What are Decentralized Physical Infrastructure Networks (DePIN)?

DePIN, which stands for 'Decentralized Physical Infrastructure Networks', describes networks that connect physical hardware devices. To allow them to operate in a decentralized manner, they are backed by cryptocurrency-based rewards.

DePIN (also known as Token-Incentivized Physical Infrastructure Networks (TIPIN) , Proof of Physical Work (PoPW), or EdgeFi ) is an important step for cryptocurrency-based technologies to connect digital and physical spaces. Some argue that it has the potential to further cement cryptocurrencies as vital resources beyond the financial and transactional use cases of their early years, ultimately driving the development of Web3.

At their core, DePIN development company projects attempt to create democratized technologies to compete with or replace centralized technology offerings. Those who provide the necessary hardware and thus constitute the network contribute to both the adoption and decentralization of the service and are typically rewarded with cryptocurrency for their services.

The most popular and earliest example of a DePIN is Helium, which launched a decentralized wireless network (DeWi) in 2019, backed by individuals operating interconnected hardware devices around the world. Others have followed suit and built various infrastructure solutions to support 5G cellular networks, connect cars, and even collect air quality data.

How does DePIN work?

DePIN is based on the basic idea of ​​the Internet of Things (IoT) which enables the automation of processes by connecting multiple physical objects ('things'). Examples of IoT include the automation of smart home technology, traffic management by connecting vehicles, and improving healthcare through wearable sensors.

To function properly, DePIN networks generally require:

• Hardware – Physical components that help connect networks to the physical world. For example, access points can be used for wireless networking, and extra hard drive space can be used for storage networking.

• Hardware Operators – Users who purchase (or lend) hardware and are connected to their respective networks.

• Token – A project-specific cryptocurrency that is paid to hardware operators for their services. Each token comes with different economic characteristics based on the rules set by the project.

• End Users – Users of the infrastructure powered by the network hardware. For example, end users could be those who prefer to rely on a DePIN project rather than a corporation for their WiFi signal and pay to receive the service provided by the network.

Helium: DePIN in action

Helium was one of DePIN’s pioneering projects. Its original goal was to create a type of low-power wide-area network (LoRaWAN) for IoT devices to connect to each other. As a unique service at the time, it has enjoyed first-mover advantage in the space, attracting partnerships with projects aimed at tracking weather, monitoring air quality, and incorporating GPS.

Users who wish to maintain Helium nodes can purchase (or build) hardware called access points that can plug into and join the network and provide internet to that geographic area. In return, the access points collect the Helium token, HNT.

Meanwhile, anyone who wants to use the networks created by the connected hardware (e.g. to run their IoT devices or browse the web) buys data credits (DCs) in exchange for burning HNT. This burning and minting balance (BME) controls the monetary policy of HNT.

Other examples of DePIN

Although the DePIN ecosystem is still being explored, there are a couple of projects that have made significant progress.

Filecoin

Launched in 2020, Filecoin offers cloud storage services similar to Web giants like Google Cloud and Amazon Web Services. However, instead of being controlled by centralized providers, Filecoin offers a distributed storage solution secured by crypto-economic incentives.

Filecoin connects those who need space to store data with users who have free space on their hard drives. Users who provide storage space are paid with the FIL token.

DIMO

Based on the idea that your information can be useful for many purposes, DIMO offers the possibility for users to monetize their own vehicle and driving data.

Downloading the DIMO app allows users to selectively share information about their cars (such as battery health, trip information, etc.) and be rewarded with the Ethereum- based DIMO token. Services such as used car marketplaces and ride-sharing apps can purchase access to this data to improve their operation.