Anyone can become a base station! Simple analysis of “DePIN”
As 5G networks gradually become mainstream, some users complain that their phones often fail to search for 5G signals and instead fall back to 4G, wasting money and consuming more power. The limited coverage of 5G base stations is mainly due to the fact that the construction of these base stations is primarily concentrated in the hands of specific telecommunication operators, resulting in a limited construction speed.
But what if everyone could participate in building network base stations and earn money from it? Would that significantly increase the speed? This is the concept pursued by the trending Web3 project “DePIN”.
DePIN, short for “Decentralized physical infrastructure networks”, aims to use token rewards as incentives to encourage people to participate in building real-world physical infrastructure.
Taking the decentralized wireless telecommunications service Helium Mobile as an example, this project not only launched its own telecommunication service but also allowed the public to purchase hotspots for installation indoors or outdoors, ensuring internet connectivity for telecommunication service customers wherever they go.
As hotspot network providers, individuals can earn token rewards when their network is connected. As more and more people hold hotspots, the network coverage can expand.
DePIN extends the spirit of decentralization to tangible infrastructure, and many experts believe that it has a higher chance of entering people’s lives, making it a great “gateway” to break the mold.
According to the definition provided by the analysis and research company Messari, DePIN can be mainly divided into two types: Physical Resource Networks (PRN) and Digital Resource Networks (DRN).
Type One: Physical Resource Networks (PRN)
Incentivize participants to provide geographically restricted goods and services in the real world using hardware based on location, such as GPS devices. This includes local energy, geographic spatial data, local wireless networks, and more.
Type Two: Digital Resource Networks (DRN)
Incentivize participants to provide digital resources that are not restricted by geographical location, such as computing power and storage space.
Breaking down the four key components of DePIN’s operation
In general, DePIN operates based on a decentralized blockchain framework, effectively distributing control and rewards throughout the network, providing benefits to participants who contribute computing power, network connectivity, storage capacity, and other resources.
Specifically, for DePIN to operate smoothly, four key components are required: physical network infrastructure, off-chain computing systems, blockchain frameworks, and token reward systems.
Key Component One: Physical Network Infrastructure
These are the concrete components or elements that make up the network, including all the physical assets required for the network to function properly, such as servers and transportation systems.
Key Component Two: Off-chain Computing Systems
These systems collect and transform real-world participant activities or contributions into data, which is then integrated with the blockchain’s incentive system.
Key Component Three: Blockchain Framework
This is a transparent and tamper-proof distributed ledger that uses smart contracts to manage network transactions. It can clearly record the workload and reward distribution for each contributor, as well as transaction records between the demand side and the contribution side.
Key Component Four: Token Reward System
The token reward system can incentivize everyone to contribute to the infrastructure, promoting the early development of the project. It is also a crucial factor in encouraging people to “start participating”.
DePIN’s network development flywheel.
Where can DePIN be applied?
Cloud and Storage Networks
This includes services such as file storage and virtual private networks (VPN).
Projects like Filecoin are examples of decentralized cloud networks. Participants can rent out storage space on their computers to others, who then pay to purchase that space. Contributors can receive cryptocurrency rewards in return.
Wireless Networks
This includes technologies such as 5G and Low-Power Wide-Area Networks (LoRaWAN). The aforementioned Helium is a typical example.
Sensor Networks
This involves devices equipped with sensors that collect real-time data from the environment, including geographic information systems (GIS).
For example, Hivemapper is a platform that allows users to draw community maps and encourages individuals to share local information by capturing real-time data through dashcams.
Energy Networks
DePIN’s decentralized energy network allows for direct sales or trading of surplus energy or related data within a community.
Arkreen is one such project that allows energy suppliers to declare the amount of renewable electricity they produce, store, or consume on the platform, making their energy production transparent. Other market participants can view and access this data for research or integration into future services or products.
What are the advantages and challenges of DePIN?
Advantage One: Scalability
Compared to traditional frameworks, DePIN can achieve faster and more cost-effective scalability through mechanisms that involve mass participation. The benefit is the ability to adapt to changing demands in real-time while maintaining efficiency.
Advantage Two: Community Empowerment
Unlike centralized platforms controlled by a few, DePIN allows individuals to own and manage their own hardware (such as the aforementioned Helium hotspots), promoting collaboration and community participation. Contributors who hold governance tokens can also vote on certain decisions, giving everyone equal status and power in a democratic manner.
Advantage Three: Reward Mechanisms Driving Network Development
Within the DePIN framework, the reward mechanism provides passive income opportunities for contributors and drives people’s participation and growth. These measures can further promote the expansion of the entire project’s network ecosystem.
Challenge One: Vulnerability to Hacking Attacks
As the entire DePIN system operates on blockchain, there is a possibility of hackers intruding into the network during this era of rampant Web3 hacking. This could potentially affect the circulation of funds on the blockchain.
Challenge Two: Inappropriate Token Price Volatility
The reward mechanism is a double-edged sword. While price increases can attract people to join the DePIN network, making the construction more complete, a price drop could lead to contributors leaving.
Challenge Three: Can the Emerging DePIN Compete with Traditional Centralized Enterprises?
Although DePIN can address the issue of centralized power in industries like unlimited networks and storage space, it is still in its infancy and faces difficulties in competing with large enterprises that provide high-quality products.
Although DePIN is still in the early stages of development, according to Messari’s report, by 2023, the number of DePIN projects is expected to exceed 650, with a total market value of over $20 billion. It is definitely a track worth continued attention.
Sources:
Techopedia, Crypto.news, CoinTelegraph
Proofread by Gao Jingyuan
