DePIN: Building a Decentralized Value Network through Dual Curve Superposition

DePIN is gradually enabling large-scale interaction between the physical world and Web3, and is progressively disrupting traditional infrastructure operating models. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, and leveraging crypto-economic incentives to promote crowdsourced development. Analyzing most DePIN projects reveals an important characteristic in DePIN's business model: using hardware revenue as the first growth curve, and overlaying data service monetization on this basis to form a second growth curve. This is one of the key factors that allows DePIN to lead current cycle growth, while also demonstrating how DePIN projects create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scalable decentralized value network.

1. Build a Decentralized Internet of Everything

Decentralization physical infrastructure network ( DePIN ) is defined in Messari's 2023 report as "utilizing cryptoeconomic protocols to deploy real-world physical infrastructure and hardware networks." This concept presages an imaginative application scenario: common infrastructures around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, as well as the data storage and computing devices behind the operation of the internet, will no longer be controlled by centralized entities and institutions, but will be divided into equally sized units, held in the hands of individuals or large-scale miners. Moreover, the same type of physical infrastructure will be highly standardized and scalable, 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. Moreover, 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 dollars. Therefore, Messari predicts that the potential market size in the DePIN field is estimated to be around 2.2 trillion dollars, expected to reach 3.5 trillion dollars by 2028.

1.1 DePIN Track Division

The DePIN track covers six subfields: 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."

• Midstream: Project platform, responsible for data verification and token settlement blockchain, and the on-chain layer 2 protocol serving DePIN; as well as the modular service components ( used for developing and managing the DePIN network, such as platform interface, data analysis, and standardized services ), SDK toolkit for DePIN development, API interfaces, etc.

• Downstream: Interface and dApp applications that connect to the demand side.

Apart from IoTeX and the former Helium(, which has migrated its mainnet to Solana), most DePIN projects rarely cover every aspect of the DePIN business. They usually choose Solana or IoTeX as the settlement layer for their token economics. AI and cloud computing projects in this subfield tend to focus more on on-chain settlement and the development and management of project platforms, while underlying hardware devices coordinate idle electronic equipment through middleware, such as mobile phones or computers equipped with high-performance consumer-grade GPUs.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja, the number of DePIN projects that have gone live has reached 1,215, with a total market cap of approximately $43 billion. Among them, the total market cap of projects that have issued tokens and are listed in the DePIN subcategory on Coingecko exceeds $25 billion.

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

2. Insights from the DePIN Business Logic

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

The Internet of Things + blockchain only reflects the characteristics of Decentralization ( "De" ), while DePIN emphasizes 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.

The most typical example is Helium, which was established in 2013, and only confirmed the use of blockchain as an incentive for decentralized deployment of the Internet of Things in 2018. So far, Helium has almost satisfied all the elements of DePIN: node economy, miner model, value network, crowdsourced incentives, and is a leading project in the field of DeWi ( decentralized wireless communication ); in addition, at the end of last year, Helium Mobile launched a $20 communication plan service in cooperation with T-Mobile, aimed at 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 helps 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 accommodates has great potential to drive the breakout of DePIN, and is expected to accelerate the large-scale adoption of blockchain technology and the Web3 network.

Helium and Filecoin both belong to the DePIN category, but the difference between the two is that Helium places more emphasis on hardware, enabling it to support the growth of data services on the 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 obscurity of programming languages leading to development difficulties, a series of actions at the end of the year reopened the growth of Helium's second curve; and as the largest DePIN project to come out first, it undoubtedly provided us with some insights into the DePIN ecosystem.

3.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 refers to the need to introduce new innovations or changes when an organization, product, or business reaches the peak of its traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the previous successful experience of DePIN projects, it can already be seen that the business logic of DePIN naturally points to hardware sales as the first curve of project development, with the monetization of data value networks overlaying on the first curve, serving as the guiding ideology for the second curve of development.

Product research and development, and operational capabilities are key to ensuring the growth of the first curve; to initiate the growth of the second curve, two capabilities are needed: first, the organizational capability of a decentralized system, and second, the service capability on the demand side.

In the context of the DePIN ecosystem, it is necessary for the project parties to ensure the smooth operation of the data value network under the premise of having the capability to organize and undertake large-scale data transmission hardware networks. Only then can the demand side successfully connect, ultimately providing high-quality, standardized data services. This will achieve a dual exponential growth in business, forming a positive cycle within the project ecosystem.

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) The hardware value of 3.1 is the first curve of value creation.

In the first growth curve, the business will experience rapid growth in the early stages, then gradually peak. The growth momentum of the first curve of the DePIN project 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: In the early stages of business, investment is needed to build infrastructure, and after the facilities are improved, services are provided to end users (C端). Therefore, developing such businesses often requires the participation of giant enterprises to bear the high costs in the early stage of business operation, including hardware purchases, land leasing, deployment, and hiring of maintenance personnel in various aspects. Citing BCG's deconstruction of the data value network, its traditional IoT operating model has led to data being transmitted as a production factor in an independent and linear manner, and each ecosystem is completely independent.

The DePIN project splits the centralized supply side and adopts a crowdsourcing model to establish a hardware network.

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

The DePIN project party must first strive to promote itself, spread its narrative, and attract supply-side user participation through a series of operational means, including pre-selling "mining machines," and offering airdrops for purchases. It aims to transfer the enormous infrastructure costs to be borne by supply-side users, achieving 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 earning money from future mining.

Moreover, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are jointly completed by the project party and miners. The device providers are only responsible for the research and development and sale of the devices, while the updates and maintenance are carried out by the supply-side users. In the process of collectively maintaining and building the hardware network, the interaction with the project party and middleware strengthens the community identity of the miners ### and supply-side users (, as well as their recognition of the DePIN project.

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

The following is the data on the number of active nodes up to now. Hivemapper, Helium, and Natix rank in the top three, each having deployed over 100,000 nodes worldwide.

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Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have all exceeded 100,000, with Helium and Hivemapper showing outstanding business performance.

Helium

• Helium is a decentralized wireless network, its main services include 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 package service launched in collaboration with T-Mobile on January 25 increased from 0 to 93,000 subscribers in 5 months.

• Collaborating with one of Mexico's telecom 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 cryptoeconomic incentives. Hivemapper's main business includes the HiveMapper Dashcam------a dashcam that allows users to collect geographical data while driving by installing this device.

• This device is priced at 549 dollars. Based on the current number of node deployments, it is roughly estimated that Hivemapper's revenue from hardware sales alone has already exceeded 60 million dollars.

• As of now, the map data collection network established by Hivemapper has already