In the outlook for 2024, investment institutions such as Messari, Coinbase, and Spartan Group are all betting on the DePIN track. Previously, tokens such as $DIMO, $MOBILE, and $HONEY, which lead the DePIN token, have achieved substantial increases and gained market attention. This article is sourced from CGV FOF and compiled and written by DeepTech.
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In the outlook for 2024, investment institutions such as Messari, Coinbase, and Spartan Group are all betting on the DePIN track. Previously, tokens such as $DIMO, $MOBILE, and $HONEY, which lead the DePIN token, have achieved substantial increases and gained market attention. The AI concept further increased the demand for DePIN due to the LLM hype. CGV continues to have a positive outlook on the development of the DePIN track and shares its understanding of the DePIN track in this article.
DePIN, short for Decentralized Physical Infrastructure, was first proposed by Messari in 2022, but projects that meet the definition of DePIN have long existed. From the name, any physical device that meets the requirements of decentralization can be called DePIN, and the earliest DePIN is undoubtedly the Bitcoin network. However, a more appropriate standard may be a decentralized network that provides physical (non-virtual) world services, which can be called DePIN. The main application types include storage, computing, bandwidth, sensors, energy, etc. Filecoin, which was born in 2014 as decentralized storage, is generally considered the first successful DePIN project.
The reason for the emergence of DePIN is people’s dissatisfaction with traditional physical infrastructure. In most cases, physical infrastructure such as communication networks, electricity, and water resources are monopolized by large companies due to their large scale, making it difficult for users to find alternative solutions. After entering the Internet era, computing resources such as computing power and storage are also controlled by large companies, leaving users with limited choices. The emergence of Web3 brings hope for solving these real-world problems.
In 2008, Bitcoin emerged and cryptocurrencies showed the possibility of decentralizing the financial system. A few years later, DePIN attempted to revolutionize traditional physical infrastructure through decentralization. From pure crypto to DePIN, from finance to the physical world, the decentralization wave has finally taken a step towards reality.
The structure of DePIN can be divided into on-chain and off-chain parts. The on-chain part is responsible for coordinating decentralized resources, providing a decentralized ledger that does not require trust or permission, allowing both supply and demand sides to obtain reliable results. This part adopts blockchain as the ledger, and the operations of the supply and demand sides are recorded using smart contracts, with cryptocurrencies used as the medium of exchange, while providing token incentives to motivate users to become resource suppliers.
The off-chain part is responsible for providing specific resources. Users supply their idle physical resources in exchange for token rewards. For computer resources with high operability, physical resource supply can often be done by installing designated software. For other resources with more complex requirements, specified hardware is needed for resource supply.
The on-chain part is responsible for the economic consensus, and the off-chain part is responsible for the physical scheduling. The operation of the DePIN project relies on the perfect combination of on-chain and off-chain, virtual and real.
In the traditional construction process of physical infrastructure, large companies/governments often make initial investments with huge capital. This top-down centralized model is costly, time-consuming, and inefficient. This also leads to the need for higher charges to compensate for the opportunity costs after the infrastructure is built.
DePIN completely subverts traditional regularization. DePIN spreads the startup costs to each participating individual through token economics and pays for the construction costs of infrastructure through crowdfunding. The project only needs to design appropriate token economics, and the driving force of economic incentives will make individuals contribute their own resources to the DePIN network in a decentralized manner, from the bottom up, to build the infrastructure network.
The infrastructure built in a decentralized manner has the attribute of self-expansion. Once the infrastructure starts to operate, the benefits will be returned to the resource providers, encouraging more users to join the network and provide resources. When the resources of the infrastructure become more abundant, more users will use the infrastructure, generating more revenue and further accelerating the increase in supply. This is a wonderful positive flywheel effect.
We emphasize that in DePIN, tokens play an important role as a market signaling mechanism, providing higher stability for the protocol. However, at the same time, we should not overly emphasize tokens and neglect the real value. Pure speculation cannot sustain the long-term execution of the protocol. The key to the DePIN project lies in its utility.
On the one hand, utility comes from the permissionless nature brought by decentralization, which guarantees that users can access services without censorship and on an equal basis. On the other hand, utility comes from the cost reduction and efficiency improvement brought by decentralization. Decentralized self-custody eliminates the structural costs of centralized platforms (management, maintenance, labor, etc.), and the characteristics of reusing idle resources greatly reduce costs.
Based on historical data from the previous cycle, among all tracks, DePIN’s on-chain revenue is the most resilient, which is the core value driven by utility.
Here is a possible real-world scenario:
At 7 o’clock in the morning, Satoshi wakes up from his sleep. The smart home in his house is supported by the IoT provided by IoTex. He opens his computer to check emails, and the wireless network is connected through WiFi Map. He checks the Arkeen application to see the situation of rooftop photovoltaic power generation and lists the accumulated carbon credits for sale. After having breakfast, Satoshi drives to work using the navigation provided by Hivemapper. Along the way, DIMO records driving data and brings passive income to Satoshi. The mobile network is provided by Helium Mobile. At the office, Satoshi charges his electric vehicle using the PowerPod charging pile. As a software engineer, Satoshi starts his programming tasks for the day and uses Bittensor to select excellent AI models for programming assistance. The training of the model is handled by Gensyn, and GPU computing power provided by Akash supports it. The data is stored in Filecoin. After work, Satoshi uses the Livepeer platform to watch movies. After watching the movie, he plays games for a while, and the high-definition AAA game is rendered by Render Network.
After years of development, we have seen explosive growth of DePIN in various categories such as energy, logistics, mapping, and telecommunications. Human daily life can now be fully covered by DePIN.
Deeper Network is a decentralized bandwidth sharing network dedicated to building a more open, fair, and trusted Internet, achieving the democratization of the Internet and individual data sovereignty. On the Deeper Network platform, users can establish decentralized VPNs, share bandwidth, and access decentralized applications. All services are based on blockchain technology to achieve trust, security, and decentralization.
On the software level, Deeper Network uses its self-developed AtomOS to ensure network security. As the world’s first unlocked network operating system, AtomOS brings high reliability, scalability, and performance to Deeper Network. In addition, Trident Protocol, as the core communication protocol of Deeper Network, provides users with excellent experience with its adaptive tunnel, intelligent routing, IP multiplexing, and tunnel congestion control mechanisms, preventing network censorship.
On the hardware level, Deeper Network has developed Deeper Connect, which features plug-and-play and zero-configuration, allowing users to enjoy uncensored secure network services without any professional knowledge, while also earning token rewards.
On the blockchain level, Deeper Network has built Deeper Chain, which adopts the NPoW consensus mechanism. NPoW fully utilizes the two-layer architecture of Deeper Network, where device nodes complete tasks to obtain credits, and then provide credit guarantees for validating nodes to elect validating nodes, thereby realizing an efficient, scalable, and secure block generation process. Compared to PoW, NPoW effectively reduces the consumption of computing resources.
Deeper has issued the platform token DPR, with a total supply of 10 billion. DPR is mainly used for incentives and service payments within the Deeper Network ecosystem, with the current FDV of 14 million US dollars. 60% of the total DPR supply will be obtained through NPoW mining, and the mining reward of DPR has been halved every year since 2021. On January 25, 2024, DPR completed a new milestone of halving. Just like Bitcoin halving triggers price increases, the halving of DPR combined with the expectation of a bull market in 2024 may trigger a new wave of price increases.
Network3, as a DePIN project in the AI ecosystem, has built an AI Layer2 that helps AI model training. Through edge computing, federated learning, model compression, and other methods, Network3 aims to democratize AI and enhance user data privacy and security in an efficient and scalable manner.
Unlike most decentralized computing platforms, Network3 focuses on low-power, low-cost edge computing devices (such as IoT) rather than high-end industrial-grade graphics cards. On the one hand, the computational power of edge devices limits the size of local models that can be supported by Network3’s edge computing. On the other hand, the accessibility of edge devices allows every user to have the conditions to perform local calculations of their privacy data, and federated learning is used for collaborative training.
In fact, there is a strong demand for AI on terminal devices (smart homes, smart manufacturing, smart health monitoring), but it is not affordable to use large models. The solutions provided by Network3 have the opportunity to fill this gap. Currently, Network3’s software has been downloaded 50 million times, with 2 million monthly active users, over 58,000 active nodes in the network, and over 2PB of network traffic.
HPChain is a DePIN protocol that aims to decentralize high-performance GPU computing and provide support for AI and cloud game developers.
Under the geopolitical influence, NVIDIA restricts the import of chips from certain countries, and centralized cloud computing platforms (AWS, Azure) restrict the use of certain countries. At this time, a decentralized high-performance computing platform becomes particularly important.
Currently, HPChain has more than 1,000 GPU cards, and cloud computing platforms and cloud service platforms are already online and are working on cooperation programs with universities such as Cambridge University and Toronto University, as well as companies such as M1 and TikTok.
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