DePIN (Decentralized Physical Infrastructure Networks) are ubiquitous. Or at least, for those of us reading CoinDarwin in July 2024, they are. As someone who has been involved in this vertical since its inception in 2019, I realize that I might be an early adopter and more enthusiastic about DePIN than most people. However, when I sat down to write this article and quickly took stock of the DePINs I engage with daily, even I was surprised by the number and variety of projects now available.
First, I wear a Cudis ring that provides me with health data and rewards me with points for future airdrops. In my home, I have Helium and XNET WiFi hotspots that provide wireless connectivity to my devices (and others’ devices) and pay me tokens when used. Helium Mobile has an app on my phone that pays me cryptocurrency for opting to share location data used to better triangulate data usage and network demand.
My computer runs the Grass browser extension, which allows AI labs and web crawlers to view the internet through my residential IP and earns me airdrop points. Finally, my car is equipped with a DIMO device that provides real-time data about my vehicle, sharing anonymized data with third-party developers and (once again) paying me tokens.
If you think this list is exhaustive, you’re thinking too small. Today, the DePIN industry has over 1,300 projects, and its growth is accelerating in the bull market. While the popularity of the DePIN model is exciting, what intrigues me more is how the next generation of DePINs are building their networks and how they differ from their predecessors. Here’s what I see. After five years of learning and iteration, this generation of DePINs is progressing in the following ways:
Everything is Demand-Driven
A common and fair criticism of the first wave of DePINs (like Helium’s IoT network) is that they excelled at building supply but didn’t foster enough demand. This generation of DePINs is securing demand early, often before the Token Generation Event (TGE).
They are also building supply in a more targeted and measured way, allowing demand to dictate where and when to incentivize the supply side to build. For example, Spexi, a DePIN company for drone aerial imagery, signed seven-figure demand contracts before TGE and paid six-figure cash to drone operators who are eager for the simple, gamified opportunity to monetize their existing drone assets.
Lowering the Barrier to Entry for Contributors
In this cycle, we see DePINs using generic hardware instead of custom hardware, which already exists on their supply side. Another way to accelerate supply-side growth is by leveraging everyday activities people are already doing. Natix exemplifies these two strategies by using smartphones in cars as dash cams to capture street-level imagery.
The company aims to utilize a behavior that already happens daily (driving), rather than incentivizing entirely new behaviors (which is a more “expensive” proposition from a token incentive perspective). The contrast here is with wireless DePINs like Helium, which aim to incentivize contributors to climb rooftops and install CBRS radios—an entirely new behavior.
Leaning Into Speculation
Incentives make the world go round. DePINs have always known this, but in this cycle, things are getting more intense. The emergence of points as a mechanism to record contributors’ contributions before the TGE has been hugely successful, providing this generation of DePINs with more flexibility and time to gather data before finalizing their token economics.
Referral programs have changed the game, where contributors may receive a fixed amount of points or tokens, or even a percentage of their referrer’s points or tokens permanently. Grass is an example of a successful point-based referral incentive program.
Staying Centralized for Longer
No project, idea, or concept can succeed without a dedicated team to make quick decisions, iterate, and drive it forward. Early-stage ideas are the most fragile (but also the most flexible). In this cycle, we all want to see DePINs quickly find product-market fit (PMF), effectively scale supply and demand, and generate revenue on-chain; decentralization isn’t a priority until there are some early signs of PMF. Only something that works is worth decentralizing.
Take 3DOS, a DePIN for manufacturing, as an example. The founder created a popular 3D printer operating system that networks devices and automates and remotely controls print jobs. He saw significant growth in the Web2 world, with NASA, Google, and 40% of U.S. universities as customers.
He envisions 3D printers as shared resources and is creating a global manufacturing network where businesses can submit jobs, find printers closest to the final customer (reducing shipping costs and time), and contract printer owners or shops to fulfill them. 3D printer owners can monetize their existing assets, businesses can save money and time on printing goods, and everyone benefits.
I mention 3DOS not only because it’s an exciting use case but also because it’s in the early stages of its lifecycle. John Dogru (the founder) has complete, centralized control over the idea, software, network, demand side, etc., which he should have. Nothing would get done without his control at this early stage, and there would be nothing worth decentralizing anyway!
DePIN (as an industry) is still in its infancy, but there has been enough time to learn from the first generation and improve. This generation of DePINs prioritizes demand early on, expands the supply side faster through lowered entry barriers and speculation, and stays centralized longer to speed up delivery.
New DePINs are launching at an astonishing rate, with more iterations and learnings to come. DePIN remains one of the most impactful ideas in the crypto industry and a powerful force for good in the real world. I look forward to the success of the DePIN 2.0 teams and can’t wait to write an update for the DePIN 3.0 teams in just a few years!
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