After riding the rollercoaster of crypto over the past few years, it’s hard to hold back a grin whenever 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’s been close to Web3 for a while — DePIN, Decentralized Physical Infrastructure Networking — commentators stumbled upon a fair share of the memes and snarks. After all, that’s the way: bulls and bears come and go, but memes are eternal.
As much as I love memes, the reality is that DePIN’s are Web3’s hands-down best shot at not just another bull run, but actual real-world acceptance. And the stories of his poster kids, riddled with mishaps and misadventures, should be a lesson to the industry, but not a bell tolling.
The craze to be
Essentially, a DePIN uses blockchain and tokens to drive the crowd-sourcing of infrastructure intended to deliver real-world services and value. Here’s an example: Imagine we launch a new Internet Service Provider (ISP) company. To provide access to our end users, we have to invest billions in purchasing and deploying the hardware and hiring numerous employees to maintain our network.
If we choose to go the DePIN way instead, we will provide both individuals and businesses with a token-based incentive to deploy their own infrastructure and connect it to our network. We would also give them a marketplace to offer their services on and implement a mechanism that would anchor the value of our token in the value in the real world these companies generate. Staying with the ISP example, we would introduce a mechanism that would allow 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 and ensure that the services never become unreasonably expensive.
In this scenario, we end up with a community-driven infrastructure grid with decentralized ownership and a self-reinforcing incentive loop. It can scale at lightning speed, it promotes individual ownership and empowerment, and it can enter markets that fall under the preferential cost/income ratio of the old names. A slew of projects are now moving in this direction, and investors are taking note and looking forward to ideas that can disrupt industries hungry for true innovation. However, for all this potential, DePIN’s story has not been without its setbacks thus far.
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 squeaky and funny. Yes, it’s Helium, the People’s Network.
Helium is a DePIN that focuses on providing Internet of Things connectivity, allowing users to set up access points using the hardware they purchase and earn from their use. Once hailed as a hero of blockchain adoption in the real world, it has taken some flak in the wake of some very about accusations revealed in a Forbes survey. That aside, while Helium’s supply-side hardware quickly scaled to just under a million hotspots according to its own website, the demand for LoRaWAN connectivity simply isn’t enough to warrant such a massive infrastructure just yet.
Another famous example is Filecoin, a decentralized data storage platform that works as a Web3 representation of services like Dropbox. Despite a little rough startthe project launched its mainnet in late 2020 and recently posted some nice ones solid numbers suggests growth and acceptance.
Skeptics might point out that the respective tokens of these projects have not been immune to the bear market, but with initiatives like this, tokens don’t tell the whole story. By 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 pretty dire for the economy across the board, which would naturally push investors to move money out of riskier assets. Brilliant as your idea is, it can only protect you from war, supply chain straits, post-pandemic inflation and whatever black swans 2023 is about to throw in our face.
The real benchmark here is the scale. Helium’s case may be darker than Filecoin’s, but they both prove the underlying model’s ability to drive rapid growth and deployment in markets hitherto dominated by centralized entities. They rapidly shot from zero to thousands of devices on their respective networks without hiring armies of staffers 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 will have an uphill battle to fight against the entrenched legacy names, but the competitive advantages inherent in their model will likely help them gain a solid bridgehead. With some business sense and persistence, this inclusive and egalitarian model could give the legacy business entities a run for the money while keeping the service financially viable for both end users and infrastructure providers. It’s a tough balancing act, but what isn’t.
Is this enough for the ultimate bull run where everyone buys a Lambo straight to the moon? Time will tell. But what is certain is that this model is Web3’s best shot at actual real-world adoption, and the real-world value it provides is a sounder foundation for sustainable growth than wild speculation.
