The advent of blockchain technology has revolutionized various industries, ranging from finance (DeFi) and gaming (GameFi) to Web2 brands like Nike for digital fashion and Starbucks for Web3 customer loyalty. However, one area that has remained essentially unchanged is the physical infrastructure.

Traditionally, the deployment and management of physical infrastructure, such as telecommunications networks, cloud services, mobility networks, and power grids, have been dominated by large corporations due to their huge capital requirements and logistical challenges.

As a result, these corporations have had a near monopoly on the prices, terms, and services offered to end users, leading to a lack of competition and innovation. That is, until blockchain and Web3 came on the scene.

Most are familiar with DeFi, GameFi, SocialFi, and decentralized autonomous organizations (DAOs). DePIN, which stands for Decentralized Physical Infrastructure Networks, is a growing use case with real-world exposure. It uses tokens to start the implementation of the physical infrastructure, then creates a network effect that unlocks the novel design space of real-world based DApps.

DePINs are an emerging cryptographic trend that leverages blockchain technology to build and operate real-world physical infrastructure and hardware networks permissionless, trustless, and programmatically.

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These DePINs are arguably the next evolution of the Internet of Things (IoT) for the Web3 ecosystem or a decentralized IoT where users, device users, and businesses own and monetize. DePINs allow globally distributed people to collectively build, maintain, and operate networks of physical infrastructure owned by people without the need for a single, centralized entity.

DePINs incentivize supply-side participants to build the network leveraging crypto-economic protocols, offering end-users more cost-effective and innovative services than traditional models.

The origin of DePIN

In November 2021, our own IoTeX became the first Web3 project to put a name to this emerging economy, calling it MachineFi, or the decentralized machine economy, or IoT. Messari became the first to mention it as a DePIN in July 2022.

Token-incentivized physical infrastructure networks, or TIPINs, emerged the same month. TIPIN describes a network that uses token incentives to motivate people to contribute to the deployment and operation of physical infrastructure and hardware networks, creating a more efficient and equitable model for infrastructure deployment.

Then, in August 2022, came Proof of Physical Work (PoPW), which referred more specifically to incentive structures that allow anyone to contribute without permission to a set of shared goals. Helium, for example, allows its users to contribute to decentralized wireless networks with hotspots for people to connect smart devices securely, cheaply, and energy-efficiently.

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Hivemapper is another example. It describes itself as a decentralized map created by people using the world’s first crypto-enabled dashcam. And DIMO, a user-owned DePIN platform that enables them to maximize the value of their connected devices, starting with cars.

In addition, HealthBlocks provides a secure health data coordination and sharing platform by leveraging token and blockchain incentives to create a more efficient and patient-centric healthcare system.

And then, there are DePIN infrastructure providers, like IoTeX, who offer centralized infrastructure like W3bstream, developer tools, and go-to-market support to enable decentralized infrastructure network projects.

In September 2022, EdgeFi emerged as a variation of decentralized infrastructure networks that focuses on deploying hardware resources closer to end users at the edge of the network. In short, EdgeFi is a decentralized infrastructure network that prioritizes edge computing.

In November 2022, Messari decided it was time to put a name to the physical infrastructure of Web3 and ran a poll on Twitter where voters had to choose between PoPW, TIPIN, EdgeFi, and DePIN. They omitted MachineFi. DePIN won with 31.6% of the vote (136).

And in December 2022, Messari mentioned it in research for the first time, saying that it “would be one of the most important areas of crypto investment for the next decade.”

How does DePIN work?

DePINs use blockchain technology and cryptoeconomic protocols to enable globally distributed individuals to collectively build, maintain, and operate physical networks without trust, without permission, and programmatically. The four fundamental components of DePINs are:

Physical infrastructure network: DePIN networks require physical infrastructure to operate. That can be anything from vehicles for mobility networks, solar panels and batteries for power grids, access points and routers for wireless networks, or servers for cloud networks. Off-chain computing infrastructure: DePIN is built on the middleware that connects physical and blockchain worlds. The user’s real-world activities are factored into your rewards calculator and distribution. Additionally, this data can be aggregated for on-chain use cases such as data proofs for smart contracts and decentralized data marketplaces. Blockchain architecture – Each DePIN network interacts with the blockchain architecture that contains smart contract logic. This blockchain network acts like a ledger, rewarding transactions and other exchanges of value between members of the network, such as buying broadband access from someone who rents their router. Token Incentives: Supply-side participants are incentivized to join and contribute to the network through token rewards. These tokens act as a subsidy for supply-side participants, allowing them to build out the network before it generates sustainable fees from demand-side usage.

to. Supply-side participants: Anyone can become a supply-side participant in a DePIN network by deploying their physical infrastructure and connecting it to the network. For example, a homeowner could implement a router and become a wireless network access provider.

b. Demand-side usage: Once the network is established, end-users can start paying to use network services or consume real-world data from multiple sources. That creates a feedback loop that attracts more supply-side participants and investors, driving growth and adoption of the network.

What is the future of DePIN?

With over 40 billion smart devices and machines already in place, and trillions of sensors deployed around the world, the future for DePIN is bright. And as the demand for decentralized infrastructure continues to grow, more and more individuals and businesses will be looking to DePINs to build their networks.

With the ability to leverage blockchain technology and token incentives, DePIN offers a more efficient and cost-effective collective ownership approach to reimagining how we will build physical infrastructure networks tomorrow.

DePINs represent an exciting new frontier in the world of blockchain technology. They offer a new way to build and operate real-world infrastructure that is more equitable, efficient, and aligned with the interests of network participants. As technology evolves and new use cases emerge, we can expect DePINs to play an increasingly important role in the development of our physical world.

A paradigm shift

DePIN represents a paradigm shift in the deployment and operation of physical infrastructure. It enables a more efficient, decentralized and equitable approach to infrastructure deployment.

With the ability to quickly scale and disrupt traditional industries, DePIN has the potential to become a major player in the world of infrastructure. As more DePIN projects are developed and implemented, we expect significant disruption and innovation in the way we build and maintain physical infrastructure networks.

Raullen Chai is Co-Founder and CEO of IoTeX. He previously worked for companies like Google, Uber and Oracle. He has a PhD. from the University of Waterloo, where his research focused on designing and analyzing lightweight encryption and authentication protocols for IoT. At Google, he led many major security initiatives for its technical infrastructure, including mitigating SSL attacks, offloading SSL to preserve privacy, and enabling certificate transparency for all Google services. He was also the founding engineer of Google Cloud Load Balancer, which now serves thousands of cloud services, with more than 1 million queries per second.

Andrew Law is a Research Scientist at IoTeX, where he conducts in-depth scientific research on Internet of Things (IoT), blockchain, and Web3 applications. He previously worked as an application engineer for EvapTech in Malaysia and has a PhD. in industrial and systems engineering from Virginia Tech.

W3bstream is the decentralized IoTeX middleware infrastructure for connecting smart devices to smart contracts. Healthblocks and DIMO are partners in the IoTeX DePIN ecosystem. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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