal cycle during downturns.

1. Attract supply-side participants through tokens: A good token economics model attracts early participants to provide resources and rewards them with tokens.

2. Attract builders and network-consuming users: As resource providers increase, developers join the ecosystem to build products, DePIN offers lower prices to attract consumers.

3. Forming positive feedback: Consumers increase revenue for the supply side, creating positive feedback that attracts more participants.

In this cycle, the supply side receives more valuable token rewards, the demand side obtains cheaper services, the project token value aligns with the growth of participants, attracting more participants and speculators, forming value capture.

Current Status of the DePIN Industry

The earliest DePIN projects such as Helium, Storj, and Sia focused on storage and communication technologies. With the development of the Internet, Internet of Things, and AI, the demand for infrastructure and innovation has increased. Currently, DePIN projects are mainly concentrated on computing, storage, communication technologies, as well as data collection and sharing.

Looking at the top 10 projects by market capitalization, most belong to the Storage and Computing sectors, while the telecommunications sector also has good projects like Helium and Theta.

Representative Projects in the DePIN Industry

Filecoin & Arweave - Decentralized Storage Track

Filecoin and Arweave offer lower prices through decentralized storage, providing different services to users.

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. Currently, the storage space has reached 24EiB. Filecoin is built on top of the IPFS protocol, supports smart contracts, and uses the Proof of Storage consensus mechanism to ensure data security and reliability.

Arweave is a decentralized permanent storage network, where data is permanently stored on the blockchain after being uploaded. It uses a "Proof of Access" consensus mechanism, requiring miners to provide randomly selected previously stored data blocks as "access proofs".

Decentralized storage has a clear price advantage over centralized storage. For the same storage of 1TB for one month, the average price of decentralized storage is less than half of Google Drive and one-tenth of Amazon S3.

In addition, decentralized storage has higher security, as data is distributed across multiple nodes, reducing the risk of single points of failure, and it has greater resistance to censorship. Users retain absolute ownership and control over their data.

In terms of disadvantages, decentralized storage faces technical challenges, including issues with data storage and retrieval efficiency, node reliability, and so on. Usability and performance may fluctuate due to the influence of network participants, affecting the user experience.

Helium - Decentralized Wireless Network

Helium was established in 2013 and is a pioneer in the DePIN sector. In the traditional IoT industry, due to the difficulty of covering infrastructure costs with revenue, there is a lack of giants among IoT device network suppliers. Helium incentivizes global users through tokens to participate in purchasing devices to form a network, achieving network supply.

Helium performs outstandingly in the IoT field, but is somewhat weak in the 5G domain. The IoT field uses LoRaWAN technology, which features low power consumption, long-range transmission, and excellent indoor penetration, making it suitable for large-scale IoT deployment. Some positioning devices and smart farms have started to adopt Helium.

The 5G market has performed poorly mainly due to the dual dilemma of compliance and market ceiling. The allocation and licensing of frequency bands in the United States are strictly regulated by the FCC, and Helium has chosen the CBRS GAA frequency band, which has a slightly smaller coverage and no obvious advantages. 5G is strictly regulated by national policies, and most operators in various countries are state-owned enterprises, making it difficult for Helium to replicate its experiences in the United States overseas.

In March of this year, Helium began migrating from its own Layer 1 blockchain to Solana for reasons including:

1. The team focuses on network construction and entrusts the maintenance of the underlying blockchain to a professional team;

2. The Solana ecosystem is rich in projects and developers, HNT is compatible with other innovative projects, increasing use cases;

3. The Solana state compression feature reduces NFT minting costs, facilitating the migration of nearly 1 million NFTs for Helium.

4. There is room for collaboration with projects such as Solana Mobile Stack and the Saga phone.

In the long run, Helium's exploration in the IoT field has extremely high value. Despite facing challenges, as IoT devices become more widespread and application scenarios expand, its solutions may see broader application, showing great potential in areas such as smart agriculture and smart cities.

Render Network - Decentralized Computing

Render Network is a decentralized GPU rendering platform that transforms 2D or 3D computer models into realistic images and scenes. For large projects, the computational resources required for rendering are immense, often relying on centralized cloud service providers such as AWS and Google Cloud, which can be very expensive.

Render Network adopts a multi-tiered pricing strategy to efficiently match the supply and demand of GPUs.

• Tier1: The value of 1 Euro RNDR is equivalent to 100 runs of OctaneBench4 per hour, comparable to the prices of centralized platforms like AWS.
• Tier2: Provides 2-4 times the OctaneBench workload of Tier1, with computing power increased by 200-400%, and rendering queue priority higher than Tier3.
• Tier3: Provides 8-16 times OctaneBench workload, rendering queue with the lowest priority, not recommended for time-sensitive tasks.

The pricing formula for each tier is fixed, but the OctaneBench unit fluctuates according to the market. Price-sensitive users can choose Tier 3, those pursuing high efficiency can select Tier 1, while those in between can opt for Tier 2.

Render Network emphasizes the full utilization of idle GPU resources. The decentralized rendering network provides an efficient two-way market for global GPU computing supply and demand, achieving efficient resource matching.