New Infrastructure Wave: Analyzing the Opportunities and Challenges of the DePIN Track

DePIN stands for Decentralized Physical Infrastructure Network, which incentivizes users to share resources through tokens to build infrastructure networks in areas such as storage, communication, and computing. It takes the form of crowdsourcing, distributing infrastructure that was originally provided by centralized companies to users around the world.

The current market value of the DePIN sector has reached 5.2 billion USD, surpassing that of the oracle sector, and shows a continuous upward trend. From Arweave and Filecoin to the Helium of the last bull market, as well as the recently highly regarded Render Network, all belong to this sector.

DePIN has recently attracted attention again for three main reasons:

1. The infrastructure is more developed than a few years ago, paving the way and empowering the DePIN track;

2. Messari proposed the new concept of DePIN, believing it to be "one of the most important areas for crypto investment in the next decade," adding heat to this sector;

3. The new narrative of Web3 breaks the circle by shifting from social and gaming to explore other directions, with DePIN becoming an important choice for builders.

This article will deeply analyze DePIN from five perspectives: demand, token economic model, industry status, representative projects, advantages analysis, as well as limitations and challenges.

Why is DePIN needed?

Current Status of the Traditional ICT Industry

Traditional ICT infrastructure mainly includes: hardware, software, cloud computing and data storage, communication technology.

Among the top ten companies by global market capitalization, six belong to the ICT industry, occupying half of the market. In 2022, the global ICT market size reached $43,900 billion, with data centers and software showing a growth trend in recent years.

The dilemmas of the traditional ICT industry

1. The entry barriers to the industry are high, limiting sufficient competition, and pricing is monopolized by giants.

Companies need to invest a large amount of capital for hardware purchases, land leasing deployment, and maintenance personnel hiring. High costs mean that only giant enterprises can participate, with AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud collectively holding nearly 70% of the market share in the fields of cloud computing and data storage. Pricing is monopolized by these giants, and the high costs are ultimately passed on to consumers.

In 2022, the total expenditure on cloud services by enterprises and individuals reached $490 billion, and it is expected to exceed $720 billion by 2024. 31% of large enterprises spend over $12 million annually on cloud services, while 54% of small and medium-sized enterprises spend over $1.2 million. 60% of enterprises indicated that cloud costs were higher than expected.

2. Low utilization rate of centralized infrastructure resources.

According to the Flexera report, companies waste an average of 32% of their cloud budget. Reasons for misallocation of resources include: overestimating demand to ensure service continuity; a lack of understanding of cloud costs, getting lost in complex pricing.

DePIN can effectively address these needs. Decentralized storage ( such as Filecoin and Arweave ) is several times cheaper than centralized storage; some projects adopt tiered pricing, such as Render Network efficiently matching GPU supply and demand through a multi-tiered pricing strategy.

DePIN's Token Economic Model

The core logic of DePIN is to incentivize users to provide resources, such as GPU computing power, hotspot deployment, storage space, etc., to contribute to the network.

Early tokens usually have no actual value; users participate similarly to venture capital, choosing promising projects to invest resources and become "risk miners," profiting through the increase in token quantity and appreciation in price.

The income of these providers is related to network usage, market demand, and other factors. Low network usage leads to reduced rewards, or network instability causing resource waste are potential risks.

This incentive creates a flywheel effect; when development is positive, it leads to a positive cycle, while the opposite may result in a withdrawal cycle.

Token economic model operation process:

1. Token attraction to supply-side participants: Attract early participants to provide resources through a good token economics model, offering token rewards.

2. Attract builders and consumer users: As resource providers increase, developers join to build products, attracting consumers with low prices.

3. Forming positive feedback: An increase in consumers leads to more supply-side income, creating positive feedback and attracting more participation.

In a circular manner, the supply side receives more token rewards, the demand side enjoys cheaper services, the value of the project tokens aligns with the growth of participants, attracting more participation and speculation, thus forming value capture.

Current Status of the DePIN Industry

Early DePIN projects such as Helium(2013), Storj(2014), and Sia(2015) primarily focus on storage and communication technologies.

With the development of the Internet, Internet of Things, and AI, the requirements for infrastructure and the demand for innovation have increased. Currently, DePIN projects mainly focus on computing, storage, communication technology, and data collection and sharing.

Most of the top 10 projects by market capitalization belong to the Storage and Computing fields, with decent projects in the telecommunications field such as Helium and Theta.

Representative Projects in the DePIN Industry

Filecoin & Arweave - Decentralized Storage Track

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. After one month of the test net going live, the storage space reached 4PB and currently stands at 24EiB.

Filecoin is built on the IPFS protocol and supports smart contracts. It employs a Proof of Storage consensus mechanism, including Proof of Replication and Proof of Spacetime algorithms to ensure data security and reliability.

OpenSea collaborates with NFT.Storage, the Shoah Foundation, and others to utilize Filecoin for storing NFT metadata.

Arweave is a permanent storage network that ensures data is permanently saved once uploaded. It uses a "Proof of Access" work proof mechanism, requiring miners to provide previously stored data blocks that are randomly selected as "access proof".

The main differences between Filecoin and Arweave:

• Storage Method: Filecoin temporary storage, Arweave permanent storage
• Economic Model: Filecoin rewards through storage space and time, while Arweave pays a one-time fee for permanent storage.
• Consensus Mechanism: Filecoin uses Proof of Storage, Arweave uses Proof of Access
• Application scenarios: Filecoin is suitable for large-scale data storage, Arweave is suitable for permanently storing important data.

Advantages of Decentralized Storage:

• The price is significantly lower than centralized storage.
• Higher security, distributed data storage reduces single point of failure risk
• Users retain absolute ownership and control of their data.

Disadvantages:

• Technical challenges: issues such as storage retrieval efficiency and node reliability
• Availability and performance may be affected by network participants, with fluctuations.

Helium - Decentralized Wireless Network

Helium was founded in 2013 and is a pioneer in DePIN. In the traditional IoT industry, infrastructure costs are difficult to cover with revenue, and there is no integrated market. Helium incentivizes users to participate through tokens, sharing costs.

Helium performs outstandingly in the IoT field, utilizing LoRaWAN technology, with low power consumption, long-distance transmission, and good indoor penetration. It is suitable for scenarios such as agriculture and smart cities. Currently, some positioning devices and smart farms have begun to adopt Helium.

However, Helium's performance in the 5G market has been poor, primarily due to the dual challenges of compliance and market cap.

• Compliance: The 5G frequency band needs strict regulatory authorization, Helium chooses the CBRS GAA frequency band, which has a smaller coverage area.
• Market: 5G is largely operated by state-owned enterprises, and Helium finds it difficult to replicate the experience from the US overseas.

Other challenges:

• The performance-price ratio of the equipment is opaque, affecting the provider's experience.
• How to prevent cheating behaviors such as cluster mining, GPS location modification, etc.

Helium migrated to Solana this March for several reasons:

1. Focus on network construction and leave blockchain maintenance to professional teams.
2. Utilize Solana ecosystem resources to increase token use cases.
3. Use Solana's state compression feature to mint NFTs at a low cost as network credentials.
4. Collaboration space with projects like Solana Mobile Stack

In the long run, Helium's exploration in the IoT field holds high value, with tremendous potential in future smart agriculture, smart cities, and other areas.

Render Network - Decentralized Computing

Render Network is a decentralized GPU rendering platform. Large project rendering requires enormous computing resources, usually relying on cloud service providers like AWS, which can be expensive.

Render Network adopts a multi-tier pricing strategy, efficiently matching GPU supply and demand:

• Tier1: Comparable to centralized services like AWS
• Tier2: The computing power is 2-4 times that of Tier1, with a higher priority than Tier3.
• Tier3: 8-16 times OctaneBench workload, lowest priority

This strategy allows price-sensitive users to choose Tier 3, efficiency-seeking users to select Tier 1, and those in the middle to opt for Tier 2.

Render Network emphasizes the utilization of idle GPU resources, providing an efficient two-way market for global GPU computing supply and demand.

Theta Network - Decentralized Video Network

Theta Network uses a blockchain-based optimized content delivery network to reduce video transmission costs and improve distribution efficiency.

In traditional CDN, video viewers connect directly to the POP server. Theta allows users to contribute bandwidth and computing power, becoming caching nodes that are closer to the viewers to distribute videos.

Advantages:

• Audience receives a better experience
• Users providing bandwidth computing power will receive token rewards.
• Reduce video platform costs

With the increase in consumption of video content, the live streaming industry is rising, and Theta is expected to be in