DePIN, short for Decentralized Physical Infrastructure Networks, refers to a network system that connects and manages physical hardware devices in a decentralized manner.

Although the concept was officially named in November 2022 by Messari through a Twitter poll, the underlying ideas and practices have existed for many years.

In the two years since the unified name of DePIN was established, despite extensive promotion by the industry, we have not seen many notable new projects.

On the contrary, many projects have been short-lived or even turned into short-term money grabs. However, this performance does not negate the value and potential of the entire sector. In fact, the concepts represented by DePIN have a long history of development.

Before the name “DePIN” gained widespread acceptance, this sector was referred to by various other names, such as:

1. TIPIN (Token Incentivized Physical Infrastructure Networks): Networks incentivized by tokens for physical infrastructure.

2. PoPW (Proof of Physical Work): Proof of physical work.

3. EdgeFi: Edge finance, emphasizing the deployment of hardware resources at the network edge.

4. MachineFi: Machine finance, first proposed by the IoTeX project in November 2021.

Although these names have different focuses, they all essentially point to the same concept: using blockchain technology and cryptoeconomics to build and manage infrastructure networks in the physical world.

In this field, some projects have achieved significant success, with the most classic examples being Filecoin and Helium. Filecoin is dedicated to building a decentralized storage network, while Helium focuses on decentralized wireless networks. Both projects emerged during the previous bull markets and remain impressive to this day.

The successful cases of Filecoin and Helium demonstrate that combining blockchain technology with real-world physical infrastructure can create disruptive solutions. These projects have not only innovated technologically but also successfully applied cryptoeconomics to solve real-world problems, showcasing the feasibility and potential of the DePIN model.

By examining these historical perspectives, we can gain a more comprehensive understanding of the concept and value of DePIN and provide important references and insights for the development of future projects.

This article will delve into the development history of Decentralized Physical Infrastructure Networks (DePIN), review successful DePIN projects, summarize their success experiences, and, based on this, outline future development opportunities for DePIN. Additionally, we will pay special attention to the new development directions and potential brought about by the combination of AI and DePIN in the wave of AI advancements.

01Value logic of DePIN

Reviewing successful DePIN projects reveals several common features:

First, they have the support of open-source communities on the software level and allow third-party manufacturers to produce mining products on the hardware side;

Second, their products have real-world applications that meet actual needs;

Third, they design blockchain algorithms tailored to DePIN business scenarios to ensure fair incentives free from project party control, rather than simply issuing a token on a public chain.

Let’s discuss these points one by one.

Open-Source Community and Hardware

Successful DePIN projects rely on the support of open-source communities on the software level and allow third-party manufacturers to produce mining hardware, avoiding a monopoly on hardware production. Open-source community support attracts global developers, accelerates technological innovation, and improves software security and stability. The open-source ethos aligns well with the decentralization concept, helping to build community trust and expand the ecosystem.

Moreover, a thriving open-source community behind a project signifies a strong technical foundation, as pseudo-concept projects cannot attract developers to contribute out of passion. Allowing third-party manufacturers to produce hardware reduces costs, promotes hardware innovation, and prevents centralization risks. This approach enhances the network’s decentralization and resilience while expanding the participant base.

This open strategy for software and hardware creates a virtuous cycle, attracting more participants, driving continuous innovation, and ultimately forming a strong, diverse ecosystem that ensures the project’s long-term sustainability. For example, Helium and Filecoin both rely on robust open-source communities to drive technological advancement and network expansion. Helium utilizes the open-source LoRaWAN protocol, providing a low-cost, low-power solution for long-range communication of IoT devices. The open-source nature of LoRaWAN has attracted numerous developers and enterprises, proving its real-world demand in IoT communication.

Similarly, Filecoin relies on the open-source distributed storage protocol IPFS, which stores and shares data in a peer-to-peer manner, solving many issues of traditional centralized storage, such as single points of failure and data censorship. IPFS’s open-source nature has attracted widespread participation from developers and enterprises globally. Even before Filecoin’s launch, IPFS was widely used by developers, with a total network storage capacity of 1 EiB by 2020.

Blockchain Consensus

Successful DePIN projects must closely integrate with blockchain technology, designing algorithms for specific application scenarios rather than separating DePIN business from Web3 and simply issuing a token on a public chain. Regarding core blockchain technology, proof-of-work and consensus mechanisms are unavoidable and are among the most challenging aspects of DePIN technology.

The core issue is how to quantify the workload of user-end devices and who will distribute the related rewards to users. This requires designing targeted proof-of-work algorithms. Helium introduced the Proof-of-Coverage (PoC) consensus mechanism, cleverly combining it with IoT hotspot business. Its challenge-response mode simulates actual IoT data transmission, verifying the communication capabilities of hotspots. Multi-hop verification reflects the broad coverage needs of IoT networks, ensuring network connectivity stability.

Proof-of-space-time aligns with IoT geolocation services, providing a reliable foundation for location-based applications. Filecoin similarly designed a targeted consensus mechanism, using its innovative Power Fault Tolerance (PFT) consensus mechanism, converting the storage capacity used by miners and the generated proofs of space-time into voting weights to elect leaders to create new blocks. This mechanism not only improves network efficiency but also significantly reduces energy consumption. By incentivizing with tokens, Filecoin effectively promotes network expansion while strengthening IPFS’s practical application status.

The greatest advantage of consensus algorithm designs tailored for DePIN projects is ensuring fairness and economic system security. This design guarantees that users receive accurate and reasonable incentives corresponding to their actual contributions while effectively preventing potential abuse by the project party. By binding contribution statistics and reward distribution directly to the tamper-proof blockchain, it ensures the transparency and immutability of incentive distribution. This means that project parties cannot maliciously withhold users’ deserved rewards nor secretly increase their quotas. Recently launched VC-backed DePIN projects have not been ideal, possibly due to this issue. These projects mostly choose to issue tokens on Solana or Ethereum public chains, with high token emissions and concentrated holdings, detaching incentives from consensus constraints.

Real Demand

Another key factor in the success of DePIN projects is the combination of long-term development and meeting real needs. This is well demonstrated in the development histories of Filecoin and Helium. Filecoin is built on the open-source protocol IPFS, which was created to solve many issues of current centralized storage systems. The existence and widespread use of IPFS prove the real demand for decentralized storage. Filecoin, by introducing a token incentive mechanism, further expands IPFS’s application scope and participation, creating a virtuous cycle.

Similarly, Helium is based on the open-source IoT communication protocol LoRaWAN. The wide application of LoRaWAN has proven the huge market demand for IoT connectivity. Helium’s incentive mechanism has greatly accelerated the deployment and expansion of the LoRaWAN network. The combination of open-source protocols and DePIN projects not only proves market demand but also demonstrates how DePIN can promote further development and application of open-source technology through economic incentives.

In conclusion, successful DePIN projects have significant advantages in open-source community support, hardware openness, long-term development, and meeting market demands. By closely integrating with blockchain technology and innovating, they further solidify their positions in the industry. Helium and Filecoin, as successful examples, show how DePIN projects can achieve long-term sustainable development by effectively combining technology and market demand.

02 AI + DePIN: Value or Speculation?

Value Window

The integration of AI and Web3 is still in the exploratory phase, and the industry has yet to establish a mature path. However, from the perspective of asset attributes, the AI field involves both hardware and algorithms, which aligns well with the characteristics of the DePIN track.

DePIN projects typically involve decentralized networks of physical hardware and incentive mechanisms driven by smart contracts, providing an ideal landing scenario for AI.

When exploring the future of AI and DePIN integration, we must address a key challenge: the mismatch between decentralized AI training needs and technological development.

Currently, the mainstream open-source AI suites used in academia and industry are mainly designed for centralized servers, reflecting that decentralized AI training needs have not yet scaled up. In fact, forming a genuine decentralized need is often a lengthy process.

Looking back at successful DePIN cases, we can see a relatively healthy development path: first, the emergence of decentralized needs, then the development of corresponding open-source decentralized frameworks by the community, and finally, the injection of incentive mechanisms into the ecosystem.

However, the current development trend in the AI + DePIN field seems somewhat reversed. Many projects rush to introduce incentive mechanisms, but without real decentralized demand, these incentives are often captured by “profit-seekers” rather than reaching actual demanders and contributors. This incentive-first model not only fails to effectively stimulate the creation of real needs but also risks disconnecting technological development from actual market demand.

In the absence of clear demand guidance, projects may focus excessively on short-term gains while neglecting the technical accumulation and ecosystem building required for long-term sustainable development.

Therefore, for AI + DePIN projects, the immediate priority is to patiently cultivate real decentralized AI needs while promoting the development of decentralized AI open-source frameworks by the community. Only with community demand can reasonable incentive mechanisms truly take effect and drive positive ecosystem development. This requires patience from project parties, developers, and investors, focusing on long-term value creation rather than short-term profits.

Only in this way can we hope to see truly successful AI + DePIN projects emerge, opening up new possibilities for the future of decentralized infrastructure.

Actively Participate in New AI Narratives

Based on the analysis above, short-term value investment paths may not be viable, but this does not mean that the AI + DePIN market is bleak. Looking at the broader environment, AI remains the hottest sector for investment.

Currently, the mainstream route for AI + DePIN is to provide a distributed network of computing resources for AI, aiming to reduce the cost of AI training and inference while fully utilizing idle computing power worldwide, especially GPU resources.

At the beginning of this bull market, participating in such projects using existing hardware yielded good returns. However, as the timeline extends and more similar projects emerge, the leading ones gradually become fatigued.

This indicates the need to actively engage in new AI narratives. Each new sub-narrative under AI can be appropriately participated in (long-term holding may not be a safe decision), but be sure it is a new narrative!

For example, Xai pioneered selling nodes, and as a trailblazer, it offered considerable returns, with a payback period of less than half a month.

03Writing at the end

At this time, the market is not performing well, and sentiment is generally low.

We need to have patience and confidence in the development of the AI + DePIN sector. The progress of this emerging field may take time, but its potential should not be overlooked.

When the market is slow, review existing projects thoroughly and look for those with real decentralized needs, strong open-source community support, open hardware production, and targeted consensus algorithms.

Finally, closely monitor the movements within the open-source community to identify new narratives worth participating in. Contribute to the healthy development of the AI + DePIN ecosystem by supporting truly innovative technological developments.

Disclaimer：

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