Disclaimer: This post contains thoughts on crypto, a volatile and risky asset class. It is not investment advice, and you should do your own research. All information is for educational purposes only. Please don’t take risks with money you’re not willing to lose.

While blockchain technology has primarily been used to decentralize and secure digital assets, it’s being increasingly applied to physical networks. DePIN promises to bring the core principles of Web3 - community-owned, publicly verifiable, permissionless - to our surrounding real-world infrastructure.

Defining DePIN

DePIN: Decentralized Physical Infrastructure Network

DePINs leverage blockchains to decentralize control and ownership of infrastructure in the real-world. In this network, users contribute physical resources such as data storage, transportation, or even energy. In return, they earn rewards via the protocol’s respective incentive mechanism (while also securing it).

Consider a cloud storage provider. In the traditional framework, the company itself employs stakeholders to build and maintain the infrastructure. Users have no other incentive but the need for storage while the architects / owners reap financial benefits from its growing network effects. DePINs flip this model, crowd-sourcing stakeholders through distributed financial incentives for providing their individual resources to the network.

Types

PRNs - Physical Resource Networks

• location-dependent

• deploy hardware to offer non-fungible goods & services

• i.e. transportation, energy, connectivity

DRNs - Digital Resource Networks

• digitally-native

• deploy hardware to offer fungible resources

• i.e. storage, bandwidth, compute power

Growth

Although notable projects such as Helium and Storj have been around since as early as 2013, DePIN was officially coined last year in Messari’s “The DePIN Sector Map”. Since this report, DePINs have grown to become one of the cycle’s leading narratives with regards to attention and funding.

According to CoinGecko, the current total market capitalization sits at ~$23b, making it one of the largest sectors just behind Artificial Intelligence. This metric accounts for 111 liquid tokens, effectively excluding early-stage startups that are still active in raising / bringing their product to market. Additionally, 3 of the top 10 biggest gainers over the past year are DePINs: Jasmy, Akash, and Arweave.

Adjacent to these developments, venture capital firms have poured capital into the sector’s leading prospects:

Use Cases

While DePINs have already seen immense growth, they are still largely in a state of experimentation as new projects continually develop novel applications.

Energy: Individuals with solar or other renewable energy sources produce and sell excess electricity directly to other network participants.

Data Storage: Users rent out or provide unused storage P2P. Native tokens facilitate payments and reward nodes that maintain the network.

Ride-Sharing and Mobility: Drivers and riders connect without intermediaries, cutting out middle-man fees and increasing service efficiency.

Mapping: Participants contribute locational data via sensors / geospatial devices in return for stake in the network.

Wireless: Individuals deploy and maintain hotspots creating a global IoT network secured through financial incentives.

Filecoin

Launched during 2017’s ICO craze, Filecoin raised $200m within 30 minutes and has surprisingly continued to deliver on lofty expectations ever since.

Filecoin is a P2P storage network where users can securely monetize, store, retrieve, and compute their own or another’s data. Leveraging content addressing similar to the IPFS protocol, Filecoin routes data from permanent references, but further incentivizes contents to be reliably stored and accessed via financial stake (FIL).

You could imagine Filecoin as a bit of a decentralized Dropbox. Users who want to store more data pay storage providers. Storage providers compete to offer the lowest price. Winners of this open market retrieve the data and are rewarded only once they can prove that they have stored correctly over time.

Just as Bitcoin introduced Proof-of-Work, Filecoin employs two new consensus mechanisms in order to ensure that miners are actually storing the data they claim to hold (and that all network participants agree).

1. Proof-of-Replication: verifies number of copies stored

2. Proof-of-Spacetime: verifies the agreed amount of time stored

These cryptographic proofs work in tandem to secure the network and validate the integrity of nodes.

As of today, Filecoin has produced ~4.1m blocks with a network storage capacity of ~22.6 EiB. Moreover, there are 2,439 active miners collectively pledging ~153.7m FIL (roughly 8% of the total token supply). Lastly, miners currently receive an average block reward of ~7.53 FIL.

You can view more protocol metrics on the Filecoin Explorer.

Livepeer

Perhaps one of the most popular DePINs to date, Livepeer is a decentralized video infrastructure network for both live and on-demand streaming. While traditional platforms such as Twitch and TikTok require intensive management through cloud service monopolies (AWS, Google Cloud, Azure), Livepeer offloads transcoding to individual users who collectively contribute their resources. The intended (and observed) end results are:

• a distributed marketplace for compute power

• reduced transcoding costs by up to 10x

• a tech stack for developers to integrate video streaming

Consistent with other Web3 models, Livepeer has several key network participants:

1. Orchestrators - operators;

• run nodes that advertise the price they will charge for video processing

• route transcoding tasks to GPUs

• earn ETH fees, 'mine' / mint LPT (native token)

2. Transcoders - service providers;

• typically run within the same machine as operators

• provide compute power / deliver transcoding for operating nodes

• earn ETH fees

3. Delegators - validators;

• stake towards effective node operators

• perform / delegate work on the network

• earn ETH fees and LPT rewards

Together these participants coordinate a vast network of developers, providers, and end-consumers in an incentive-aligned marketplace for video processing.

Across 100 active orchestrators and 3500 delegators, 14.5m LPT is staked, $832k in fees have been paid out, and 415.6m minutes of video has been transcoded.

You can view more protocol metrics on the Livepeer Explorer.

Hivemapper

While Filecoin and Livepeer tackle verticals that are more complex in nature, Hivemapper stands out as a relatable entry point by crowd-sourcing one of the world’s earliest technologies: mapping.

With an estimated total market size of $300b:

• billions of people use mapping applications every day

• millions of businesses use and pay for mapping APIs

• 1.5b vehicles are adding automated features that require map data

As it stands, traditional techniques (i.e. deploying a dedicated fleet of vehicles to collect road-level imagery) are cost-intensive and slow. Rather than consolidate this process to a few companies and further risk centralization, Hivemapper collects map data from an open market of participants with hopes of solving several core issues:

1. uneven coverage - even the best-funded services have trouble coordinating mapping data on a global scale

2. freshness for autonomous driving - today’s maps suffice humans, but self-driving vehicles necessitate live data

3. expensive - few choices for reliable maps exist; monopoly pricing leads to unaffordable data

4. the “why” - user incident reports issued through current mapping apps are untrustworthy without imagery

5. data without rewards - the user-generated data that traditional mapmaking relies on goes uncompensated

With Hivemapper’s approach, individual users become the fleet via affordable hardware such as dash cameras or their phones. Additionally, they can use a built-in AI trainer to better inform the protocol’s machine learning models. These efforts are then collectively rewarded (and incentivized) via Hivemapper’s native token, HONEY. What results is a modernized mapping model that directly shares economic benefits with those who help build it.

To date, participants have mapped a total 276.06m kilometers, spanning 24% of the entire world.

You can read more about the network’s current coverage on Hivemapper.

In Sum

Despite more recently garnering widespread attention, DePINs have long represented a transition towards putting the data economy on-chain. As L1 and L2 scalability improves, it’s likely that computationally expensive applications will only grow in popularity as they become more economically feasible.