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Home»Blockchain»From physical rewards to solar energy: how DePIN works
Blockchain

From physical rewards to solar energy: how DePIN works

2024-12-28No Comments6 Mins Read
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DePIN has come to the world offering the opportunity to create definitive projects that reward actions in the physical world. What is this technology about and how does DePIN work?

Table of contents

  • What is DePIN and why does blockchain need it?
  • What are the DePIN options?
  • Advantages and disadvantages of DePIN
  • Looking to the future: what will happen to DePIN in five years?

Theoretical studies on cryptocurrencies have long predicted that encryption tools currently implemented in the blockchain will be used on the Internet and sooner or later will have an impact on the physical world. Nick Szabo noted in the late 20th century that smart contracts could automatically manage physical objects. More than 25 years have passed and the blockchain is firmly entrenched in our lives.

This is mainly due to cryptocurrencies: Bitcoin (BTC) continues to break records and is backed by significant physical infrastructure. At first glance, this confirms an actual physical presence in our world.

However, the limits of decentralized technologies continue to expand with the arrival of solutions such as DePIN.

What is DePIN and why does blockchain need it?

DePIN means a decentralized physical infrastructure network. Blockchain participants use a public ledger and cryptocurrency to build and maintain specific, real-world infrastructure projects. Simply put, DePIN means using the DePIN blockchain to run and maintain decentralized networks of equipment that can serve a common purpose.

This allows the network to be built on decentralized, horizontal connections rather than the hierarchical approach typically seen in large infrastructure projects such as bridges or roads. Building and managing physical infrastructure networks is expensive and complex, so historically they have been the domain of large companies or governments with capital and resources.

See also  Nigeria Adopts National Policy To Create 'Blockchain Powered' Economy

DePIN, on the other hand, encourages voluntary cooperation between participants. People can participate in DePIN networks by using their own hardware or purchasing specialized hardware for specific tasks. Options range from simple hard drives to weather stations. However, DePINs are usually built around capabilities that are available to the general public.

Max Thake, co-founder of peaq, explained to crypto.news that DePIN uses tokens to incentivize people to use connected hardware to offer services to other people:

“Let’s imagine a smartphone-centric DePIN, like Roam Network. The smartphones, owned by ordinary people, are the hardware component, the local connection quality data they collect are the goods. Telecom companies looking to improve their services purchase this data on a Web3 marketplace, where the smart contracts come into play, enabling the value exchange between the demand and supply sides.”

Max Thake, co-founder of peaq

What are the DePIN options?

There are two types of DePINs: Physical Resource Networks (PRN) and Digital Resource Networks (DRN).

PRNs are decentralized networks where providers provide hardware resources (such as sensors or Internet access), and these resources are tied to a specific location. Their contribution to the network is location dependent and therefore not interchangeable.

DRNs are networks where providers provide resources determined by their function, not their location. Here location doesn’t matter. Examples of such resources are computing power, bandwidth and storage.

DePIN Sector Map | Source: Messari

Advantages and disadvantages of DePIN

In theory, DePIN can completely transform the way we manage and interact with physical infrastructure. Using blockchain and smart contracts, this model increases the efficiency and transparency of systems, allowing the community to make decisions independently.

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DePIN can be regarded as a kind of ‘industrial DAO’, where all participants have equal opportunities and guarantee the independence of the infrastructure. The system is flexible and horizontally scalable. Successfully attracting motivated users can significantly accelerate the creation of a decentralized physical infrastructure.

The pricing model in DePIN crypto systems is also considered more accessible and fair, as infrastructure assets are owned by the government and the cost of services is not determined by the company’s benefits, but by availability. By rewarding participants in the form of tokens, users can regularly receive passive income for the benefit of society.

However, significant disadvantages should be taken into account:

  • Vulnerability to hacks and errors.
  • High volatility of tokens.
  • There is a need for technical knowledge to maintain a decentralized infrastructure.

Nevertheless, blockchain with DePIN powers real-world DePIN use cases and value exchanges. It is inherently linked to real-world supply and demand, making this segment uniquely positioned for sustainable, healthy growth.

“People won’t stop using navigation apps, ordering food or using the internet because Bitcoin has taken a dip. DePIN combines web3 with real value instead of speculation and offers it an opportunity to deliver on its promise to change the world.”

Looking to the future: what will happen to DePIN in five years?

According to Messari analysts, by 2023 the DePIN ecosystem grew to more than 650 projects and the number of nodes increased by 600,000. Researchers noted the main trends in the development of DePIN in 2024.

Experts believe that meme tokens will help drive mass adoption of projects like Solana Saga’s BONK airdrop for smartphone users. Analysts also see Asia as the region with the greatest potential for the rapid development of decentralized infrastructure, and expect some of the most influential projects in the sector to emerge here between 2024 and 2025.

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The first development in the field of DePIN appeared about ten years ago. During this time, the number of projects has increased significantly. According to Messari experts, the sector’s market capitalization is well over $20 billion, excluding RWA and blockchain oracles.

Source: Messari

Speaking about the future of DePIN, Thake expects it to become a key part of the industry alongside the entire enabling stack, from DePIN crowdsourced data for training models to decentralized compute and Web3 federated learning marketplaces for AI agents.

“Some of the most exciting implementations of the DePIN model will be in the energy sector, especially when it comes to green energy, which requires flexible and decentralized networks, while most old-fashioned networks follow the centralized model. People will soon be making money by harvesting solar energy and contributing to the grid.”

However, DePIN projects have not yet achieved popularity even among cryptocurrency industry participants, let alone widespread adoption of the concept. Implementing a decentralized infrastructure can take some time as DePIN faces issues that need to be resolved. However, experts are convinced that this system will play a key role in shaping the future and changing the operating principles of the physical infrastructure.

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