The DePIN (decentralized physical infrastructure) sector could help existing networks scale and innovate, says Moody’s.
Unclear regulations could hinder widespread adoption of the technology.
Moody’s cites Helium (HNT) as an example that shows promising developments within the sector.
The DePIN sector, which stands for decentralized physical infrastructure, could help existing networks scale and innovate, but several risks, including unclear regulations, could stifle growth, Wall Street ratings agency Moody’s Ratings said Tuesday in its inaugural report on the sector.
“By linking established parts of a system’s backbone to the building blocks of distributed ledger technology (DLT), DePIN has the potential to improve network reliability and efficiency, while reducing operational costs and optimizing resources and collaboration within the industry ,” said the authors of the report.
“However, there are significant barriers to widespread adoption, including regulatory and interoperability issues, cybersecurity risks and the need for substantial investment in infrastructure and skills,” they said.
Incumbent network operators – telecommunications companies, utilities and transportation companies, to name a few – face ever-growing user demand requiring capital-intensive infrastructure developments, the report said. Leveraging decentralized models could help them alleviate some of the pressure and stay relevant as artificial intelligence and the internet-of-things (IoT) disrupt old business models, the report said.
Part of DePIN’s appeal is issuing their own digital tokens, which can help projects drive participation and network expansion. However, the current unclear global regulatory landscape makes compliance problematic and could stifle industry growth. Connecting existing infrastructure to blockchain rails could also open up new attack vectors, creating cybersecurity risks.
DePIN combines blockchain technology with real networks such as telecommunications, file storage and computing capacity. The sector has become one of the hottest corners in digital assets this year. The fact that a well-known traditional Wall Street financial name such as Moody’s Ratings covers DePIN underscores the increased attention the sector is attracting.
The sector’s increasing mindshare is reflected in rising venture capital funding, with investors having committed $583 million in private investments to DePIN projects so far this year, already surpassing the previous record year of 2022, according to a report from digital asset market maker Wintermute.
The Moody’s report cited As an example, Helium (HNT), a blockchain-based decentralized wireless network that gives users symbolic incentives to deploy and maintain wireless Internet hotspots, has shown promising developments. The project has attracted more than 350,000 participants and acquired more than 100,000 subscribers, the report said.
Read more: Why DePIN is now getting off the ground