What is DePIN in cryptocurrencies?

DePIN, or Decentralized Physical Infrastructure Networks, is one of the new concepts in the world of cryptocurrencies and blockchain. The basic idea is to combine physical assets with digital solutions to create new market mechanisms and optimize the process of managing various resources. Briefly speaking, DePIN combines decentralization and physical infrastructure, which makes it an important element of the Web3 ecosystem.

Content:

• Introduction to DePIN
• Origins and main stages of development
• Decentralization and governance
• 5 most popular DePIN coins by market capitalization
• Venture capital interest in DePIN projects
• Advantages and disadvantages of DePIN
• Main use cases of DePIN
• Conclusion

Introduction to DePIN

The DePIN concept addresses the transparency and accountability issues inherent in traditional infrastructure management systems. For example, many physical assets, including buildings, transportation networks, and power grids, require centralized control, which sometimes leads to abuse and inefficient use of resources. DePIN addresses these shortcomings by providing more transparent and accountable governance.

With DePIN models, network participants can securely share resources based on the rules embedded in smart contracts. This means that users are empowered to operate without intermediaries. In this context, it is important to note that DePIN not only helps to improve the processes themselves, but also to create a new level of trust between participants, which in turn leads to higher standards of data and resource management.

Origins and main stages of development

The origins of DePIN can be traced back to the emergence of the first cryptocurrencies in the early 2010s. The idea of decentralization inherent in bitcoin inspired many projects and developers who began to explore the use of blockchain not only for finance, but also for managing physical assets. Projects such as Ethereum have provided developers with tools to create smart contracts, which has opened new horizons for automating a multitude of processes.

In November 2022, research firm Messari conducted a poll on Twitter to unify the concept under one acronym. Users chose between the names PoPW, TIPIN, EdgeFi and DePIN. DePIN won with 31,6% of the vote.

The first significant phase of DePIN’s development is related to the introduction of resource sharing concepts. Projects such as Helium and Filecoin have become popular because they provide network participants with the opportunity to earn money by sharing physical resources or data. These platforms have demonstrated how physical assets can be successfully integrated into decentralized networks, offering users models based on trust and transparency.

Blockchain ensures data immutability and protects transactions, which is critical for building decentralized systems. DePIN’s core operating principles include the use of tokens to incentivize participation in the network, decentralized control of resources, and automated processes through smart contracts. This enables models where users can collaboratively manage infrastructure by sharing resources without centralized intermediaries.

DePINs are usually divided into two categories PRN (physical resource network) and DRN (digital resource network):

• PRNs. Encourage users to apply equipment to provide real-world goods and services, such as 5G, VPNs, and others.
• DRNs. Encourage those who use the equipment to create real physical infrastructure networks for digital resources.

Source: peaq website

The key features of DePINs are transparency, security and availability, making such networks more reliable than traditional systems. These features provide users with confidence that their investments and assets are well protected and that governance processes remain under public scrutiny.

Decentralization and governance

Decentralization is a key aspect of the DePIN concept, as it is what avoids dependence on centralized structures. In traditional systems, the management of physical assets is often concentrated in the hands of a few organizations, which can lead to a lack of transparency and the potential for abuse.

In DePIN, governance is managed through decentralized mechanisms that allow each participant to influence processes, which in turn fosters trust and user engagement.

Governance in the DePIN ecosystem is done through smart contracts and decentralized autonomous organizations (DAOs). This means that decisions are made based on the consensus of the participants, allowing the interests of all parties to be taken into account. This allows for more flexible and efficient resource management and reduces the likelihood of conflicts between participants.

Source: peaq website

Security and resilience in DePIN networks also play a significant role. The use of blockchain technology ensures that data and transactions are protected from unauthorized access or changes. Each transaction is recorded in a distributed registry, which makes it impossible to change information without the consent of all participants. Thus, even in the event of failure of individual nodes, the network remains operational and secure.

DePIN’s economic model is based on encouraging network participants to actively interact. Participants can receive rewards in the form of tokens for providing resources or services to other network users. This creates mechanisms that motivate users to share and be active, thus ensuring the sustainability of the network.

Incentives can also vary depending on the level of participation: the more activities and offers a user makes, the more rewards they can receive. This approach not only promotes user activation, but also improves the overall performance of the network, creating conditions for its growth and development. Thus, decentralization, security and the right economic model serve as the basis for the success of DePIN networks.

5 most popular DePIN coins by market capitalization

Investing in DePIN tokens is becoming increasingly attractive for those looking for dynamic and innovative projects with high growth potential. The coins presented in the table have different advantages and offer unique solutions for users. We have collected the most popular tokens below:

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Venture capital interest in DePIN projects

DePIN’s projects have attracted significant attention from venture capital funds, which emphasizes their potential in technology and cryptocurrencies. For example, investment firm Borderless Capital has been actively investing in DePIN initiatives since 2021 and is one of the first investors in the Helium network. The firm manages a specialized DePIN fund that has made more than 30 investments and raised funding from well-known companies such as market maker Jump, Telefónica, and the OKX exchange.

Borderless Capita0l is currently building a $100 million DePIN Fund III in an effort to support the expanding DePIN ecosystem on the Solana blockchain. Borderless managing partner David Garcia noted:

“The intersection of Crypto+AI, mobility, mapping, wireless networks, and digital resources presents significant opportunities. DePIN’s efficiency gives it an edge, enabling the creation of superior and more affordable services for consumers.”

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Advantages and disadvantages of DePIN

The concept of decentralized physical infrastructure networks (DePINs) offers a number of significant advantages that make it attractive to various sectors. One of the main advantages is decentralized governance. It eliminates the need for centralized intermediaries, which greatly simplifies communication between participants and reduces costs. Moreover, such a system provides a high degree of transparency, as all transactions are recorded on the blockchain and are available for anyone in the network to view.

Another critical element is resilience to cyberattacks and disruptions. Due to the distributed data structure and mobile management, the network remains operational even if individual nodes fail. This makes DePINs more reliable and secure than traditional centralized systems. In addition, decentralized networks allow for economic incentives that attract more participants, encouraging further development of projects.

DePIN also enables new levels of innovation across sectors. By removing barriers to entry associated with traditional infrastructure networks, DePIN encourages new entrants to compete in markets previously dominated by a few established players.

However, despite its significant advantages, DePIN has its disadvantages. One of the main ones is the difficulty of introducing and adapting new participants. Working in such systems requires an understanding of blockchain technology and the relationships in the ecosystem, which can be a barrier for less experienced users.

It is also worth noting that decentralized structures can be subject to the risks of operating under imperfect consensus algorithms, which can lead to slow transactions and lower overall quality of service.

Finally, there is a risk of legal restrictions and regulatory actions by governments, which may hinder the further development and implementation of DePINs.

Thus, when evaluating DePINs, it is necessary to weigh both their merits and potential drawbacks and risks in order to make informed decisions about adopting and utilizing the technology or investing in DePIN tokens.

Main use cases of DePIN

Decentralized physical infrastructure networks find applications in various fields, demonstrating their versatility and efficiency. One of the main use cases is energy resource management. In this area, projects such as SolarCoin allow users to earn tokens for producing and utilizing solar energy. Such systems not only facilitate the transition to renewable energy sources, but also enable a decentralized market for exchanging excess energy between users.

Projects such as Helium show how a decentralized network can be created for interoperability between IoT (Internet of Things) devices. Participants in the network can provide their own access points and earn tokens for their use. This creates a powerful platform for sharing data and services, significantly reducing infrastructure costs.

DePIN is also actively used in data management, especially in the context of information storage and processing. The Filecoin project has become a significant example in this direction. It offers users the opportunity to use decentralized storage space and helps earn tokens for providing storage services. This solution allows for more efficient use of resources and creates a more secure and transparent environment for data storage.

Other successful examples include OriginTrail, which offers a decentralized platform for supply chain management. Using blockchain, it provides transparency and traceability of goods through all stages of logistics, which is critical to ensuring quality and trust from end consumers.

These examples emphasize that DePINs are not limited to just one sector. The concept is being applied in a wide variety of areas including energy, transportation, data storage, and logistics. Each of these projects demonstrates how decentralization can improve existing processes, increase efficiency, and provide new opportunities for network participants.

Conclusion

In the dynamic and evolving landscape of the blockchain industry, decentralized physical infrastructure networks stand out as a revolutionary approach that combines the digital and physical realms. By integrating real-world infrastructure with decentralized blockchain mechanisms, DePINs offer a pathway to transform traditional service delivery models.

Despite the significant infusion of venture capital and technological intrigue surrounding DePINs, the road to development may be thorny. The pace of adoption is modest as the sector seeks to build a significant user base that can sustain growth and viability.

Technical complexity and initial operating costs pose significant hurdles, particularly for providers managing private facilities. However, the potential for scalability and democratization of access to essential services support the interests of investors and developers. Through strategic investment and continuous innovation, DePINs may well redefine the way services are delivered, making them more accessible, affordable, and relevant to the needs of the global digital economy.