Decentralized Physical Infrastructure

Messari also has a recap on the state of DePIN

DePIN has been a new buzzword this cycle, but I can’t help but notice that it’s just a new word for what crypto has always been. An incentive mechanism to coordinate infrastructure.

Think about Bitcoin. Bitcoin is software that anyone is able to run for free on their computer. If you decide to contribute resources to this network, you’ll receive a reward for doing so. The network needs the infrastructure you provide to deliver on its value proposition - to be a resilient, decentralized network that upholds a ledger of who owns what. Because it needs physical infrastructure to run, and needs hardware distributed globally to uphold the state of the network — it’s a decentralized physical infrastructure project.

Ethereum, now with its upgrade to PoS vs Bitcoin's PoW, relies on nodes around the world to manage the state of the Ethereum Network, which tracks the balances and storage of all accounts and smart contracts. Anyone with some ETH (less than 32 needs to join a pool) can run a node and validate the chain, and be rewarded for doing so. Ethereum needs globally distributed hardware running it's code to deliver on it's product.

The same goes for every other alternative layer one ecosystem in crypto like Solana, Cosmos and some of the newer players — they all need physical infrastructure to deliver on their promise of building a decentralized, resilient network for which anyone can create and execute of smart contracts.

It feels kind of like the franchise model, but instead of users putting up capital to build physical infrastructure like a Snap Fitness or a Subway, users get paid to provide some form of infrastructure, usually something that they already have, like a computer or business, or some relatively inexpensive device.

DePIN, while a buzzword, is what crypto has always been about. Incentivizing the contribution of infrastructure in whatever capacity, to create a protocol that provides a service, that’s open and anyone can build on top of. A few examples that are being experimented on right now

Your computer:

• Kuzco is creating a protocol that enables anyone who has a GPU to contribute to their inference network.

• Filecoin is one of the original DePIN protocols, building a decentralized storage solution on top of IPFS

• Fleek is also a decentralized storage solution, but is now focused on server capabilities.

• Render is building a gpu cooridnation protocol

• Flux/Akash are building a decentralized compute protocol

Your phone:

• Dimo is an app that tracks your driving data, and rewards you for doing so

• Natix is an app that is trying to build an alternative map protocol by incentivizing users to record with their phene

Code-Only Protocols:

These protocols could be classified as an L1 (or whatever base layer they build out), as the nodes main function is to uphold a distributed ledger, not some additional function.

• Uniswap built a protocol for anyone to exchange value.

• dYdX built a protocol in which anyone can list an asset to trade derivatives on.

• 3DNS is working on a domain protocol. Imagine a protocol in which all web2 domains are onchain, and the benefits that would bring — no more month long processes to purchase domains, no more escrow, no more long transfer periods etc.

• Hivemapper is building a community built openstreet maps alternative through their bee device. People are driving millions of miles around the world to provide the data for these maps.

• WeatherXM is building a decentralized weather protocol.

• Deeper Network is attempting to build a decentralized AQI

  

Supply side has been easy for DePIN projects. Create a token or points system, give it to people, the market assigns a value to this token, people happily continue contributing whatever piece of infrastructure for ideals/free money/some combination.

The harder part of this is making the consumer facing product as good, or better, from a UX than existing products so that the demand side takes care of itself. This may take time as these networks bootstrap themselves, as any successful company in web2 took time and enormous amounts of capital to build better products at scale. Additionally, what's likely necessary, is similar incentives on the demand side on the supply side as the products catch up to their counterparts.

Using software products is kind of like consuming food — there's a supply chain to it. While there are things in place to let you know the quality of the food you're getting, where it was grown, if any hormones were injected into your meat, whether it meets certain guidelines to qualify as organic, there isn't anything like this for your tech stack.

The existing tech stack for most web2 companies is non transparent to say the least. It is not clear that when you're signing up to Instagram, that you are agreeing to go into an environment thats designed to extract information about your behaviors and interactions the then sell so that you can use this service. Educating people on what the web2 stack looks like and how it compares to most web3 companies would encourage more people to begin experimenting in contributing to these nascent protocols. And while the value may only be in the dollars per user/yr, sharing that small amount to people across multiple products they use could provide meaningful outcomes to people on long time horizons on the protocols that are the most successful on top of providing a service that is built on top of a tech stack that at least has a chance to give users more sovereignty over their online profiles, whether they know it's there or not.

Crypto has a hyperbolic word problem. While there are undoubtedly fundamental technological advancements, like everything on Vitalik's blog posts I barely understand, ZK-SNARKS, FHE, and other technologies — there is a bunch of bs and you don't have to look hard to find them — DePIN projects have a flood of made up words. The hard part is figuring out what is legit and what isn't, or what could be legit, but needs time to develop. Buzzwords will be prevalent in any technological boom, and when there's life changing money on the line, there's a stronger incentive to make up or stretch words for marketing sake. This is something that needs improvement as an industry as a whole.

This isn't just a problem with crypto/depin projects, though. Nearly everywhere you look, what companies are marketing differs pretty significantly from what their products actually are — from technology to food to clothing.

Coordinating people to contribute infrastructure is what gave birth to this industry. In Bitcoin's case, it was a core group of people, who had an understanding of how our existing financial infrastructure worked and recognized that this technology was a tool that could change the existing structure. When bitcoin was worthless, early infrastructure providers provided the resources to uphold the network because they believed in the technology as a tool to disrupt what they saw as an injustice. The early bitcoin believers were more akin to a religion — believing in the manifesto that was the bitcoin whitepaper. Capping it off, was this headline in the genesis block The Times 03/Jan/2009 Chancellor on brink of second bailout for banks . Later on, people began mining for financial reasons, and today it's a multi billion dollar industry with publicly traded companies involved providing infrastructure to the network.

Focusing on hardcore technical decentralized infrastructure is what crypto must get back to in order to deliver on its promises of building a more open and fair internet.