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Author: Biteye core contributor Fishery
Editor: Crush, core contributor of Biteye
Community: @BiteyeCN
*The full text is about 4,500 words and the estimated reading time is 5 minutes
DePIN, or Decentralized Physical Infrastructure Networks, refers to a network system that connects and manages physical hardware devices in a decentralized manner. Although the concept was officially named by Messari through a Twitter vote in November 2022, the concept and practice behind it have existed for many years.
In the two years since the unified name DePIN was established, despite the industry's heavy publicity, we have to admit that we have not seen many eye-catching emerging projects.
On the contrary, many projects are short-lived and even become short-term funding. However, this performance cannot negate the value and potential of the entire track. In fact, the concept represented by DePIN has a long history of development.
The track was referred to by many different names before the name "DePIN" became widely accepted.
For example:
TIPIN (Token Incentivized Physical Infrastructure Networks): Token-incentivized physical infrastructure networks
PoPW（Proof of Physical Work）
EdgeFi: Edge finance, emphasizing the deployment of hardware resources at the edge of the network
MachineFi: Machine Finance, first proposed by the IoTeX project in November 2021
Although these names have different focuses, they essentially point to the same concept: using blockchain technology and cryptoeconomics to build and manage infrastructure networks in the physical world.
In this field, some projects have achieved remarkable success, the most classic of which are Filecoin and Helium.
Filecoin is committed to building a decentralized storage network, while Helium focuses on decentralized wireless networks. Both projects emerged in the previous rounds of the bull market, but they are still doing well today.
The success stories of Filecoin and Helium prove that combining blockchain technology with real-world physical infrastructure can create disruptive solutions.
These projects have not only innovated in technology, but also successfully applied cryptoeconomics to solving practical problems, demonstrating the feasibility and potential of the DePIN model.
Through this historical perspective, we can not only understand the concept and value of DePIN more comprehensively, but also provide important reference and inspiration for future project development.
This article will explore the development history of the decentralized physical infrastructure network (DePIN) in depth, review the successful DePIN projects in history, summarize their successful experiences, and use them as a basis to sort out the development opportunities of DePIN in the future. At the same time, we will pay special attention to the new development direction and potential brought by the combination of AI and DePIN under the wave of AI.
01
DePIN Value Logic
Successful DePIN projects often have several common features:
First, there is support from the open source community at the software level, and third-party manufacturers are allowed to manufacture products that can mine hardware;
Second, the product has a practical landing scenario and meets actual needs;
The third is to design the blockchain algorithm in a targeted manner according to DePIN's business scenarios to ensure that the incentives are fair and not controlled by the project party, rather than simply issuing a token on the public chain.
Let’s discuss these three points one by one.
Open source community and hardware
A successful DePIN project cannot be separated from the support of the open source community at the software level, and the hardware is open to third-party manufacturers for production, rather than monopolizing the production of mining hardware.
Open source community support can attract global developers to participate, accelerate technological innovation, and improve software security and stability. The open source spirit is also highly consistent with the concept of decentralization, which helps to build community trust and expand the ecosystem.
At the same time, if the open source community behind a project is prosperous, it means that the project technology is solid and reliable. It should be noted that pseudo-concept projects cannot attract open source developers to "generate power with love."
Opening up hardware production to third-party manufacturers can reduce costs, promote hardware innovation, and prevent centralized risks. This approach enhances the network’s decentralization and risk resistance, while also expanding the base of participants.
This open software and hardware strategy creates a virtuous cycle, attracting more participants, promoting continuous innovation, and ultimately forming a strong and diverse ecosystem to ensure the long-term sustainable development of the project.
Take Helium and Filecoin as examples, both projects rely on strong open source communities to drive their technological advancement and network expansion.
Helium uses the open source LoRaWAN protocol, a low-power wide area network protocol that provides a low-cost, low-power solution for long-distance communication of IoT devices. Through open source, LoRaWAN has attracted a large number of developers and companies to participate, proving its actual demand in IoT communications.
Similarly, Filecoin relies on the open source distributed storage protocol IPFS to store and share data in a peer-to-peer manner, solving many problems of traditional centralized storage, such as single point failure and data censorship.
The open source nature of IPFS has attracted widespread participation from developers and enterprises around the world. Long before Filecoin was launched, IPFS had been widely used by program developers, and the total network storage capacity reached 1 EiB in 2020.
Blockchain consensus
Any successful DePIN project must be closely integrated with blockchain technology and design algorithms for specific application scenarios, rather than separating the DePIN business from Web3 and simply issuing a token on the public chain.
When it comes to the core technology of blockchain, proof of work and consensus are unavoidable and are also one of the most difficult problems in DePIN technology.
The core of the problem is how to calculate the workload of user-side devices and who will distribute the relevant benefits to users?
What is involved is designing a targeted proof-of-work algorithm.
Helium cleverly combines the IoT hotspot business by introducing the "Proof-of-Coverage" (PoC) consensus mechanism. Its challenge-response mode simulates actual IoT data transmission and verifies the communication capabilities of the hotspot.
Multi-hop verification reflects the wide coverage requirements of IoT networks and ensures the stability of network connectivity.
Proof of space and time is consistent with the geographic location services of the Internet of Things, providing a reliable foundation for location-based applications.
Filecoin also has a targeted design in terms of consensus. Through its innovative PFT (Power Fault Tolerance) consensus mechanism, the storage used by miners in the network and the generated proof of space and time are converted into voting weights to elect leading nodes to create new blocks.
This mechanism not only improves network efficiency, but also greatly reduces energy consumption. Through token incentives, Filecoin effectively promotes the expansion of the network and also strengthens the position of the IPFS protocol in practical applications.
In this way, the biggest benefit of the consensus algorithm designed by the DePIN project is to ensure fairness and ensure the security of the economic system. This design not only ensures that users can obtain accurate and reasonable incentives that are consistent with their actual contributions, but also effectively prevents potential abuse by the project party.
The contribution statistics and reward distribution are directly bound to the tamper-proof blockchain through consensus, ensuring the transparency and immutability of incentive distribution.
This means that the project owner cannot maliciously withhold the rewards that users deserve, nor can they secretly increase their own quotas.
Looking back at the recently launched VC-based DePIN, the results are not ideal at the moment, and this may be the reason.
Most of these projects choose to issue tokens on the Solana or Ethereum public chains, with high token emissions, a large number of chips concentrated, and incentives that are free from the constraints of consensus.
Real needs
It is not easy to underline another key factor for the success of the DePIN project: the combination of long-term development and actual needs.
This is fully reflected in the development history of Filecoin and Helium. Filecoin is built on the open source protocol IPFS (InterPlanetary File System), which was created to solve many problems of the current centralized storage system. The existence and widespread application of IPFS proves the actual demand for decentralized storage.
By introducing a token incentive mechanism, Filecoin further expands the application scope and participation of IPFS, forming a virtuous circle.
Similarly, Helium is built on the open source IoT communication protocol LoRaWAN. The widespread use of LoRaWAN has proven the huge market demand for IoT connections, and Helium's incentive mechanism has greatly accelerated the deployment and expansion of LoRaWAN networks.
The combination of this open source protocol and the DePIN project not only proves the existence of market demand, but also demonstrates how DePIN can promote the further development and application of open source technology through economic incentives.
In summary, successful DePIN projects have significant advantages in open source community support, hardware openness, long-term development, and market demand satisfaction, and further consolidate their position in the industry through close integration and innovation with blockchain technology.
Helium and Filecoin are successful examples that demonstrate how the DePIN project can achieve long-term sustainable development through the effective combination of technology and market demand.
02
AI + DePIN Value or speculation? Value window
The combination of AI and Web3 is still in the exploratory stage, and the industry has not yet formed a mature route. However, from the perspective of asset attributes, the AI field involves both hardware and algorithms, which is highly consistent with the characteristics of the DePIN track.
DePIN projects typically involve decentralized networks of physical hardware and smart contract-driven incentive mechanisms, which happens to provide an ideal landing scenario for AI.
When exploring the prospects for the integration of AI and DePIN, we have to face up to a key challenge we are currently facing: the mismatch between decentralized AI training needs and technological development.
At present, the open source AI suites used by academia and industry are still mainly designed for centralized servers, which reflects that the demand for decentralized AI training has not yet reached scale.
In fact, forming a real demand for decentralization is often a long process.
Looking back at the successful DePIN cases in the past, we can find a relatively healthy development path: first, the demand for decentralization emerges, then the community is driven to develop a corresponding open source decentralized framework, and finally an incentive mechanism is injected into the ecosystem.
However, the current development trend in the field of AI+DePIN seems to be putting the cart before the horse. Many projects are eager to launch incentive mechanisms, but due to the lack of real decentralized demand support, these incentives are often obtained by "fleecing players" rather than flowing to real demanders and contributors.
This incentive-first model not only fails to effectively stimulate the emergence of real demand, but may also lead to a disconnect between the direction of technology development and actual market demand.
In the absence of clear demand guidance, projects may focus too much on short-term benefits and ignore the technology accumulation and ecosystem construction required for long-term sustainable development.
Therefore, for the AI+DePIN project, the top priority is to patiently cultivate the real demand for decentralized AI, while promoting the open source community to develop a decentralized AI open source framework.
Only when there is community demand can a reasonable incentive mechanism be introduced to truly play a role and promote the healthy development of the entire ecosystem.
This requires project owners, developers, and investors to remain patient and focus on long-term value creation rather than short-term interests.
Only in this way can we expect to see truly successful AI+DePIN projects emerge, opening up new possibilities for the future of decentralized infrastructure.
Actively participate in the new AI narrative
After the above analysis, the path of value investment may not work in the short term, but this does not mean that the market of AI + DePIN is bleak. Looking at the overall environment, AI is still the track with the most hot money.
Currently, the mainstream route of AI + DePIN is to provide a distributed computing resource network for AI, aiming to reduce the cost of AI training and reasoning, and to make full use of idle computing power around the world, especially GPU resources.
In the early stage of this bull market, you can use existing hardware to participate in such projects, and the returns are still good. But as the timeline lengthens, more and more similar projects appear, and the leading ones gradually weaken after listing.
This means that we must actively participate in new AI narratives. We can appropriately participate in each sub-narrative under each AI (long-term holding is not a safe decision). Note that it must be a new narrative!
For example, Xai pioneered the sale of nodes. As an early adopter, the profits were considerable, and the investment could be recovered in less than half a month.
03
Final Thoughts
At this time, the market is not very good and the sentiment is generally low.
We must be patient and confident in the development of the AI+DePIN track. The development of this emerging field may take time, but its potential cannot be ignored.
When there is no market, review existing projects more often and look for those with real decentralization needs, strong open source community support, open hardware production, and targeted consensus algorithm design.
Finally, keep a close eye on the trends in the open source community, screen out new narratives that are worth participating in and truly technological, and contribute to the healthy development of the AI+DePIN ecosystem.
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