Original author: Jason, Puzzle Ventures
introduction
DePIN is the abbreviation of Decentralized Physical Infrastructure Networks, which as the name suggests is decentralized network hardware infrastructure. In fact, this kind of decentralized hardware facilities has had practical applications of vague concepts a long time ago. For example, Bitcoin mining machines are actually a decentralized hardware network, and the power grid management system in the web2 world also covers A certain concept of decentralized hardware facilities.
In order to accurately define the concept of DePIN in this article, we adopt Messari (https://messari.io/report/the-depin-sector-map)’s explanation of DePIN: a method that uses blockchain technology to incentivize through tokens A permissionless, trustless and programmable way to coordinate the physical hardware facilities of multiple individual units. DePIN can also be described as Proof of Physical Network (PoPW) or Token Incentivized Physical Infrastructure Networks (TIPIN). In simple words, it is a network composed of countless individual pieces of hardware managed by token incentives, and this network can be used to serve certain specific projects.
Broadly speaking, the scope of DePIN is actually very broad. The PoW mining machine is the hardware facility that maintains the operation of the blockchain network. However, as the traditional PoW model is gradually eliminated, the mining machine is not within the scope of this article. This article will focus more on providing specific services on the blockchain network. The hardware network of services, rather than the blockchain network itself. From another perspective, the entire web3 world is built on the DePIN network, because the operation of each node is based on individual units renting their own servers. After clarifying these two logics,We can focus more on the research direction of this article: a network formed by hardware facilities that are not covered by the blockchain network itself and provide additional toB or toC services, but are managed and coordinated by the blockchain network.
figure 1
As shown in Figure 1,The entire DePIN vertical ecological chain is more complex than ordinary web3 projects.In the upstream,Project parties need to consider the choice of manufacturer for hardware equipment, especially projects involving high-precision sensing equipment and chips. They need to select suitable partners from the perspectives of cost, quality, and large-scale production.In the middle reaches,The project party needs to consider the usage scenarios of the hardware equipment and the integration with the corresponding third-party service providers/carriers, which sets a threshold for the users own conditions. For example, the necessity of network speed, power, drone driving and other resources makes the users The overall cost of use is high.in the downstream,The project party must also establish a corresponding integration platform based on project needs and design an economic model that conforms to the flywheel effect, which poses a high test to the project partys knowledge and experience. In general, a complete DePIN project is a more complex and comprehensive web3 project.
DePIN’s core mechanism
The basic mechanism for building a DePIN network is that individual hardware units obtain returns by leasing the services provided by the hardware.Forming this mechanism into a global network-like decentralized network requires the token economy to play a role in it. Therefore, the entire economic flow model can be summarized as Figure 2. This mechanism itself is different from the traditional hardware industry. Traditional centralized hardware service providers often require a large upfront capital to purchase or build hardware facilities, and the income depends on future orders. This model can only be borne by large companies with deep pockets or projects led by government finances to bear its potential risks and face competition, while small and medium-sized enterprises can hardly participate.DePIN was a spiraling dynamic mechanism during the early boot-strap period. Users, providers, and platforms could all participate and gradually grow while taking relatively small risks.The most critical of these is the coordination role played by the highly dynamic nature of token incentives. The platform can design parameters such as one-time rewards and Staking APR based on data from both suppliers to achieve dynamic balance.
figure 2
For example, Render Network is a decentralized GPU rendering service matching platform that connects users who perform rendering jobs with users who have idle GPUs. Regarding the token incentive mechanism, Render Network first designed a rendering power unit standard based on OctaneBench (OB) based on its experience in the rendering industry, and based on this standard, participating idle GPU users were divided into 3 tiers. The 3 tiers are based on Differentiated by the difference in GPU rendering speed. 100 RNDR token can pay 2,500 OBh-20,000 OBh (depending on the GPU level used). Specifically speaking, 100 RNDR token can use 1 RTX 2070 graphics card for 50-100 hours or use 10 RTX 2070 graphics cards for 5- 10 hours, this is the simplest initial token incentive model. After accumulating early users, Render Network gradually began to enter step 4, which is the point at which the platform further optimizes and maintains the balance of token income. In terms of optimization, Render Network mainly starts from the perspective of scalability, such as optimizing algorithms to reduce queuing time and establishing local APIs to improve upload and work efficiency. In terms of token income balance, the RNDR network voted to adopt the Burn-and Mint Equilibrium (BME) model in February 2023.
image 3
The essence of this model is that users purchase GPU rendering services through RNDR tokens, and then the tokens used are destroyed after the task is completed, while the service providers rewards are issued using newly generated tokens. The newly issued token will not only be based on completing an indicator of the task, but also include customer satisfaction, etc. and will be issued comprehensively. Thus,RNDR token has consumption scenarios in the entire economy. At the same time, the supply and demand relationship can be adjusted based on the algorithm between destroyed tokens and newly minted tokens. The entire business model has gradually evolved from a simple C2C to A more managed B2C.
The meaning and value of DePIN
The concept of DePIN was proposed because of its far-reaching significance and value, whether it is for the future web3 industry form or the theoretical development of technological revolution and economic revolution.
Unit cost and economies of scale
DePINs crowdsourcing model can reduce overall costs (or diversify costs) and enable rapid scale-up in a short period of time. In a previous article, we mentioned (link) that decentralized storage platforms such as Filecoin and Arweave can be dozens to hundreds of times cheaper than Amazon S 3 storage, and the hotspot signals provided by helium and the Render Network provide GPU rendering services have price advantages over traditional centralized service providers. The radiation range of Heliums LongFi protocol is 200 times that of Wifi, and if a device that needs to accept data packets is updated every hour, the total cost for a year is $0.09. By comparison, the total cost of using a large signal provider like ATT is about $36. On the other hand, DePINs costs in other aspects have also been reduced, including labor costs, factory costs, operation and maintenance costs, etc., which almost no longer exist due to its decentralized nature. Essentially,DePINs asset-light model is a disruptive innovation to the asset-heavy model of the traditional ICT industry.
However, the other side of the coin is instability and security risks. A completely permissionless hardware network that relies on token incentives to manage nodes is, at least so far, just an ideal idea. In practical applications, you may encounter various problems: the imbalance of income and expenditure caused by token floating and eventually reaching the shutdown price, triggering a death spiral; misoperation caused by the unprofessionalism of a single node, causing malfunctions; nodes doing evil things behavior, hacking issues, and more. Therefore, solving these problems requires high business capabilities of the project team, and also requires further improvement of the overall blockchain infrastructure. Predictably,Different levels of demand correspond to different levels of service providers.Businesses with high security and stability requirements use centralized service providers, while high-frequency and low-demand data service needs can use DePIN. In other words, DePIN means what DEX means to traditional finance.
Reuse idle resources
DePIN can gather scattered idle resources and provide them to the most needed and valuable businesses. This topic is actually very interesting, because the reuse of idle resources can be said to create additional markets and value, and at the same time, it can drive individuals to generate additional income. Judging from the current mainstream DePIN projects,The idle resources collected are mainly four: hard disk storage space, communication traffic, GPU computing power, and energy.But in theory, we can imagine that more similar idle resources can be centralized and reused in the future, such as cameras, screens, brain power, etc. This is actually an attempt at a globalized sharing economy in the field of digital information. Its essence is similar to idle fund management in the financial field and idle vehicle leasing in the transportation field.
But is this model of reusing idle resources a necessary factor for future economic development? It is true that idle GPU, hard disk space or WiFi are idle during non-normal use or working hours, but is fully working at full capacity covering all hardware a state we want to have in the future? These are actually deeper ethical issues. On the one hand, this large-scale sharing economic model is based on credit. Therefore, any mistakes in the design of token incentives will lead to a small number of people taking advantage of loopholes to benefit, while most participants will suffer losses. and users. On the other hand, large-scale access hardware interfaces will bring about reduction of privacy and data leakage problems in all aspects. therefore,Under the existing infrastructure environment, DePIN is not suitable for everyone to participate, and the upper limit of its market size is also lower than the sharing economy in the non-digital information field.
regional effectiveness
Regional performance refers to the fact that distributed hardware can provide higher short-term performance than centralized hardware service providers. The main scenario is game rendering and calculation. This feature has not yet been proven and applied on a large scale, but it is still worth thinking about its significance. In the current multi-player chain game scenario, when a large number of users are online at the same time, public RPC nodes need to be called to perform execution-level tasks such as smart contract reading. When the node enters an overloaded state, it will cause delays or even downtime. This problem itself is a technical barrier to the large-scale application of blockchain, and there are currently some targeted measures, such as the execution environment rental adopted by Altlayer, L2s, gamefi dedicated servers, etc. Some DePIN projects are also trying to solve such problems through higher-density hardware networks. Taking exaBITS as an example, when the density of its cloud computing hardware layout is wide enough, nearby servers can be instantly called based on the geographical location of game players, thereby distributing and distributing the computing or rendering needs of thousands of players in a more even manner. solve. In the same way, when large-scale computing needs such as GPU rendering or AI calculations arise, the corresponding batch of hardware in the DePIN network can also meet the needs in a short time. From a theoretical perspective, the high-density, decentralized hardware deployed by DePIN can instantly meet the needs of short-term, high-computation tasks, thus resulting in regional performance improvements. Of course, this is only an ideal assumption. The distribution of professional game servers may reach a certain breadth to meet the needs of global players, and the gaming experience brought by comprehensive computing hardware such as DePIN is not necessarily guaranteed. Better than expected. In any case, the imagination space that DePIN brings to us is huge, and even bigger icebergs will gradually surface in the future.
Track overview
The DePIN track is a special track, on the one hand because the scope of this track is very broad, and on the other hand because many similar or similar projects can be roughly classified as DePIN. This article is based on Messaris DePIN Sector Map, using more detailed and three-dimensional splitting logic to try to describe this track more clearly.
Figure 4
niche dimension
First of all, the most important classification dimensions in the DePIN track are: part of the blockchain network itself and the use of blockchain technology to realize new businesses. This dimension is not mentioned in the Messari report.There are two parts in the blockchain network ecosystem that can be adopted and optimized by DePIN. One part is data storage, calling, and archiving, and the other part is the possibility of L3 expansion. In the data storage part, independent storage layers represented by Filecoin and Arweave have become the mainstream paradigm, and the decentralized storage nodes built by such projects are a form of DePIN. The other part is some L3 layers that try to improve performance by renting external communication networks or GPU networks. These L3 layers are more customized to solve a specific problem, but they do call outside the blockchain network in the process of solving the problem. hardware facilities, so it can also be classified as DePIN. These two DePIN projects are designed to solve the needs of one or more blockchain ecosystems themselves, and can also be said to be components of the underlying network of the blockchain. The other dimension is new businesses built on the underlying blockchain network and built using Blockchain as a Service, such as the Internet of Things, cloud computing, energy storage, traffic data, geographical and weather data, image and video processing Etc., this type of projects all use blockchain as a coordination and management network to connect hardware facility providers and demanders, which is the second dimension.
Device dimensions
Secondly, the DePIN track can split out the dimensions of the device. Overall, the hardware devices currently involved in DePIN are mainly hard drives, databases, servers, communication signals, and GPUs that come with PCs or mobile phones, while different types of sensors and project-customized hardware are another market. The customized hardware model dominated by Helium was once popular all over the world, but now it has fallen into a whirlpool of doubts. According to data revealed by @Liron, Helium’s data service revenue in June 2022 was only US$6,500, but its global layout has as many as 900,000 hotspots. This huge imbalance in provider and user demand has also led to the HNT token The value has been declining (since there is no additional source of income, the balance can only be maintained through the reduction of token incentives). There is no problem with Heliums hardware products and concepts. The core of the problem is: the customized hardware model involves upstream manufacturers. The profit goal of the upstream manufacturers is to sell more devices, and the profit goal of the Helium platform is also to some extent. Earning fees by selling equipment and registering, without external income, can only be transfused by existing equipment buyers or new equipment buyers, which completely violates the original intention of the DePIN network. Currently, Helium is trying to build a network of networks that is compatible with third-party wireless networks (5G, WiFI, CDN, VPN), but the current effect is unknown.
It can be seen from the case of Helium that a model that emphasizes customized hardware will cause a death spiral if the layout and development rhythm are not properly grasped.Other more innovative equipment include Spexigons drone photography, Geodnets space weather station, etc., all of which are full of imagination. But when considering the success probability of these projects, we should focus on several indicators: 1. The cost of purchasing hardware and the payback period. Does the project party mainly sell hardware or provide services? 2. Are there confirmed, already working service buyers using the network? 3. Does the hardware itself match the home environment and does not consume excessive resources?
Domain dimension
Finally, the DePIN track can also be split from the field dimension, that is, what types of services are provided. The Internet of Things and wireless communication fields centered on Helium are one. The GPU field centered on GPU rendering and video transcoding is one. Real-life data and image collection, centered on various sensors, are one. Hivemapper uses the driving recorder as the hardware device to establish a map data update mechanism, Spexigon uses the drone camera as the hardware device to establish a high-definition, three-dimensional picture library, and DIMO uses the car as the hardware device to establish an Internet of Vehicles information system. These projects all have one characteristic in common: the demand is unknown. In the current relatively complete web2 ecosystem, some items such as maps, photo shooting, car information, etc. can be partially or completely replaced by a large number of web2 products. The only advantage of these projects is that users can obtain token incentives. Token incentives are not all of web3.The significance of the DePIN era is to connect real life with web3 through hardware facilities so that web3 can better integrate with peoples lives. However, the real demand for DePIN may still need to wait for a better time.
Latest developments and potential issues
In order to fully understand the development status of the DePIN project, we analyzed the latest progress and community response from the two top projects - Helium and Render Network, and tried to identify potential development bottlenecks.
Helium
Helium has completed more than US$300 million in financing from 2021 to 2022, and its early equipment sales once reached FOMO sentiment. As of now (May 2023), Helium has deployed 460,000 hotspots around the world, with its network covering 192 countries and 77,000 cities, and new hotspots are being added every day. However, even after such a perfect start, Heliums reputation in the community started to go up and down, completing a plot reversal from hard to find to sold at low prices. The main issues that arise include:
1. The issue of miners’ income.The current HNT income of a mining machine with an average price of around US$500 is around US$20/month, and the income and cost are extremely unbalanced. Of course, after Helium migrated to Solana and converted new IOT token income, the situation of some miners improved slightly, but it is still far from expectations (as shown in Figure 5). According to the latest statistics from Heliumtracker.io, the recent average daily income of each hotspot is around US$0.2, while the average daily income of $MOBILE on the 5G network is around US$3.6. However, the hotspot coverage of the 5G network requires higher Require.
Figure 5
2. Professional miners have no advantage in entering the market.To operate a mature miner network requires not only ordinary enthusiasts, but also the participation of a professional miner team. Heliums Proof of Coverage mechanism needs to ensure that hotspots are kept 500-1000 meters apart, which is not friendly to dense deployment. This also causes the traditional model of dense deployment of mining machines by professional miner teams to be unable to take advantage of the Helium project. .
3. Helium migrated to Solana network on April 20 this year, and has since transformed into a project that is biased towards application layer networks. However, Solanas own reputation and the FTX thunderstorm incident have had a negative impact on Helium in disguise, and Heliums development direction of abandoning L1 layer network construction has also caused some community backbones to lose followers. Judging from Heliums official recommendation, the benefits of migration are lower transaction costs, stronger market integration capabilities, and a change in development language to attract more developers (it turned out to be the unpopular Erlang).But the biggest problem is that it reduces the unique appeal of the Helium network and transforms it from an L1-level project into a Solana ecological project.
Judging from the latest community feedback, this migration has brought many technical problems to ordinary participants, such as the conversion of IOT to HNT, the inability to receive rewards, etc. This is detrimental to the participation of new users and the retention of old users. the elements of.In general, Helium is a pioneer in the DePIN track, and has once triggered high popularity and potential paradigm revolution. However, based on Heliums current operating status, it is still impossible to verify the future value of DePIN.
Render Network
OTOY, the parent company of Render Network, is a leading project in rendering software, and its web2 product Octane has been used by projects in the film and music fields, including Disney and music producers. The project concept of Render Network is to provide higher order of magnitude decentralized rendering support for the future Metaverse. From the perspective of demand, Render Network provides rigid needs for all projects that require rendering in the future metaverse (dynamic NFT, metaverse gaming), while Helium is more like actively creating demand. As shown in Figure 6, Render Network completed 6 million and 9.4 million Frames in 2021 and 2022, and $RNDR is also constantly circulating in it.
Figure 6
Judging from recent project dynamics, the adjustments made by the project side are beneficial to the long-term development of the project:
1. The RNP-001 proposal passed the BME token model mentioned above, which has greatly improved the liquidity and supply-demand balance of the token. Although it is only a theoretical economic model optimization, from the price of $RNDR Judging from the trend, it still has a great influence on boosting community confidence.
2. The RNP-002 proposal approved the decision to migrate to Solana and explained the main considerations: developer community, TPS, liquidity, transaction fees, programming language, smart contract integration, etc. This proposal is also from the future of the project Considering the expansion capacity, it finally received 99.26% of the votes. After the RNP-002 proposal was passed, community satisfaction and token prices increased positively (token prices increased by 43% in two days), which also proved the good relationship between Render Network and the community.
3. The RNP-003 proposal approved the Render Network Foundation’s team expansion and Grants’ token usage rights needed for future development. This proposal also received a voting approval rate of 99.9%. Render Network ensures that participants receive sufficient rewards while expropriating a portion of the newly generated tokens to develop the project ecology, which is in the interest of the community for the long-term ecological construction of the project.
In general, Render Network has the support of an experienced parent company in the industry like OTOY, as well as a foundation and token mechanism that are in line with the spirit of web3. It can also balance project development and community interests and maintain a good relationship with the community. , can be considered as the current benchmark project on the DePIN track.
Summarize
The DePIN track is a track that can be used to “put old wine in new bottles”, or it can be an imaginative track that completely breaks through the boundaries of the industry.Hardware networks based on decentralized storage and computing are still an important underlying infrastructure for the entire web3 ecosystem, and can also provide lower-cost back-end designs for the application layer. The hardware facility network, dominated by GPUs and sensors, is trying to establish a new service rental and matchmaking market.
In the future, key directions worthy of our attention include:
1. Pan-entertainment DePIN
The pan-entertainment DePIN network composed of wearable hardware such as Gopro and AR glasses is an imaginative track. The essence of entertainment upgrade is experience upgrade, and the pan-entertainment network based on DePIN can not only improve the immersive participation of entertainment (supply layer), but also bring more three-dimensional and dynamic entertainment methods (demand layer). The industries involved include sports, live streaming, games, media, etc. How to combine DePIN with these fields and create a forward flywheel model is worth looking forward to.
2. Real-world data
The value that DePIN brings to society is inseparable from the use of data elements. Judging from the current development trend, sensors, as real-world data input and output ports, have formed an interactive mechanism with meteorological data, motion data, and image data. In the future, more types of data can be captured in more ways. . In addition, some real-world data are difficult to capture through centralized systems. The decentralized nature of DePIN can more effectively capture those scattered but important data, and the subsequent processes such as storage, use, and transformation of these data will gradually A complete industrial chain has been derived, so the market size has a large scope for imagination.
Original link: https://mp.weixin.qq.com/s/_uagOV-8 dxNMktG 99 bhMpQ
