DePIN: Constructing a Dual Curve for Decentralization Value Networks

DePIN is gradually realizing large-scale interaction between the physical world and Web3 through the combination of IoT and blockchain technology, disrupting the operational model of traditional infrastructure. The business models of most DePIN projects share an important characteristic: hardware revenue serves as the primary growth curve, and on this basis, the monetization of data services is layered to form 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 projects can create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scalable decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralization physical infrastructure network ( DePIN ) utilizes cryptoeconomic protocols to deploy real-world physical infrastructure and hardware networks. This means that common infrastructure around us, including communication base stations, charging piles, power generation equipment, and the storage and computing devices behind the operation of the internet, will no longer be controlled by centralized entities, but will be divided into standardized units, controlled by individuals or miners. Through decentralization, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall system's security and resilience.

The market size of the relevant industries involved in DePIN has exceeded 5 trillion dollars. Messari predicts that the potential market size in the DePIN field is approximately 2.2 trillion dollars and is expected to reach 3.5 trillion dollars by 2028.

1.1 DePIN Track Division

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

• Upstream: hardware manufacturers and supply-side users
• Middle Chain: project platform, blockchain, layer two protocol, and DePIN development tools
• Downstream: Connect to the demand side applications and interfaces

Most DePIN projects do not cover all aspects and typically choose Solana or IoTeX as the settlement layer.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja data, the number of DePIN projects that have been launched has reached 1,215, with a total market value of approximately $43 billion. Among them, the projects listed on Coingecko have a market value exceeding $25 billion, a fivefold increase compared to $5 billion in October last year, demonstrating the rapid growth trend of the industry.

2. Insights from the Business Logic of DePIN

The prototype of DePIN can be traced back to the concept of IoT + blockchain from the previous cycle. Compared to the former, which only reflects decentralization characteristics, DePIN emphasizes the construction of physical infrastructure and the scaling of interconnected networks.

Helium is a typical case that meets all the elements of DePIN: node economy, miner model, value network, crowd-sourced incentives, etc. Its collaboration with T-Mobile for communication services provides users with token rewards and reliable service, while also addressing the issue of signal coverage in remote areas, creating a win-win situation for all three parties. This model is expected to accelerate the large-scale adoption of blockchain technology and Web3 networks.

3. The explosive growth of DePIN is based on the dual curve theory

The DePIN business logic naturally points to hardware sales as the first curve and monetization of the data value network as the second curve. Product research and development, as well as operational capabilities, are key to ensuring growth of the first curve; while initiating growth of the second curve requires organizational capabilities of a decentralized system and service capabilities towards the demand side.

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

The first curve of growth for the DePIN project is driven by hardware sales revenue. The project party attracts supply-side users to participate through promotional narratives and pre-sales of mining machines, achieving a low-cost and lightweight launch. Supply-side users act as "shareholders" to help deploy the hardware network, strengthening community identity.

Successful cases include:

• Hivemapper: More than 100,000 nodes have been deployed, and hardware sales revenue has exceeded 60 million dollars.
• Jambo: Achieved outstanding sales performance in the African market with Web3 mobile as a selling point.
• OORT: has technical barriers in cloud computing and edge computing, achieving significant hardware sales revenue.
• Ordz Game: Integrating DePIN elements, BitBoy handheld console pre-sale sold out quickly

Hardware sales are crucial for the early revenue of DePIN projects, affecting initial cash flow and network deployment speed. Only on the basis of a stable development of the hardware network can the DePIN project smoothly transition to the data value network stage.

The monetization of data value and network value is the second curve of DePIN growth.

Before the DePIN project reaches the critical point in device sales, it initiates the second curve of the data value network based on a mature hardware network. After data is verified and confirmed on the blockchain, it becomes a highly liquid trading object. Once the data value network can maintain a positive incentive loop, the entire ecosystem will create a huge wealth effect around the data.

Token economics is the economic foundation of value networks, with mainstream models including BME( burn and mint equilibrium) and SFA( stake for access). The nature of the project determines which model is suitable.

The DePIN value network will promote the improvement and growth of the AI industry. The development of AI relies on a large amount of data and computational power support, and the DePIN network can obtain raw data at a low cost. Decentralized cloud computing and sensors that provide data for AI training are the two DePIN subfields most likely to first realize the data value network.

The middleware infrastructure will play an important role in connecting the two growth curves.

Middleware is the key channel connecting the physical world to the digital world, including middleware that provides standardized interfaces and toolkits, public chains or layer two chains that implement token trading and settlement, as well as layer two protocols that enhance liquidity.

Main middleware includes:

• Public chains such as Solana and IoTeX: as the token settlement layer
• DePHY: Provides open-source hardware solutions, SDKs, and tools
• Swan Chain: A full-stack AI intelligent chain based on OP Stack technology
• Unibase: AI data validation solution based on zero-knowledge proof
• Parasail: A re-staking protocol specifically designed for DePIN services

The integrated product of AI+Data, which combines decentralized storage and decentralized computing for AI training, is also worth paying attention to, such as projects like Databricks and Kyve.

4. Thoughts on the DePIN Narrative, Limitations and Challenges Beyond the Growth Curve

Despite the enormous potential of DePIN, its development faces many limitations and challenges:

• Projects with hardware supply chains and sales channels have greater growth potential.
• Cross-chain interoperability can maximize the value of data.
• Data credibility is crucial for the development of AI.
• Need to address data ethics, legal, and moral issues

The DePIN track covers a wide range of categories, and the existing markets in each field present varying degrees of competition. Despite facing challenges, there are still opportunities to discover quality projects within DePIN. In the future, with technological advancements and ecosystem improvements, DePIN is expected to promote the deep integration of the physical and digital worlds, creating new value networks and business models.