The Rise of DePIN: Analyzing the Opportunities and Challenges of Decentralized Infrastructure Networks

The New Infrastructure Wave: Analyzing the Opportunities and Challenges in the DePIN Track

1. Introduction: What is DePIN

DePIN stands for Decentralized Physical Infrastructure Network, which encourages users to share personal resources through token incentives to build infrastructure networks, including storage space, communication traffic, cloud computing, energy, and other fields.

In short, DePIN crowdsources the infrastructure originally provided by centralized companies and distributes it to numerous users around the world.

According to data, the current market value of the DePIN field has reached 5.2 billion USD, surpassing the 5 billion USD of the oracle field, and shows a continuous upward trend. From the early Arweave and Filecoin, to the last bull market's Helium, and the recently high-profile Render Network, all belong to this field.

The recent resurgence of interest in DePIN can be attributed to three main reasons:

  1. The infrastructure has become more完善 compared to a few years ago, providing support and empowerment for 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," injecting new narrative hotspots into the track.

  3. Web3's narrative is shifting from social and gaming to other possibilities, with DePIN, closely connected to Web2 users, becoming an important choice.

This article will deeply analyze DePIN from five perspectives: demand, token economic model, industry status, representative projects, advantages analysis, and limitations and challenges.

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

2. Why is DePIN necessary?

2.1 Current Situation of the Traditional ICT Industry

Traditional ICT infrastructure mainly includes: hardware, software, cloud computing and data storage, communication technology.

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

In 2022, the global ICT market size reached 43.9 billion USD, with data centers and software showing a growth trend in recent years, affecting various aspects of our lives.

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

2.2 The Dilemmas of the Traditional ICT Industry

The current ICT industry is facing two significant dilemmas:

  1. The industry has a high entry barrier, which restricts sufficient 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 capital in hardware purchases, land leasing for deployment, and hiring maintenance personnel. The high costs result in only giant enterprises participating, with AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud collectively holding nearly 70% of the market share in the cloud computing and data storage sectors. This leads to pricing being monopolized by these giants, and the high costs are ultimately passed on to consumers.

Taking the prices of cloud computing and data storage as an example, the costs are quite high. In 2022, the total spending on cloud services by enterprises and individuals reached $490 billion, and it is expected to exceed $720 billion by 2024. 31% of large enterprises spend more than $12 million annually on cloud services, while 54% of small and medium-sized enterprises spend more than $1.2 million. 60% of enterprises reported that cloud costs were higher than expected.

In the field of cloud computing and data storage-related cloud services, it is evident that after prices are monopolized by giants, the spending pressure on users and enterprises is increasing. The capital-intensive nature also limits sufficient competition in the market, affecting innovation and development in the field.

  1. The utilization rate of centralized infrastructure resources is low.

The low utilization rate of centralized infrastructure resources is a major challenge for business operations today, particularly prominent in cloud computing environments.

According to the 2022 report, an average of 32% of company cloud budgets is wasted, meaning that one-third of resources are idle after cloud spending, resulting in significant financial losses.

Improper resource allocation is attributed to various factors. Companies often overestimate resource needs to ensure service continuity. Additionally, more than half of cloud waste stems from a lack of understanding of cloud costs, getting lost in complex pricing and packages.

The monopoly of giants leads to excessively high prices, with most of the company's cloud spending wasted, putting enterprises in a dual predicament of IT costs and utilization, which is detrimental to the healthy development of the business environment. However, this also provides fertile ground for the development of DePIN.

In the face of high prices and waste dilemmas in cloud computing and storage, the DePIN track can effectively address the demand. Decentralized storage ( such as Filecoin and Arweave ) is several times cheaper than centralized storage; regarding cloud waste, some decentralized infrastructures adopt tiered pricing to distinguish different needs, such as Render Network, which efficiently matches GPU supply and demand through a multi-tiered pricing strategy. The following text will detail the advantages of decentralized infrastructure in addressing these two dilemmas.

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

3. The Token Economic Model of DePIN

The core logic of DePIN is to promote users to provide resources, including GPU computing power, hotspot deployment, storage space, etc., through token incentives, contributing to the entire network.

Early DePIN project tokens often lack actual value, and user participation in providing resources is akin to venture capital. On the supply side, they select promising projects among numerous options, and investment resources become "risk miners," profiting by increasing the number of tokens obtained and through price appreciation.

These providers differ from traditional mining; the resources they offer may involve hardware, bandwidth, computing power, etc. The income is often related to network usage, market demand, and other factors. For example, low network usage can lead to reduced rewards, or attacks on the network or instability can cause resource wastage. Therefore, risk miners in the DePIN track must be willing to take on potential risks and provide resources for the network, becoming a key component of network stability and project development.

This incentive mechanism creates a flywheel effect, forming a positive cycle when development is good; conversely, it can easily lead to a withdrawal cycle when development declines.

  1. Attracting supply-side participants through tokens: A good token economic model attracts early participants to contribute resources to network construction and provides token rewards.

  2. Attract builders and network consumers: As resource providers increase, developers join the ecosystem to build products, and the supply side provides certain services, DePIN offers lower prices compared to centralized infrastructure, attracting consumers to join.

  3. Forming positive feedback: An increase in consumer users and demand incentives bring more income to supply-side participants, forming a positive feedback loop that attracts more people to participate from both supply and demand sides.

Under this cycle, the supply side has more valuable token rewards, while the demand side offers cheaper and more cost-effective services. The value of the project tokens aligns with the growth of participants on both the supply and demand sides, and the rise in token prices attracts more participants and speculators, forming value capture.

Through the token incentive mechanism, DePIN first attracts suppliers, then attracts users to use it, achieving project cold start and core operation mechanism, thereby further expanding development.

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

4. Current State of the DePIN Industry

Early projects such as Helium(2013, Storj)2014, and Sia(2015 indicate that early DePIN projects primarily focused on storage and communication technologies.

With the development of the internet, the Internet of Things, and AI, the demand for infrastructure and innovation has increased. Currently, DePIN projects are mainly focused on computing, storage, communication technologies, as well as data collection and sharing.

From the current market value ranking of the top 10 projects in the DePIN field, most belong to the Storage and Computing sectors, and there are also good projects in the telecommunications sector, including the pioneer Helium and the rising star Theta.

![New Infrastructure Wave: Analyzing the Opportunities and Challenges of the DePIN Track])https://img-cdn.gateio.im/webp-social/moments-86f46fd67ce5819ff816286c269b8259.webp(

5. Representative Projects in the DePIN Industry

Ranked by market capitalization, focusing on the top five projects: Filecoin, Render, Theta, Helium, and Arweave.

)# 5.1 Filecoin & Arweave - Decentralized Storage Track

Filecoin and Arweave break the deadlock by providing lower prices through decentralized storage, offering users different services.

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. The testnet achieved about 4PB of storage space within a month of going live, with Chinese miners playing an important role. Currently, the storage space has reached 24EiB.

Filecoin is built on the IPFS protocol, which is a widely recognized distributed file system. Filecoin stores user data on network nodes, achieving decentralized and secure storage. It supports smart contracts, allowing developers to build various storage-based applications.

At the consensus mechanism level, Filecoin employs Proof of Storage, including Proof of Replication ( PoRep ) and Proof of Spacetime ### PoSt ( algorithms to ensure data security and reliability.

Filecoin collaborates with several well-known projects and enterprises, such as NFT.Storage, the Shoah Foundation, and the Internet Archive. OpenSea also utilizes Filecoin for NFT metadata storage, promoting ecosystem development.

Arweave is similar to Filecoin in incentivizing the supply side by using tokens to encourage users to provide storage space, with rewards depending on the amount of stored data and access frequency.

Arweave is a decentralized permanent storage network, where data uploaded will be permanently stored on the blockchain.

Arweave uses a "Proof of Access" work proof mechanism to prove the accessibility of data in the network. Miners are required to provide randomly selected previously stored data blocks as "access proof" during the block creation process.

Currently, the official provides various solutions, including permanent file storage, creating permanent profiles, and web pages.

Filecoin and Arweave have significant differences in storage methods, economic models, and consensus mechanisms, each having its advantages in different application scenarios; however, Filecoin is far ahead in market performance.

With the widespread application of big data and artificial intelligence, the amount of data generated is growing exponentially, leading to an increased demand for data storage. In the context of high pricing for centralized storage, the demand for decentralized storage has become increasingly prominent. Decentralized storage has a significant price difference compared to centralized storage.

Under the same condition of storing 1TB for a month, the average price of decentralized storage is less than half of Google Drive and one-tenth of Amazon S3.

In addition to price advantages, decentralized storage offers higher security, as data distributed storage reduces the risk of single point of failure and provides greater resistance to censorship.

In terms of data privacy, users retain absolute ownership and control over their data in decentralized storage, allowing them to access, modify, or delete stored data at any time; in centralized storage, users entrust their data to service providers and must comply with their terms of use.

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NeverPresentvip
· 22h ago
Forget it, the airport is all messed up, who still believes in it?
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NftRegretMachinevip
· 22h ago
The rise in market capitalization is exaggerated, I don't dare to take risks.
View OriginalReply0
ApyWhisperervip
· 22h ago
A market capitalization of 5 billion is just so exciting, it’s just squeezing the Oracle Machine's position.
View OriginalReply0
MultiSigFailMastervip
· 23h ago
Whoever tells me that DePIN has hope, I will directly spit in their face.
View OriginalReply0
TokenRationEatervip
· 23h ago
Not optimistic, just taking resources to Be Played for Suckers now.
View OriginalReply0
BearMarketLightningvip
· 23h ago
Another sucker play people for suckers machine
View OriginalReply0
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