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

1. Introduction: What is DePIN

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

Data shows that the market value of the DePIN field has reached 5.2 billion USD, surpassing the 5 billion USD of the oracle field, and is on a continuous upward trend. From the early Arweave and Filecoin, to the last bull market's Helium, and the recently highly regarded Render Network, all belong to this field.

DePIN has recently drawn attention for three main reasons:

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

2. At the end of 2022, Messari proposed the new concept of DePIN, believing it to be "one of the most important areas for crypto investment in the next decade," adding a narrative spark to this sector.

3. The new narrative of Web3 breaking boundaries shifts from social and gaming to exploring other directions, with the DePIN track closely linked to Web2 users becoming an important choice for Web3 practitioners.

Is the DePIN track an old wine in a new bottle, or a new opportunity for Web3 to break through? This article will analyze DePIN in depth from five perspectives: why DePIN is needed, token economic models, industry status, representative projects, advantage analysis, as well as limitations and challenges.

2. Why is DePIN needed?

2.1 Current Status of the Traditional ICT Industry

Traditional ICT infrastructure is mainly divided into: hardware, software, cloud computing and data storage, communication technology. Among the top ten companies by market value globally, six belong to the ICT industry: ( Apple, Microsoft, Google, Amazon, NVIDIA, Meta ).

According to Gartner data, the global ICT market size reached $439 billion in 2022, with data centers and software showing a growth trend in the past two years, impacting our lives in various ways.

2.2 The Dilemmas of the Traditional ICT Industry

The traditional ICT industry faces two significant dilemmas:

1. The industry has a high entry barrier, limiting full competition, which leads to pricing being monopolized by giants.

Fields such as data storage and communication services require significant capital investment in hardware purchases, land deployment, and personnel hiring. The high costs mean that only giant companies can participate, with AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud commanding nearly 70% of the market share in cloud computing and data storage. 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 were higher than expected.

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

According to a report by Flexera, an average of 32% of company cloud budgets are wasted, meaning that one-third of resources remain idle after cloud spending, resulting in significant financial losses. Improper resource allocation can be attributed to overestimating demand to ensure service continuity, as well as a lack of understanding of cloud costs leading to waste.

On one hand, the monopoly of giants leads to excessively high prices; on the other hand, a considerable portion of company cloud expenditures is wasted, putting enterprise IT costs and utilization in a dual dilemma, which is detrimental to the healthy development of the business environment. However, this also provides fertile ground for the development of DePIN.

In the face of the high costs of cloud computing and storage, as well as the dilemma of cloud waste, the DePIN track can effectively address this demand. In terms of price, decentralized storage is several times cheaper than centralized storage; regarding cloud waste, some decentralized infrastructures adopt tiered pricing to differentiate between different needs, such as the Render Network, which efficiently matches GPU supply and demand through a multi-layered pricing strategy.

3. The Token Economic Model of DePIN

The core logic of DePIN is to incentivize users to provide resources, such as GPU computing power, hotspot deployment, storage space, etc., to contribute to the entire network.

Early DePIN project tokens often have no actual value. Users participate by providing resources similar to venture capital, choosing promising projects to invest resources and become "risk miners," profiting through an increase in the number of tokens and appreciation of their price.

Unlike traditional mining, DePIN providers' income is related to factors such as network usage and market demand. For example, low network usage can lead to reduced rewards, or network instability can result in resource waste. Therefore, the "risk miners" in the DePIN track must be willing to bear potential risks and provide resources, becoming a key component of network stability and project development.

This incentive mechanism creates a flywheel effect, forming a positive feedback loop when development is thriving; conversely, it can easily lead to a withdrawal cycle when development declines.

Through the token incentive mechanism, DePIN first attracts suppliers, then attracts users to use it, achieving the project's cold start and core operation mechanism, thereby further expanding development.

4. Current Status of the DePIN Industry

Early DePIN projects mainly focused on storage and communication technologies, such as the decentralized network Helium( in 2013, decentralized storage Storj) in 2014, and Sia( in 2015.

With the development of the Internet, the Internet of Things, and AI, the demand for infrastructure and innovation has increased. Currently, DePIN projects are mainly focused on computing, storage, communication technologies, and data collection and sharing.

Looking at the top 10 projects by market capitalization in the DePIN field, most belong to the Storage and Computing sectors, with some good projects in the telecommunications sector, such as Helium and Theta.

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V. Representative Projects in the DePIN Industry

)# 5.1 Filecoin & Arweave - Decentralized Storage Track

Filecoin and Arweave break the deadlock by providing lower prices through decentralized storage methods, offering different services to users.

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. After one month of the testnet launch, the storage space reached 4PB, and it currently stands at 24EiB. Filecoin is built on the IPFS protocol, supports smart contracts, and employs a Proof of Storage consensus mechanism.

Collaborating with multiple well-known blockchain projects and enterprises, such as NFT.Storage, the Shoah Foundation, the Internet Archive, etc. OpenSea also utilizes Filecoin to store NFT metadata.

Arweave is a decentralized permanent storage network that ensures data uploaded will be preserved forever. It employs a "Proof of Access" work proof mechanism to demonstrate the accessibility of data within the network.

Filecoin and Arweave have significant differences in storage methods, economic models, and consensus mechanisms, each with its own advantages. However, Filecoin is far ahead in market performance due to its lower storage prices.

Decentralized storage has a significant price difference compared to 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 to price advantages, decentralized storage offers higher security, with data distributed across locations reducing the risk of single points of failure and providing stronger resistance to censorship. Users retain absolute ownership and control over their data.

In terms of disadvantages, decentralized storage faces technical challenges, such as data storage and retrieval efficiency, node reliability, and so on. Availability and performance may be affected by network participants, leading to fluctuations that impact user experience.

5.2 Helium - Decentralized Wireless Network

Helium was founded in 2013 and is a pioneer and veteran in the DePIN space. In the traditional IoT industry, infrastructure costs are difficult to cover with revenue, and there are no giants among IoT device network suppliers. The demand-supply imbalance provides a fertile ground for Helium's development in IoT.

Helium incentivizes users worldwide to purchase network devices to form a network, achieving network supply. Its technical strength gives it a significant advantage in the IoT field, with the number of hotspots surpassing 900,000 last August and the monthly active hotspots in IoT reaching 600,000, which is 20 times that of traditional IoT network leader The Things Network.

After making progress in the IoT field, Helium began to venture into the 5G and Wi-Fi markets. However, it currently excels mainly in the IoT field, while its performance in 5G is mediocre.

Helium adopts LoRaWAN technology in the IoT field, a low-power wide-area network technology that features low power consumption, long transmission distances, and excellent indoor penetration. It requires no specific authorization, making it an economical choice for large-scale IoT deployments.

The IoT network market has difficulty generating revenue due to its wide coverage but low data transmission volume, and industry giants have yet to emerge. Helium seizes the opportunity by combining Web3 technology with the IoT network and cleverly addresses the high capital threshold issue through DePIN.

Helium's performance in the 5G market after one year has been unsatisfactory, mainly due to the dual challenges of compliance and market ceiling. On the compliance side, frequency allocation and licensing in the U.S. are strictly regulated by the FCC. Regarding the market ceiling, 5G is heavily regulated by national policies, and in most countries around the world, network operators are state-owned enterprises.

In addition, the lack of transparency in cooperative equipment is an experiential issue on the supply side. Helium devices are open-source, and the performance, price, and installation processes vary among different cooperative manufacturers, leading to confusion for suppliers due to the lack of transparency in performance and price.

On March 27 this year, Helium began migrating from its own Layer 1 blockchain to Solana. The reasons for the migration include:

1. The team wants to focus on network construction and leave the maintenance of the underlying blockchain to professionals.

2. When choosing Solana, the main consideration is its ecosystem, as Solana has many high-quality ecosystem projects and developers.

3. Solana's latest state compression feature can mint a large number of NFTs at a very low cost.

4. In terms of future planning, there is a lot of room for collaboration with Solana on projects such as mobile phones.

In the long run, Helium's exploration in the IoT field is an innovation from 0 to 1, which has extremely high value in addressing the demands of the Internet of Things. Despite facing numerous challenges, as IoT devices become more widespread and application scenarios expand, Helium's decentralized network solutions may gain broader adoption and demonstrate immense potential in future fields such as smart agriculture and smart cities.

![New Infrastructure Wave: Analyzing DePIN