DePINs (decentralized physical infrastructure networks) are everywhere. Or, at least they are for those of us reading CoinDesk in July of 2024. As someone who’s been involved in the vertical since its inception back in 2019, I recognize that I might be more of an early adopter, more DePIN-fanatical than most. But as I sat down to write this piece and took a quick mental inventory of the DePINs I contribute to on a daily basis, even I was surprised at the number and variety of projects out there now.
This op-ed is part of CoinDesk’s new DePIN Vertical, covering the emerging industry of decentralized physical infrastructure. Connor Lovely is the DePIN Lead at IoTeX and Host of the Proof of Coverage Podcast. He was previously a consultant at BCG.
For starters, there’s a Cudis ring on my hand that gives me health data and pays me points towards a future airdrop. There are the Helium and XNET WiFi hotspots in my home that provide wireless connectivity for my devices (and others’) and pay me tokens when it is used. Helium Mobile (my sole cellular provider by the way) has an app on my phone that pays me crypto for opt-in sharing of location information that is used to better triangulate data usage and network demand. There’s the Grass browser extension running on my computer that allows AI labs and web scrapers to view the internet through my residential IP and earns me airdrop points. And, finally, there’s the DIMO device in my car that provides me with real-time data on my vehicle, makes this anonymized data available to third-party developers, and (again) pays me tokens.
If you think this list is exhaustive, you’re thinking too small. Today, the DePIN sector is 1300+ projects strong and its growth is accelerating through the bull market. While the proliferation of the DePIN model is exciting, what’s even more interesting to me is how exactly this next generation of DePINs is going about building their networks…and how that differs from their predecessors. Here’s what I’ve been seeing.
The DePINs of this generation are improving upon the last five years of learning and iteration in these ways:
Being demand-led in everything
The most common, yet fair critique of the first DePINs (like Helium’s IoT network) were that they had done a great job building out supply, but didn’t have enough demand. The DePINs of this generation are securing demand as early as possible, in many cases pre-TGE. They’re also building out supply in a more targeted, measured way, allowing demand to dictate where in the country or world they incentivize supply-side buildout.
For example, Spexi is a DePIN for aerial drone imagery. They’ve secured seven figures of demand contracts pre-TGE and have paid out six figures in cash to drone operators, who are salivating at the simple, gamified opportunity to earn money from their existing drone assets.
Lowering contributors’ barrier to entry
This cycle, we’ve seen the rise of DePINs that utilize generic, not custom-built hardware, that already exists for their supply-side. Another way to speed supply-side growth is to tap into everyday activities people are already doing. An example of both of these strategies is Natix, which uses smartphones in cars as dashcams for street-level imagery. The company is looking to capitalize on a behavior (driving) that is already occurring day to day, rather than trying to motivate net new behaviors with tokens (a much more “expensive” proposition from a token incentive standpoint). The example here for contrast would be a wireless DePIN like Helium looking to incentivize contributors to climb a roof and install a CBRS radio. That’s a net new behavior.
Leaning into the speculation
Incentives make the world go round. DePIN has always known that, but this cycle we’ve seen things be amped up a notch. The advent of points as a mechanism to account for contributor contributions pre-TGE has been wildly successful and gives the DePINs of this generation more flexibility and time to gather data before finalizing their tokenomics. Referral programs where a contributor might receive a fixed amount of points or tokens, or even a % in perpetuity of their referral’s points or tokens, have been a game-changer and driven viral supply-side growth. Grass is the best example of a successful points program driven by referral incentives.
Staying centralized, longer
No project, idea, or concept will get off the ground without a dedicated person or group of people making quick decisions, iterating and pushing things forward. Ideas are most fragile (yet also most nimble) at their earliest stages. This cycle, we all want to see DePINs that quickly find product-market fit (PMF), scale supply and demand effectively and generate revenue on-chain; we could care less about decentralization until there are some early signs of PMF. It’s only worth decentralizing something that is working.
Take 3DOS, a DePIN for manufacturing. The founder created a popular 3D printer operating system that allowed the devices to be networked together and have their print jobs be automated and controlled remotely. He saw great uptake in the Web2 world, counting NASA, Google, and 40% of the universities in the U.S. as clients. He sees 3D printers as a shared resource and is creating a global manufacturing network where businesses can submit a job, find printers in the area closest to the end customer (reduce shipping cost and time), and then contract with a printer owner or shop to fulfill the contract. 3D printer owners can monetize their existing assets, businesses can save money and time on printed goods, and everyone is better off.
I mention 3DOS because it’s an exciting use case, but also because it’s very early on in its life cycle and John Dogru (the founder) is exerting complete, centralized control over the idea, the software, the network, the demand-side, etc., as he should. Without him taking the reins at this early stage, nothing would get done and there is not much worth decentralizing anyways!
DePIN (as an industry) is still fairly nascent but has had enough time to learn lessons from its first generation and improve upon them. This generation’s DePINs are prioritizing demand at the earliest stages, scaling their supply-sides even faster by lowering barriers to entry and leaning into speculation, and staying centralized longer to ship at a faster pace.
New DePINs are launching at an astonishing rate and there will be much more iteration and learning to come. DePIN remains one of the most impactful ideas to come out of the crypto industry and a serious force for good in the real world. I look forward to the success of the DePIN 2.0 cohort and towards writing an update to this piece on the DePIN 3.0 cohort in just a few short years!
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.