On March 8, Vitalik asked a question on the Warpcast platform. The question mainly expressed doubts about the DePIN concept that has existed for ten years but has not yet started.
DePIN is very popular. From the concept proposed by Messari in the first quarter of 2023 to the soaring prices of multiple DePIN projects in the fourth quarter of 2023, DePIN has become one of the most watched tracks in 2024 and this new bull market cycle. . But this still cannot eliminate the industry’s doubts about the new concept. Vitalik’s doubts are also the main background issues faced by practitioners entering the track.
In this article, we will explain in three directions that DePIN currently meets the conditions for an outbreak.
There are three directions:
1. The market education of blockchain and Web3 has taken shape.
2. The hardware industry is mature, product choices are abundant, and low-cost construction solutions have emerged for the DePIN network.
3. Blockchain and cryptocurrency business models are diversified, and DePIN’s business implementation has scenarios.
Blockchain and Web3’s education on the market has taken shape
The DePIN report written by Messari pointed out the development timeline of DePIN. The earliest project was the distributed storage project filecoin that appeared in 2014 (it was only a concept at this time).
But in fact, the development of IoT-related industries can be traced back to at least 2005-2008. After the release of the Bitcoin white paper and the launch of the network, blockchain and cryptocurrency began to educate users. Both have long-term industry development and user education to date.
Relying on the cyclical performance of cryptocurrency in the secondary market, a batch of innovators have entered the cryptocurrency and Web3 markets with projects and ideas. After the entry of traditional financial capital, cryptocurrency has become a major player in the global financial market. component.
Over the years, the blockchain industry represented by cryptocurrency has continued to break through, spawning cases that are combined with multiple industries. Some of these industry cases formed DePIN in the 2023 Messari research report. Including distributed storage, distributed computing, wireless networks, AI, sensor networks, etc., the process of continuous integration with cryptocurrency is the result of the external markets attempt to use the financial logic of cryptocurrency itself.
When we look back, we will find that multiple events in the development cycle of the industry have also had an impact on DePIN.
The first is the mining industry formed by Bitcoin and other cryptocurrencies, which is related to the development of the global computing hardware industry. However, since 2020, restrictions on the mining industry have been adjusted due to energy issues and mining costs have increased. After Ethereum completely changes to PoS in 2022, the mining industry tends to shift from mining machines to more common types of equipment.
Secondly, with the emergence of NFT technology, the markets understanding of the application of blockchain has returned to recognition of its own technology applications, becoming the first step for mainstream enterprises and institutions to accept blockchain.
What followed was a breakthrough in the compliance issues of cryptocurrency in financial supervision. Bitcoins superior trading liquidity and yield gained the favor of Wall Street financial capital, and after cryptocurrency companies had many confrontations with regulatory authorities such as the SEC, , the adoption of the Bitcoin ETF has recognized the huge value of cryptocurrencies in the financial field.
Most traditional business enterprises have seen the positive effects of the economic model of cryptocurrency and began to explore the Web3 model to solve the problem of industrial power. This has become the background for the development of the DePIN track seen today and the integration of real-world hardware and cryptocurrency. .
The hardware market is mature and the cost of building DePIN network is low enough
The project concept of distributed storage in the cryptocurrency industry emerged in 2014. In 2014, it was difficult for us to identify distributed storage as a DePIN track.
At that time, storage and IoT were different fields. IoT was still in its early stages, and the prices and costs of smart devices were very high. For example, smart speakers had not yet been able to recognize voice offline and had not been widely circulated in the market. From production to In terms of capabilities, the IoT devices on the market are still in the period of larger-volume devices. In order to realize device networking, a computing device requires many combinations of hardware. The number of ordinary smart devices sold on the market is very small, and the industrial chain has not yet been developed. Developed and matured.
With the explosion of mobile devices that began to emerge after 2017, smart speakers, smart watches and other smart wearable devices or smart home industries have rapidly emerged and matured in a few years, and the corresponding industry chains around the world are booming. , standards are constantly updated, technology is iterated, and smart devices begin to enter the stage of rapidly becoming smaller, faster, and smarter.
Today, various IoT and smart wearable devices have kept the cost of a device with DePIN’s communication and computing capabilities at a stable and low price.
Against this hardware background, the technical cost of connecting physical computing devices to Web3 is further reduced, which will allow many entrepreneurs to add the concept of cryptocurrency based on the smart device model and try the concept track of DePIN.
After dismantling the network construction process of projects such as distributed storage, distributed computing, distributed AI or wireless networks, it can be found that the equipment requirements for these networks are very high, and many of them still maintain the early stage of cryptocurrency mining industry. Characteristics, high hardware investment, forming a high threshold.
For example, both distributed storage and computing require projects with large storage space. The storage space in the hardware component must be large. Some storage projects or AI may also require computing power. The requirements for CPU and GPU will increase the cost again. Even most wireless network (such as LoraWAN low-power network) projects require a device to build a network access node, and a single device will cost at least $100 to achieve access.
For ordinary users and even hardware brands, this is the cost of accessing the web3 world. But today, lower-cost solutions have emerged. For hardware brands, such as smart lights, smart switches, smart watches and other devices, they can already connect to the Web3 network in a low-cost way.
The smallest commonly used smart home device or wearable device, the cost of connecting to the web3 network is at least 3 US dollars. It requires a certain amount of computing power and is reliable, and can be controlled at a minimum of about 10 US dollars.
There are scenarios for DePIN’s business implementation
Against the above two backgrounds, there will still be driving forces in the industry for DePIN after 2024, which comes from extensive business needs within the Crypto market.
The first is that Crypto can absorb the resources that DePIN brings in hardware mode. These resources are related data generated around users. Various application forms such as Defi, Gamefi, Socialfi, etc. can be directly combined with the user identity and data brought by DePIN to form some services or functions, such as device DID authentication, computing power sharing, bandwidth sharing, oracles, data markets, data Mining or NFT, games, in addition to these applications, todays DePIN network provides computing power and storage and is even related to federated learning, which are all directions that can be tried.
The above is technical support. Beyond technology, smart hardware itself is extremely functional and has a closed-loop economic model for sales operations. In addition to use value, cryptocurrency can give more financial performance. . Most DePIN projects will hope that through the incentive mechanism brought by cryptocurrency, they can form a closed loop from using hardware, supporting market value, to obtaining token rewards, and secondary market transactions.
It can be seen from some products similar to DePIN, such as Worldcoin, whose market value has increased under the wave of AI. The personal iris data and distributed network model it promotes can also become one of the cases of DePIN.
Growth Drivers of the DePIN Industry
The background conditions for the explosion of DePIN have been met, which will be followed by an increase in industry volume. We need to find the growth momentum within the DePIN track.
First of all, in the face of the continuous growth of the bull market market value, global capital also needs to find corresponding project carriers. DePIN is one of the important tracks in the new bull market cycle. Most of the DePIN projects we see so far are transformed from original projects in various tracks. These projects have diverse attributes and can be imitated. Secondly, subsequent projects can also try the corresponding model while enjoying the new lower access solution. Currently, there are multiple projects that can help projects that want to enter DePIN to be quickly established through standardized modular technical frameworks. This is the inherent development power of the industry.
Throughout 2023, the number of DePIN track projects has increased by hundreds, with a total market value of approximately US$200 billion (full market value, non-trading market value), but this number is far from enough. Among the new projects that have emerged, in the form of middleware Projects that provide technical frameworks and solutions will play an important role in the growth period. There are many examples of this in the past development process. The Cosmos SDK has allowed the Cosmos ecosystem to grow rapidly, Polkadots Substrate has increased the number of parachains, the OP Stack launched by Optimism has allowed successful models to be quickly replicated, and for example, RiscZero has integrated zkVM and other capabilities. Equivalent copy.
Industry middleware is already reducing various costs and accelerating industry growth. At present, it can be seen that modular frameworks and solutions such as W3bstream and DePHY are focusing on this part.
A DePIN project can be roughly divided into three parts: DePIN equipment, message network and blockchain network. Among them, the hardware part requires ensuring that the hardware can be connected to the network to form an IoT network under the premise of ensuring computing conditions. The hardware part requirements change with the network functional requirements. The IoT network mainly completes the data transmission of hardware devices to ensure stable transmission efficiency. The blockchain network is responsible for calculation and overall status maintenance.
W 3 bstream and DePHY can provide standard technical solutions in a modular way in several parts. These modular functions together form the core Hub of the two projects. The upstream is the brand and manufacturer of the hardware equipment, and the downstream is the web3 network. , when the development team wants to quickly build a DePIN project, they can use modular construction to quickly implement the corresponding parts.
However, what is interesting is that W 3 bstream does not mention device-side assistance in the document. It seems to focus more on the relevant parts of device access to the blockchain network and interaction with various web3 networks; DePHY mentioned it in the technical architecture. Low-cost open source hardware solution, the entire process of IoT network communication and blockchain network interaction, and will use TEE to achieve device trust.
write at the end
At present, we can boldly predict the project development trends that DePIN will present.
1. The types of IoT devices that can be accessed by blockchain networks will extend from computing devices with high computing power and high storage (such as mining machines, computers, high-performance routers) to more common devices that are small in size and have low computing power. On smart devices (such as speakers, desk lamps, switches, watches, mice).
2. Hardware devices can quickly connect to the Web3 network, and seamlessly interact with current Solana, Ethereum and other chains to conduct business with ecological applications.
3. Cryptocurrency and the real world begin to have two-way interactions between technology and economic models.
In Messaris prediction of industry size, DePIN will contribute 10 trillion in growth to global GDP in the next ten years, and there is no doubt about the trend. At this point in the development of DePIN, the question raised by Vitalik hit the target. Because of this, it is also the moment to awaken the industry to think and face the background issues of this mixed multiple attribute project track.
When the conditions for technology, user education, market popularity, development trends, etc. are all met, background issues are no longer a problem. As the bull market progresses, DePINs fire will become more and more prosperous. As of press time, on Coingecko, the DePIN track shows that the circulating market value has just exceeded 30 billion US dollars, an increase of more than 30% in 7 days. It is time for DePIN to become popular.
