After the crypto roller coaster has been rolling for the past few years, it’s hard to hold back a smile when a new buzzword drops, no matter how much you believe in the Web3 dream. So when Messari rolled out a new name for something that had been around for a while on Web3 – DePIN, Decentralized Physical Infrastructure Networks – commenters met him with his fair share of memes and snarks. It is, after all: bulls and bears come and go, but memes are forever.
As much as I love memes, however, the reality is that DePINs are Web3’s best shot at not just another bull run, but actual real-world adoption. And the stories of its poster children, riddled with mishap and misfortune, should be a lesson for the industry, but not a bell tolling its demise.
The passion to be
Essentially, a DePIN uses blockchain and tokens to incentivize the crowd-sourcing of infrastructure to deliver real-world services and value. Here’s an example: Imagine we’re starting a new Internet Service Provider (ISP) business. To provide access to our end users, we must invest billions in purchasing and deploying hardware and hiring countless employees to maintain our network.
If we go the DePIN route instead, we will offer individuals and businesses a token-based incentive to deploy their own infrastructure and connect it to our network. We would also grant them a marketplace to offer their services and implement a mechanism that would root the value of our token in the actual value these companies generate. Sticking with the ISP example, we would introduce a mechanism for end users to convert our token into a stable value token to pay for their connectivity. This mechanism would protect our end users from market fluctuations, ensuring that services never become unreasonably expensive.
In this scenario, we end up with a community-powered infrastructure network with decentralized ownership and a self-reinforcing incentive loop. It can scale at lightning speed, it promotes individual ownership and empowerment, and can enter markets that are below the preferred cost/income ratio of legacy names. A whole series of projects are now moving in this direction, and investors are taking note, in search of ideas that can disrupt industries in search of real innovation. Despite all that potential, however, so far the DePIN story has not been without its setbacks.
The bear market is coming
When discussing all things DePIN, it’s hard to avoid all the elephants in the room, especially since it makes everyone’s voices so grating and funny. Yes, it’s Helium, the People’s Network.
Helium is a DePIN that focuses on providing Internet of Things connectivity, which allows users to set up access points using the hardware they purchase and earn on their usage. Once hailed as a hero of real-world blockchain adoption, it has come under fire following some very regarding allegations revealed in a Forbes investigation. Additionally, while Helium’s supply-side hardware was rapidly scaling to just under a million APs according to its own website, the demand for LoRaWAN connectivity just isn’t enough yet to justify an infrastructure. so massive.
Another famous example is Filecoin, a decentralized data storage platform that functions as a Web3 version of services like Dropbox. Despite a little difficult startthe project launched its mainnet at the end of 2020 and recently released some nice solid numbers suggesting growth and adoption.
Skeptics might point to the fact that the respective tokens of these projects have not been immune to the bear market, but with moves like these, the tokens don’t tell the whole story. Right now, even those who don’t normally read financial news know that the macro economy is not in its best shape. The past year has been quite atrocious for the economy as a whole, which would naturally encourage investors to pull money out of riskier assets. As brilliant as your idea may be, it can’t do much to protect you from war, supply chain difficulties, post-pandemic inflation, and whatever the black swans 2023 might throw at us. throw in the face.
The real metric here is scaling. Helium’s case may be darker than Filecoin’s, but they both prove the ability of the underlying model to encourage rapid growth and deployment in markets hitherto dominated by centralized entities. They have pulled from zero to thousands of devices on their respective networks at a rapid pace without having to hire armies of personnel to deploy and maintain them and empowered communities to own the infrastructure that serves them.
Projects that bring this model into markets with established demand have an uphill battle battling ingrained legacy names, but the inherent competitive advantages of their model will likely help them secure a strong beachhead. With a little business smarts and persistence, this inclusive and egalitarian model could give legacy companies a run for the money – while keeping the service financially feasible for end users and infrastructure providers. It’s a difficult balancing act, but what isn’t.
Is that enough for the ultimate bull run that buys everyone a Lambo straight to the Moon? Only time will tell. But what is certain is that this model is Web3’s best chance of being adopted in the real world, and the real value it provides is a sounder basis for sustainable growth than wild speculation.