DePIN - Dual Curve Construction for Decentralized Value Network

DePIN is gradually achieving large-scale interaction between the physical world and Web3, subverting traditional infrastructure operation models. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, it promotes crowdsourced development through crypto-economic incentives. An important feature of the DePIN business model is: using hardware revenue as the first growth curve, on which data service monetization is layered to form a second growth curve. This is one of the key factors driving the current cycle of growth for DePIN, while also demonstrating how the DePIN project creates significant wealth effects in the process of building a decentralized infrastructure network, ultimately forming a scalable decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralization Physical Infrastructure Network ( DePIN ) refers to "the deployment of physical infrastructure and hardware networks in the real world using crypto-economic agreements". This implies a scenario where common infrastructures such as communication base stations, charging piles, photovoltaic panels, billboards, and internet backend devices will no longer be controlled by centralized entities, but will instead be divided into standardized units, held in the hands of individuals or miners, creating a carpet-like coverage.

By utilizing decentralization, infrastructure layout and utilization can achieve higher efficiency and lower costs, enhancing system security and resilience. From energy production to data processing, various facilities have the potential to transition to a decentralized model. The market size of DePIN-related industries has currently exceeded $5 trillion. Messari predicts that the potential market size of DePIN will be approximately $2.2 trillion, reaching $3.5 trillion by 2028.

1.1 DePIN track division

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

• Upstream: Hardware manufacturers and supply-side miner users
• Middle Stream: Project platform, blockchain, layer 2 protocols; as well as modular service components, SDK toolkit, API interfaces, etc.
• Downstream: Connecting with the demand side dApp applications and interfaces.

Except for IoTeX and the former Helium, most DePIN projects struggle to cover all aspects and typically choose Solana or IoTeX as the settlement layer. AI and cloud computing projects focus on on-chain settlement and platform development management, scheduling idle device resources through middleware.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja data, there are currently 1,215 DePIN projects launched, with a total market value of approximately 43 billion USD. The total market value of projects that have issued tokens and are listed in the Coingecko DePIN sub-sector exceeds 25 billion USD, a fivefold increase from 5 billion USD in October last year, reflecting the market's increasing recognition of DePIN. With more projects launching and application scenarios expanding, DePIN is expected to become an important area for the combination of blockchain technology and real-world applications.

2. Insights into DePIN Business Logic

The prototype of DePIN can be traced back to the IoT + blockchain concept from the last cycle. Projects like Filecoin have transformed centralized storage into decentralized operations through an encrypted economic model, achieving practical applications in the Web3 ecosystem.

DePIN places greater emphasis on the construction of physical infrastructure and the large-scale interconnected network. Among them, Helium is a typical representative, meeting all the elements of DePIN: node economics, miner model, value network, and crowdsourced incentives, making it a leading project in the DeWi field. Helium Mobile's communication package service in partnership with T-Mobile provides users with token rewards and reliable communication, while also addressing signal coverage issues in remote areas, resulting in a win-win situation for all three parties. This is expected to accelerate the large-scale adoption of blockchain technology and the Web3 network.

Helium emphasizes hardware, supporting the growth of data services through hardware revenue to build an independent ecosystem. Despite once being involved in issues such as false advertising, it still inspires the DePIN ecosystem as the largest DePIN project.

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

The "Second Curve" theory refers to the need for an organization, product, or business to introduce innovation or transformation to initiate a new growth curve when it reaches the peak of the traditional growth curve, in order to avoid stagnation or decline.

From the successful experience of DePIN projects, its business logic points to hardware sales as the first curve, and the monetization of data value networks as the second curve. Product research and development, as well as operational capabilities, are key to ensuring the growth of the first curve; initiating growth of the second curve requires decentralization system organizational capabilities and demand-side service capabilities.

The DePIN ecosystem needs to ensure the smooth operation of the data value network based on the organizational large-scale data transmission hardware network capabilities, facilitate seamless access from the demand side, and provide high-quality standardized data services. Ultimately, it aims to achieve a hyperbolic business growth and create a positive cycle within the project ecosystem.

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

The first curve of growth for the DePIN project comes from hardware sales revenue and profit. DePIN splits the centralized supply side into a crowdsourced form to complete the establishment of the hardware network. The project party attracts supply-side users to participate through operational means, achieving a low-cost and lightweight startup. Supply-side users become 'shareholders' of the project, helping to deploy the hardware network.

The DePIN device updates and maintenance are completed jointly by the project parties and miners, strengthening community recognition. If the project parties can successfully carry out narrative marketing, mining machine sales, and community operations, they can form the first curve of increasing network coverage scale - increasing token incentives - attracting more miners to join.

Currently, active node data shows that Hivemapper, Helium, and Natix rank in the top three, each deploying over 100,000 nodes globally. Helium and Hivemapper have impressive business performance:

• Helium's partnership with T-Mobile has increased its communication service subscriptions from 0 to 93,000 in just 5 months. Collaborating with Telefónica to enter the Mexican market further enhances revenue sources and market influence.

• Hivemapper Dashcam is priced at $549, and the estimated revenue from hardware sales has exceeded $60 million. Its map data collection network has covered most regions in Europe and the United States, and data service revenue has significantly increased.

Other projects such as Jambo, OORT, and Ordz Game have also achieved breakthroughs in hardware revenue through innovative models, exploring new ways to integrate DePIN across various industries.

Hardware sales play a key role in the early revenue of DePIN projects, influencing initial cash flow and the speed of hardware network deployment. Only with a stable development of the hardware network can the DePIN project smoothly transition to the data value network phase, initiating the second wave of growth curve.

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

DePIN aggregates the value chain, splits the centralized supply side, and utilizes public chains to aggregate multiple demand sides, forming a data value network. After being verified and confirmed by the blockchain, the data becomes a highly liquid trading object that circulates within the network.

Token economics is the economic foundation of the data value network, with mainstream models being BME( burn and mint equilibrium) and SFA( stake for access). BME is determined by demand for its deflationary degree, while SFA is determined by supply for its deflationary degree. The project's characteristics determine which model to choose. Token empowerment such as point redemption, governance functions, and staking mechanisms helps ensure that the interests of all parties are aligned, achieving long-term success for the project.

The DePIN value network will drive the improvement and growth of the AI industry. The development of AI requires substantial data and computational power support. DePIN can obtain raw data at a low cost, and its decentralized distribution characteristics make the data more valuable and unique. Decentralized cloud computing and sensors are the two DePIN subfields most likely to first realize the data value network.

Middleware infrastructure plays an important role in bridging the two growth curves.

Middleware is the key channel that connects the physical world to the digital world, including standardized interface and toolkit providers, public chains or layer two chains, and layer two protocols that enhance liquidity.

Blockchain serves as the settlement layer for DePIN project tokens,承担结算和数据验证:

• Solana is the preferred platform for most DePIN projects, but it may not fully meet specific needs.
• Peaq is a chain born for Decentralization of Physical Infrastructure Networks (DePIN), offering multifunctional modular DePIN capabilities.
• IoTeX emphasized its public blockchain customized for Internet of Things devices as early as the last cycle.

The middleware that connects devices and the DePIN network is also very critical, providing developers with a user-friendly one-stop service:

• DePHY provides open-source hardware solutions, SDKs, and tools.
• Swan Chain is a full-stack AI smart chain based on OP Stack technology.
• Unibase provides AI data validation solutions based on zero-knowledge proofs.
• Parasail is a re-staking protocol specifically designed for DePIN services.

The integrated product of AI + Data, combining decentralized storage and decentralized computing for AI training, is worth paying attention to. For example, Databricks promotes the integration of AI and big data analytics, while Kyve provides decentralized general data analysis services.

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

The DePIN track covers a wide range of categories, and the competitive landscape varies in each field. Although DePIN shows great potential, its development also faces limitations and challenges.

• DePIN projects with hardware supply chains and sales channels have greater growth potential.
• Cross-chain interoperability can maximize the value of data.
• Data verifiability is crucial for AI development.

DePIN provides a new approach for building decentralized value networks, but many challenges still need to be addressed to achieve large-scale application. Future development will depend on multiple factors such as technological advancements, market demand, and regulatory environment.