Internet infrastructure is one of the most crucial segments of the digital economy, yet it is also the most tightly held.  For example, two-thirds of global cloud services are provided by only three companies: Amazon Web Services, Microsoft, and Google Cloud. In other words, three companies ensure two-thirds of the world’s computing needs – a situation that raises serious concerns regarding market concentration, the potential for abuse of power, and the vulnerability of global digital infrastructure to systemic failures or monopolistic practices.

Even the ostensibly decentralized world of blockchain is still largely dependent on centralized infrastructure. For example, over 38% of Ethereum nodes are currently hosted on AWS (data from ethernodes), which brings a single point of failure threat to the otherwise decentralized protocol.

Naturally, since the rise of web3, numerous initiatives have been working on a decentralized infrastructure, which would leverage blockchain to construct and operate physical hardware in a permissionless, trustless, and programmatic manner. Dubbed DePIN (decentralized physical infrastructure), this sector has recently reached the scale, which now positions it at the forefront of the crypto trends.

According to the blockchain research firm Messari, DePIN has the potential to add +$10 trillion to global GDP over the next decade and +$100 trillion in the decade after that. In 2023, the sector added over 600,000 nodes, growing steadily and becoming ever more efficient.

Also, in the last cycle, DePIN revenues proved to be the most resilient of on-chain revenues: during the last bear market the overall crypto space fell 70-90% from its peak, while DePIN tokens lost only 20-60%. This shows that, unlike some other web3 protocols, DePIN tokens are driven more by utility than speculation.

DePIN protocols overview

The main promise of DePIN is to allow users, device owners, and businesses to collectively own and monetize digital infrastructure. It incentivizes network development by engaging participants through token-based protocols and offers users cost-effective and resilient solutions.  

DePIN encompasses various sectors, which could be broadly categorized into five areas: computing, wireless, data sales, services marketplaces, and additional sectors.

  • Compute Marketplaces. The oldest and the most successful DePIN business model, represented by popular protocols like Filecoin ($FIL), Arweave ($AR), or Storj ($STORJ). These networks provide storage and computing services primarily to other crypto networks.
  • Wireless Services (DeWi). Nowadays the wireless services market is even larger than compute, and numerous actors are developing their web3 alternatives. For example, Helium ($HNT) and WiFi Map ($WIFI) provide public network coverage through independent nodes acting as hotspots.
  • Data Sales. A diverse sector aiming at monetizing data in many innovative ways. Hivemapper ($HONEY) is creating a world map by coordinating users who take dashcam photos or train the AI to recognize map features correctly, while Natix leverages edge AI to collect anonymized insights from people’s smartphones. This sector is particularly promising in collaboration with AI, which requires huge amounts of data to be trained. DePIN-based sensors and data networks can monetize valuable datasets via intelligence mining or compute-over-data markets, unlocking the on-chain crypto AI.
  • Service Marketplaces. This direction is disrupting traditional gig economies by emphasizing local ownership and control. For example, Teleport aims at uberizing Uber, creating a rideshare app that promises fair prices and more transparency for both users and drivers. Braintrust ($BTRST) connects freelance talents and employers searching for long-term engagements, giving users the ownership of the platform.
  • Additional Sectors. DePIN is also related to real-world assets (RWAs) and blockchain infrastructure networks, such as oracles and RPC nodes, making these sectors a part of DePIN’s broader impact. Vertical advertising networks, such as those used in the fitness app Sweatcoin ($SWEAT), or protocols decentralizing energy supply, such as GlowGreen, could also be considered as DePIN-adjacent sectors.

Any technical infrastructure is notoriously difficult to build; it is a lengthy and capital-intensive endeavor, which explains the sector’s pronounced oligopolistic (or even monopolistic) tendencies. Building a decentralized digital infrastructure is no walk-in-the-park either, especially in the early stages before the network effect begins to manifest. However, the potential of sturdily built DePIN protocols is great, for they encourage regular users to get involved in making public internet infrastructure better, and gain some money in the process.

In a time where digital giants seem to control so many aspects of our lives, DePIN is stepping in as a game-changer, bringing the decentralization ethos to the very pillars on which our digital life is built.

 Written by D.Center