By
Dimitar Bogdanov
February 26, 2024
4 Min Read
Decentralized physical infrastructure networks, DePIN for short, seem like it could be the natural evolution of blockchain technology beyond the realm of Web3 and into the real world.
Last year saw the emergence of that promising new trend and in 2024 the interest in DePINs is poised to get even stronger. This is because more and more people in the Web3 sector are beginning to recognize DePIN’s potential to leverage decentralization and crowdsourcing to power innovative solutions in various traditional industries.
Blockchain technology has some very distinct strengths that position it to drive innovation in a lot of areas. Among those is that blockchain protocols are extremely good at facilitating decentralized networks. This is exactly what makes them perfect for powering decentralized physical infrastructure networks.
On these pages we’ve already talked about blockchain’s innate ability to serve as a great foundation for physical peer-to-peer networks. This is, of course, because a blockchain protocol is specifically designed to facilitate such networks in the first place. After all, any Web3 network is a network of interconnected physical devices governed by a set of rules specified and enforced by a blockchain protocol. The difference is that those networks are typically only concerned with the Web3 space, whereas DePINs seek to enable applications that go beyond crypto and DeFi and are able to tackle real-world use cases.
For example, a DePIN of electric vehicles could become a decentralized car-sharing service or a commercial delivery service. Or you can utilize DePIN infrastructure to manage a decentralized grid comprising small solar energy producers. A decentralized mapping service where users use their phones to map the world? Well, guess what, that’s already a thing!
The possibilities are practically endless and that’s why decentralized physical infrastructure networks have many in the Web3 community so excited.
DePINs have a number of advantages that make them such an exciting prospect. The main ones revolve around their ability to facilitate, encourage and reward crowdsourcing. Let’s take a closer look.
One of the things that makes blockchains such a great fit for decentralized networks is the fact that they have established protocols designed specifically for governing peer-to-peer networks. This includes the consensus mechanism, an integral part of every blockchain protocol that provides a way for network participants to agree on the state of the network in a trustless manner.
Because a DePIN leverages blockchain technology, those mechanisms are readily available to use. So a DePIN can utilize those tools, without needing to come up with its own methods for defining and managing network roles, determining network state and facilitating cooperation between users.
Another advantage of blockchain protocols is that they come with built-in mechanisms for encouraging and incentivizing participation and good behavior. A blockchain network typically has a proprietary crypto token, or at the very least, the means to easily create one, if needed. So a DePIN can have its own token that it leverages to issue rewards based on user engagement and contribution to the network.
Because of this, it is crucial for a DePIN to have the right tokenomics model that is tailored to the network’s needs, the profile of its members and so on. The reward structure has to be fair and enticing, without being overblown, which may jeopardize the sustainability of the network.
Building online services and applications usually requires significant upfront investment - you need equipment, time and development resources to build the necessary infrastructure to support your product. DePINs leverage crowdsourcing and peer-to-peer infrastructure models to make that initial phase much more manageable. Furthermore, those networks are typically open and permissionless, which means that anyone can join in and start contributing.
While they are still an emerging trend, the variety of real-world applications that could be enabled by DePINs hint at their enormous potential. Web3 observers see potential DePIN applications in healthcare, energy, data storage, telecommunications, broadband and more.
It’s noteworthy that all that immense versatility stems from one seemingly simple idea - using blockchain and Web3 technologies to better leverage crowdsourcing. This shouldn’t come as a surprise, though - after all, when people work together they can achieve practically anything.
