Is DePIN the Future of Shared Resources? Industry Leaders Weigh In on the Prospects

Decentralized Physical Infrastructure Networks (DePIN) represent a revolutionary advancement, connecting the digital and physical domains, including WiFi networks, storage systems, transportation services, and additional applications. In simple terms, DePINs are peer-to-peer (P2P) networks in which individuals provide physical infrastructure resources.

The  Background

Numerous centralized digital platforms utilize community resources to provide valuable services for millions of users.

Consider Airbnb as a case study.

Property owners provide their physical spaces (homes, apartments, rooms) and services (hosting, cleaning, local guidance) in exchange for financial remuneration, while the platform facilitates access to these accommodations for travellers globally.

These centralized systems entice providers via conventional payment methods and supplementary advantages such as improved listing visibility and "Superhost" designation while exercising stringent control over the listing and management of properties on their platform.

To engage in the ecosystem, hosts and guests must complete comprehensive verification procedures encompassing identity verification, property validation, and review mechanisms. At the same time, the platform serves as the central authority, establishing terms, collecting commissions, and regulating the exchange of information between parties.

As much as these centralized platforms have effectively showcased the efficacy of community-driven resources, they establish a framework in which value predominantly accrues more benefit to them rather than the community that sustains it.

Does DePIN Solve the Problem?

Decentralized Physical Infrastructure Networks (DePIN) represent a transformative alternative, providing a model in which community members contribute resources and partake in the ownership and success of the network.

The sector has witnessed significant growth, with over 1,500 projects in progress and a total market capitalization surpassing $25 billion, with Bittensor, Internet computer, Filecoin, Render, and The Graph leading the way in terms of market capitalization.

Basically, DePIN allocates control of resources among various participants rather than consolidating it (control) under a single company or authority, allowing individuals and organizations to jointly possess, oversee, and gain advantages from these infrastructures.

In return, they earn token rewards for managing and sustaining networks, providing resources, and engaging in decision-making processes.

The big value add of DePIN is bringing consumer capacity onboard. Consumer devices have minimal fixed costs, meaning they can participate in revenue-sharing engagements without having overhead.

AI Morris, CEO Koii

Hivemappers effectively exemplifies this concept properly.

How?

Participants acquire a dashcam and earn tokens for mapping streets, undertaking tasks akin to those performed by Google engineers in specialized vehicles valued at hundreds of thousands of dollars.

The process

A complex interaction of various technological layers is exemplified by the DePIN process, with blockchain architecture serving as the foundation and major bedrock.

The system is designed to execute smart contracts, manage intricate transactions, and distribute rewards to network participants in a systematic manner.

Hence, spare computing power from your desktop and surplus solar energy from your rooftop can now be contributed to a decentralized resource pool.

Contributors obtain cryptocurrency tokens commensurate with the value of their resources, establishing a self-sustaining economic infrastructure.

Baron Koch, Co-Founder and CEO of Money Bridge, spoke about revolutionizing the capacity of crypto-based incentives:

Crypto-based incentives stand to completely revolutionize gig economies and many other industries currently dominated by a central administrator through increased speed, improved transparency, better security of transactions, and decreased costs. These are fundamental improvements that could spark immense change in how value is exchanged in our economy.

For gig service providers, fast transactions ensure payments in real-time, transparency gains trust, and lower costs mean higher earnings. Unsurprisingly, consequences for conventional platforms include potential loss of user base as people recognize the value of direct, decentralized systems where they have more control and ownership.

This incentive mechanism is essential; similar to how ride-sharing applications prompted car owners to serve as part-time drivers, DePIN tokens incentivize infrastructure proprietors to contribute their resources to the network.

The last phase is the off-chain network, which manages the actual transfer and application of resources.

AI Morris further discussed how the “revenue-sharing” model has gained traction, yet with implementation challenges in the world of AI:

Support for new initiatives via pure revenue share has been popular in the VC and crowdfunding world before (i.e. kickstarter, DeFi) but has never been easy to implement in the world of AI or traditional hosting capacity.

New transaction layers are faster, cheaper, and more reliable, which means we can now implement global hosting capacity without gatekeepers, and keep revenue sharing fair for all participants. If it works, this means we can cut the costs of AI by a factor of 99%.

Classification of DEPIN

A report by the crypto research firm Messari categorizes DePINs into two distinct groups:

Physical Resource Networks (PRNs) constitute the material foundation of the DePIN ecosystem, wherein providers systematically deploy hardware to cater to designated geographical areas.

Conversely, Digital Resource Networks (DRNs) function within the virtual domain, operating autonomously from physical sites to establish a decentralized substitute for conventional cloud services.

By incentivizing providers to contribute computing power, storage capacity, and bandwidth, DRNs are effectively constructing the next generation of digital infrastructure.

Baron Koch, CEO of Money Bridge, mentioned a case study:

One of the challenges of DEPIN is ensuring that the fiat and crypto worlds are seamlessly connected to support the liquidity needed for the DePIN ecosystem to grow. At MoneyBridge, we see ourselves as playing a crucial role in overcoming this challenge by providing the necessary on-ramp infrastructure (fiat-to-crypto conversions) so people can access DePIN assets easily. By facilitating these conversions, MoneyBridge is paving the way for the gig economy to evolve in a way that is both decentralized and sustainable.

We envision a future where value flows with little friction between the fiat and crypto worlds, where participants and contributors to the DePIN ecosystem are adequately rewarded and aligned, and where the role of the intermediary is effectively replaced with blockchain technology so that peer-to-peer infrastructure and gig economy networks can become a force for economic change.

What kinds of challenges does the ecosystem face?

There are challenges that the DEPIN ecosystem must traverse in order to thrive.

For this reason, it is necessary to overcome a multitude of obstacles in order to create an ecosystem that is sustainable.

These obstacles can be grouped into various subgroups, including; technical, economic, community, and user adoption-related, to mention a few.

When viewed from a technical standpoint, the establishment of an adaptable infrastructure that is capable of scaling and maintaining interoperability presents a significant number of challenges.

Economically, developing effective incentive structures while lowering operational costs and diversifying revenue models is critical to long-term viability.

User adoption depends on creating intuitive interfaces and the assurance of dependable performance, requiring efficient marketing and feedback systems.

DePIN protocols face a similar challenge as the broader blockchain space: making complex technology accessible and valuable for everyday users. We see this in many projects over and over again– mainstream users are not familiar enough with the tech and the new business models. And they need to see a strong reason for committing time, money, and effort.

Martin Půlpán, CEO & Co-founder Artiffine

Furthermore, the DEPIN model unavoidably prompts regulatory inquiries, especially concerning tokenizing physical assets like computing power and solar energy units.

Mainstream Adoption

In the same way that the internet became popular by hiding its technical complexities behind user-friendly interfaces, DePIN needs to simplify processes by utilising interactions that only require one click, wallet configurations that are easy to understand, and tutorials that are easily accessible.

A flourishing DePIN ecosystem would create an inclusive, transparent community in which stakeholders, comprising local entities and individual users, actively influence the network's development.

Martin Půlpán, CEO & Co-founder of Artiffine, gave further insight into how the DePIN ecosystem can attain mainstream adoption.

The real turning point for DePIN projects going mainstream comes when they can effectively communicate a strong value proposition while offering a seamless, user-friendly experience. When projects achieve that, they’re able to scale beyond the crypto bubble into everybody's lives.

Therefore, DePIN protocols must prioritize intuitive interfaces. Simplified wallet setups, gas sponsorships, and one-click interactions, all lower the barriers to entry and improve conversions. For instance, just as the internet went mainstream by making its infrastructure invisible to the average user, DePIN should abstract away complexity to appeal to non-experts.

A shift needs to happen even in communication - instead of communicating features and protocol details, users need to be sold benefits and utility. Education should be layered and optional for the ones who seek to dig deeper, not a requirement for the first usage.

Martin Půlpán, CEO & Co-founder Artiffine