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

DePIN stands for Decentralized Physical Infrastructure Network, which incentivizes users to share personal resources through tokens to build an infrastructure network, including areas such as storage space, communication bandwidth, cloud computing, and energy. In simple terms, DePIN crowdsources infrastructure that was originally provided by centralized companies and distributes it to numerous users worldwide.

According to data from the data platform, the market value in the DePIN field has reached 5.2 billion USD, surpassing the 5 billion USD in the oracle field, and is showing a continuous upward trend. Whether it is the early Arweave and Filecoin, the Helium of the last bull market, or the recently popular Render Network, they all belong to this field.

The reasons why DePIN has attracted attention again are mainly three:

1. The infrastructure is more complete than a few years ago, paving the way for and empowering the depin track;

2. At the end of 2022, Messari first proposed the concept of DePIN, believing it to be "one of the most important areas of crypto investment in the next decade". The new definition and expectations have added narrative heat to this track;

3. People once placed their hopes for breaking the boundaries of web3 on social and gaming, but with the arrival of the bear market, they began to explore possibilities in other directions, and the DePIN track, closely linked to web2 users, became an important choice for web3 practitioners.

This article will analyze DePIN in depth from five perspectives: why DePIN is needed, the token economic model of DePIN, the current state of the industry, representative projects, advantages analysis, as well as limitations and challenges.

Why is DePIN needed?

Current State of the Traditional ICT Industry

In the traditional ICT industry, infrastructure is mainly divided into: hardware, software, cloud computing and data storage, and communication technology.

Among the top ten companies in the global market capitalization ranking, six belong to the ICT industry: ( Apple, Microsoft, Google, Amazon, NVIDIA, Meta ), accounting for half of the market.

According to data, the global ICT market size reached 439 billion dollars in 2022, with data centers and software showing a growth trend in recent years, impacting our lives in many ways.

The dilemma of the traditional ICT industry

However, the current ICT industry is facing the following two significant dilemmas:

1. The industry has a high barrier to entry, which restricts full competition and leads to pricing being monopolized by giants.

In fields such as data storage and communication services, companies need to invest a large amount of money in hardware purchases, land leasing for deployment, and hiring maintenance personnel. These high costs mean that only giant enterprises can participate; for example, the market share of a few giants in the cloud computing and data storage sectors approaches 70%. This leads to pricing being dominated by these giants, and the high costs will ultimately be passed on to consumers.

Taking the prices of cloud computing and data storage as an example, their costs are quite high. According to data, in 2022, the total expenditure of enterprises and individuals on cloud services reached 490 billion USD, and it is expected to continue growing in the coming years, surpassing 720 billion USD by 2024. Among them, 31% of large enterprises spend more than 12 million USD annually on cloud services, while 54% of small and medium-sized enterprises spend more than 1.2 million USD on cloud services. As enterprises increase their investment in cloud services, 60% of them report that their cloud costs are higher than expected.

The current situation in the cloud services sector related to cloud computing and data storage shows that once prices are monopolized by giants, the expenditure pressure on users and enterprises will also increase. In addition, the capital-intensive nature restricts full competition in the market, which will also affect innovation and development in the field.

The utilization rate of centralized infrastructure resources is relatively low for 2).

The low utilization of centralized infrastructure resources is a significant challenge in today's business operations. This issue is particularly prominent in cloud computing environments, where companies often allocate substantial budgets for cloud services.

According to a recent report (2022 ), a concerning trend has emerged where, on average, 32% of corporate cloud budgets are wasted, meaning that after cloud expenditures, one-third of resources are left idle, resulting in substantial financial losses.

This improper allocation of resources can be attributed to various factors. For example, regarding resource supply, companies often overestimate their demand to ensure the continuous availability of services. Moreover, data shows that cloud waste is due to a lack of understanding of cloud costs in more than half of the cases, getting lost in complex cloud pricing and a variety of packages.

On one hand, the monopoly of giants leads to excessively high prices, while on the other hand, a significant portion of the company's cloud spending is wasted, causing the IT costs and utilization of enterprises to fall into a double dilemma, which is very detrimental to the healthy development of the business environment. However, this also provides fertile ground for the development of DePIN.

Faced with the high prices of cloud computing and storage, as well as the dilemma of cloud waste, the DePIN track can effectively address this demand. In terms of pricing, decentralized storage is several times cheaper than centralized storage; regarding the cloud waste dilemma, some decentralized infrastructures have begun to adopt a tiered pricing approach to differentiate between different needs. For example, a certain project in the decentralized computing track employs a multi-tiered pricing strategy to match the supply and demand of GPUs most efficiently. The advantages of decentralized infrastructure in solving these two dilemmas will be detailed in the project analysis section that follows.

The Token Economic Model of DePIN

The core logic of DePIN is to incentivize users to provide resources, including GPU computing power, deploying hotspots, storage space, etc., through token incentives to contribute to the entire DePIN network.

In the early stages of DePIN projects, tokens often have no real value, so users' participation in providing resources to the network somewhat resembles that of venture capitalists. The supply side selects promising projects from numerous DePIN projects and then invests resources into them to become "risk miners," profiting through the increase in the number of tokens acquired and the appreciation potential of the token price.

These providers differ from traditional miners in that the resources they offer may involve hardware, bandwidth, computing power, and so on, and their income tokens are often related to network usage, market demand, and other factors. For example, low network usage can lead to reduced rewards, or if the network suffers attacks or instability, it can result in wasted resources. Therefore, risk miners in the DePIN track need to be willing to take on these potential risks and provide resources for the network, becoming a key component in the stability of the network and the development of the project.

This incentive mechanism will create a flywheel effect, forming a positive cycle when development is going well; conversely, it can also easily lead to a withdrawal cycle when development is declining.

1. Attract supply-side participants through tokens: By utilizing a sound token economics model, attract early participants to engage in network construction and provide resources, offering token rewards.

2. Attract builders and network consumption users: With the increase in resource providers, some developers have started to join the ecosystem to build products. At the same time, after providing certain services on the supply side, consumers are also beginning to be attracted to join, due to DePIN offering lower prices compared to decentralized infrastructure.

3. Forming Positive Feedback: As the number of consumer users increases, the incentive of this demand brings more income to supply-side participants, forming positive feedback, which in turn attracts more people's participation from both supply sides.

Under this cycle, the supply side has more and more valuable token rewards, while the demand side has cheaper and more cost-effective services. The value of the project's tokens remains aligned with the growth of participants on both the supply and demand sides. As the token price rises, it attracts more participants and speculators, forming value capture.

Through the token incentive mechanism, DePIN first attracts suppliers, then attracts users to use it, thus achieving the project's cold start and core operational mechanism, which can further expand and develop.

Current Status of the DePIN Industry

From the earliest established projects, such as a decentralized network project ( in 2013 ), a decentralized storage project ( in 2014 ), and a certain project ( in 2015 ), it can be seen that the earliest DePIN projects were primarily focused on storage and communication technologies.

However, with the continuous development of the Internet, the Internet of Things, and AI, the requirements for infrastructure and the demand for innovation are increasing. From the current development status of DePIN, the projects of DePIN are mainly focused on computing, storage, communication technology, as well as data collection and sharing.

From the current top 10 projects by market capitalization in the DePIN field, most belong to the Storage and Computing sectors. Additionally, there are some notable projects in the telecommunications sector, including industry pioneers and late bloomers, which will be further analyzed in the subsequent project analysis.

Representative Projects in the DePIN Industry

According to market capitalization, this article will focus on analyzing the top five projects: Filecoin, Render, Theta, Helium, and Arweave.

First, let's take a look at Filecoin and Arweave in the decentralized storage track, which are two projects that everyone is quite familiar with.

Filecoin & Arweave------decentralized storage track

As mentioned in the introduction about the dilemmas faced by the traditional ICT industry, in the traditional data storage field, the high pricing of centralized cloud storage on the supply side and the low resource utilization on the consumption side have created challenges for the interests of users and enterprises, and there are also risks such as data leakage. In response to this phenomenon, Filecoin and Arweave provide a solution through decentralized storage, offering lower prices and different services to users.

Let's first take a look at Filecoin. From the supply side, Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through token rewards. Providing more storage space is directly related to obtaining more block rewards. In about a month since its testnet launch, its storage space reached 4PB, with Chinese miners playing a significant role as storage space providers. Currently, the storage space has reached 24EiB.

It is worth noting that Filecoin is built on top of the IPFS protocol, which itself is a widely recognized distributed file system. Filecoin achieves decentralized and secure data storage by storing users' data on nodes within the network. Additionally, Filecoin leverages the advantages of IPFS, giving it strong technical capabilities in the field of decentralized storage, while also supporting smart contracts, enabling developers to build various storage-based applications.

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