DePIN: Building a Dual Curve for Decentralization Value Network

DePIN is driving large-scale interaction between the physical world and Web3, gradually transforming the operational models of traditional infrastructure. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, and leveraging economic incentives to promote crowdsourced development, the DePIN project is building a decentralized Internet of Things.

Analyzing most DePIN projects reveals a key characteristic in their business models: hardware revenue serves as the primary growth curve, on top of which data service monetization is layered to form a secondary growth curve. This is one of the important factors that enables DePIN to lead the current cycle of growth, while also demonstrating how DePIN-like projects can create significant wealth effects during the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

Build a Decentralized Internet of Everything

Decentralized Physical Infrastructure Network (DePIN) is defined as "deploying real-world physical infrastructure and hardware networks using cryptoeconomic protocols". This concept heralds an imaginative application scenario: common infrastructures around us, including communication base stations, charging piles, photovoltaic panels, billboards, and the data storage and computing devices behind the operation of the Internet, will no longer be controlled by centralized entities, but will be divided into standardized units, held in the hands of individuals or miners, forming a carpet-like coverage.

Through decentralization, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall system's security and resilience. From energy production to data processing, various facilities have the potential to transition to a decentralized model. The total market size of the related industries involved in DePIN has already exceeded $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN field is about $2.2 trillion, expected to reach $3.5 trillion by 2028.

DePIN track division

The DePIN track covers six sub-fields: computing, AI, wireless communication, sensors, energy, and services. From the perspective of the supply chain, DePIN can be broken down into:

• Upstream: Hardware manufacturers and supply-side users acting as "miners".

• Middle layer: Project platform, blockchain responsible for data verification and token settlement, and on-chain Layer 2 protocol serving DePIN; as well as modular service components, SDK toolkits, API interfaces, etc., used for developing and managing the DePIN network.

• Downstream: Interface and applications connecting to the demand-side dApp.

Most DePIN projects rarely cover all aspects. They typically choose Solana or IoTeX as the settlement layer for their token economy. AI and cloud computing projects focus more on on-chain settlements and the development and management of project platforms, while underlying hardware devices schedule idle electronic devices, such as mobile phones or computers equipped with high-performance consumer GPUs, through middleware.

Overview of DePIN Industry Development

Currently, the number of DePIN projects that have been launched has reached 1215, with a total market value of approximately 43 billion USD. Among them, the total market value of projects that have issued tokens and are listed in the DePIN sub-section on Coingecko exceeds 25 billion USD.

In October last year, this figure was only 5 billion USD, and in less than a year, it multiplied by 5, demonstrating the rapid growth of the DePIN industry. This indicates that the market's demand and recognition for decentralized physical infrastructure networks are continuously increasing. With more projects launching and application scenarios expanding, the DePIN industry is expected to become an important field for the integration of blockchain technology and real-world applications.

Insights from DePIN Business Logic

The prototype of DePIN can be traced back to the Internet of Things + Blockchain (IoT + Blockchain) concept from the last cycle. Projects like Filecoin and Storj have transformed centralized storage into a decentralized operating model through cryptoeconomic models, and have found practical applications in the Web3 ecosystem, such as on-chain NFT storage and front-end and back-end resource storage for DApps.

The Internet of Things + blockchain only reflects the characteristics of Decentralization ("De"), while DePIN places greater emphasis on the construction of physical infrastructure and the large-scale interconnected network. In DePIN, "PI" stands for Physical Infrastructure, and "N" stands for Network, which refers to the value network formed after the DePIN hardware reaches a certain coverage scale.

Helium is a typical case. Founded in 2013, Helium did not determine to use blockchain as an incentive for decentralized deployment of the Internet of Things until 2018. Currently, Helium meets almost all elements of DePIN: node economy, miner model, value network, and crowdsourced incentives, making it a leading project in the DeWi (Decentralized Wireless Communication) field. At the end of last year, Helium Mobile launched a $20 communication package service in cooperation with T-Mobile, targeting traditional users. When users transmit data using the Helium network, they not only receive token rewards but also enjoy reliable communication services. At the same time, Helium also helped T-Mobile solve the signal coverage problem in remote areas of the United States, creating a win-win situation for all three parties. The large number of traditional users it attracts is expected to drive the DePIN to break boundaries and accelerate the large-scale adoption of blockchain technology and Web3 networks.

Helium and Filecoin both fall under the category of DePIN, but Helium places a greater emphasis on hardware, enabling it to support the growth of data services on its second curve through hardware revenue, building an independent ecosystem while reaping Alpha and Beta returns. Despite Helium's involvement in false advertising last year and facing issues such as the niche programming language leading to difficulties in development, a series of actions at the end of the year reignited Helium's second curve growth. As one of the first scaled DePIN projects, Helium undoubtedly provides important insights for our understanding of the DePIN ecosystem.

The explosive growth of DePIN is based on the dual curve theory

The "Second Curve" is a concept in management and innovation theory, originally proposed by management scholar Charles Handy. It suggests that when an organization, product, or business reaches the peak of the traditional growth curve, it is necessary to introduce new innovations or changes to initiate a new growth curve, in order to avoid stagnation or decline.

From the experience of successful DePIN projects, it is evident that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with data value network monetization layered on top of the first curve, serving as the second curve of development.

The ability to develop products and operate is key to ensuring growth on the first curve. To initiate growth on the second curve, two capabilities are required: the organizational ability of a decentralized system and the service ability for the demand side.

In the context of the DePIN ecosystem, project parties need to ensure the smooth operation of the data value network under the premise of having the hardware network capability for large-scale organizational data transmission. Only then can the demand side be successfully integrated, ultimately providing high-quality and standardized data services. This is the only way to achieve dual exponential business growth and create a positive cycle within the project ecosystem.

The value of hardware is the first curve of value creation.

In the first growth curve, the business will experience rapid initial growth, followed by a gradual peak. The growth momentum of the DePIN project's first curve comes from the revenue and profits generated by hardware sales.

Traditional infrastructure, especially in areas such as data storage and communication services, has a linear business logic for centralized service providers or entities: the business requires investment in building infrastructure in its early stages, and services are provided to end users (C-end) only after the facilities are in place. Therefore, developing such businesses often requires the involvement of large enterprises to bear the high costs in the early stages of operation, including hardware purchases, land leasing, deployment, and hiring maintenance personnel.

The DePIN project decentralizes the supply side and turns it into a crowdsourcing model to establish a hardware network.

Therefore, the first step in dismantling centralized infrastructure is key to achieving the first curve growth of the DePIN project.

DePIN project parties must first strive to promote themselves, spread narratives, and attract supply-side users to participate through a series of operational means, including pre-sale "mining machines" and purchasing with airdrop gifts; transferring the substantial infrastructure costs to be borne by supply-side users to achieve a low-cost lightweight launch. Supply-side users also become "shareholders" of the project party by holding hardware while helping the project party deploy the hardware network with the expectation of making money from mining in the future.

Unlike traditional centralized device providers, the updates and maintenance of DePIN devices are jointly carried out by the project parties and miners, meaning that device providers are only responsible for the development and sale of device updates, while updates and maintenance are completed by supply-side users. In the process of jointly maintaining and building the hardware network, the interaction with project parties and middleware strengthens the community identity of miners (supply-side users) and their recognition of the DePIN project.

If a DePIN project team can smoothly complete the narrative marketing, mining machine sales, and community operation stages; then, the first growth curve elements belonging to the project team will have been gathered, ultimately forming the first curve of increased network coverage scale - increased token incentives - attracting more miners to join.

As of now, active node data shows that Hivemapper, Helium, and Natix rank in the top three, each having deployed over 100,000 nodes globally.

Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have all exceeded 100,000, with Helium and Hivemapper's business performance being particularly impressive:

Helium

• Helium is a decentralized wireless network, primarily offering Helium Hotspot, which provides low-power wide-area network (LoRaWAN) coverage; Helium Mobile, a mobile communication service launched in collaboration with T-Mobile and TEF.

• The $20 communication plan service launched in collaboration with T-Mobile on January 25 increased from 0 to 93,000 subscribers within 5 months.

• Partnering with one of Mexico's telecommunications giants, Telefónica (TEF), to enter the Mexican market with a population of 126.7 million, further enhances Helium's revenue sources and market influence.

Hivemapper

• Hivemapper is a decentralized mapping platform aimed at creating a global, real-time updated map ecosystem through blockchain technology and cryptocurrency incentives. Hivemapper's main business includes HiveMapper Dashcam - a dashcam that allows users to collect geographic data while driving by installing this device.

• This device is priced at 549 dollars, and based on the current number of nodes deployed, it can be roughly estimated that Hivemapper has already achieved over sixty million dollars in revenue from hardware sales alone.

• As of now, the map data collection network established by Hivemapper has covered most areas of Europe and America. Hivemapper's data service revenue has also seen significant growth.

In terms of hardware revenue, there are also other projects that have achieved good growth by taking different approaches. For example, Jambo has achieved outstanding sales performance in the African market by leveraging mobile phones as a selling point. OORT has technological barriers in cloud computing and edge computing, achieving significant hardware sales revenue through its innovative model. Ordz Game, as a project in the GameFi track, cleverly integrates DePIN elements to gain a wave of popularity. These projects have achieved innovation in their own ways.