DePIN: Building a Decentralized Value Network with Dual Curve Overlay

DePIN is realizing large-scale interaction between the physical world and Web3, gradually disrupting traditional infrastructure operation models. By combining sensors, wireless networks, computing resources, and AI with blockchain technology, and utilizing crypto-economic incentives to drive crowdsourced development. Analyzing most DePIN projects reveals that their business models share an important characteristic: hardware revenue serves as the first growth curve, on top of which data service monetization forms a second growth curve. This is one of the key factors that enable DePIN to lead current cycle growth, while also demonstrating how DePIN-like projects create significant wealth effects in the process of building decentralized infrastructure networks, ultimately forming a scaled decentralized value network.

1. Build a Decentralized Internet of Everything World

The Decentralized Physical Infrastructure Network (DePIN) is defined in the 2023 Messari report as "deploying real-world physical infrastructure and hardware networks using cryptoeconomic protocols". This concept heralds application scenarios full of imaginative possibilities: common infrastructure around us, including communication base stations, electric vehicle charging piles, photovoltaic panels, billboards, and the data storage and computing devices behind the internet, will no longer be controlled by centralized entities and institutions. Instead, they will be divided into equally sized units, held by individuals or large-scale miners. Similar physical infrastructure is highly standardized and scaled, forming a carpet-like coverage.

By adopting a decentralized approach, the layout and utilization of infrastructure can achieve higher efficiency and lower costs, while enhancing the overall system's security and resilience. From energy production to data processing, various facilities have the potential to transition to a decentralized model. The total market size of the industries involved in DePIN has now exceeded $5 trillion. Therefore, Messari predicts that the potential market size in the DePIN field is approximately $2.2 trillion, expected to reach $3.5 trillion by 2028.

1.1 DePIN track classification

The DePIN track covers six subfields: computing, AI, wireless communication, sensors, energy, and services. From the supply chain perspective, DePIN can be divided into:

• Upstream: Hardware manufacturers and supply-side users acting as "miners".

• Middle Layer: Project platform, a blockchain responsible for data validation and token settlement, and the on-chain Layer 2 protocol serving DePIN; as well as modular service components for developing and managing the DePIN network (such as platform interface, data analysis, and standardization services), SDK toolkit developed for DePIN, API interfaces, etc.

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

Except for IoTeX and the former Helium (which has now 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 economy. AI and cloud computing projects in the subdomain focus more on on-chain settlement and project platform development management, while the underlying hardware devices utilize middleware to schedule idle electronic devices, such as mobile phones or computers equipped with high-performance consumer-grade GPUs.

1.2 Overview of DePIN Industry Development

According to DePIN Ninja data, the number of DePIN projects that have been launched has reached 1,215, with a total market value of approximately $43 billion. Among them, the projects that have issued tokens and have been listed in the DePIN sub-section on Coingecko have a combined market value exceeding $25 billion.

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

2. Insights from the Business Logic of DePIN

The prototype of DePIN can be traced back to the IoT+Blockchain concept from the previous cycle. Projects like Filecoin and Storj have transformed centralized storage into a decentralized operating model through encryption economic models, and have found practical applications in the Web3 ecosystem, such as on-chain NFT storage and resource storage for DApps front and back ends.

The Internet of Things + blockchain only reflects the characteristic 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 in 2018 to use blockchain as an incentive mechanism for the decentralized deployment of the Internet of Things. So far, Helium has almost met all the elements of DePIN: node economy, mining model, value network, and crowdsourced incentives, making it a leading project in the DeWi (Decentralized Wireless Communication) field. Additionally, at the end of last year, Helium Mobile launched a $20 communication package service in collaboration with T-Mobile, targeting 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 has also helped 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 they serve has the potential to drive the breakout momentum 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. Although Helium was involved in false advertising last year and faced issues such as the rarity 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 one of the first large-scale DePIN projects to emerge, 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 for an organization, product, or business to introduce new innovations or changes when it reaches the peak of the traditional growth curve, in order to initiate a new growth curve and avoid stagnation or decline.

From the successful experience of previous DePIN projects, it is clear that the DePIN business logic naturally points to hardware sales as the primary development curve of the project, with data value network monetization added on top of the first curve, serving as the guiding principle for the second development curve.

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

In the context of the DePIN ecosystem, project parties must first ensure the smooth operation of the data value network under the premise of having the hardware network capabilities to organize and support large-scale data transmission. Only then can the demand side be successfully integrated, ultimately providing high-quality, standardized data services. This will ultimately achieve a double exponential growth in business, forming a positive cycle within the project ecosystem.

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

In the first growth curve, the business experiences rapid initial growth, which then gradually reaches a peak. The growth momentum of the DePIN project's first curve 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 the business, investment is needed to build infrastructure, and services are provided to end users (C-end) only after the facilities are in place. Therefore, the development of such businesses often requires the participation of giant enterprises to bear the high costs in the early stages of operation, including hardware purchases, land leasing, deployment, and hiring maintenance personnel. Citing BCG's dissection of the data value network, its traditional IoT operating model has created the data value chain shown in the left diagram, where data is 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 growth of the DePIN project.

The DePIN project team must first work hard to promote themselves, spread their narrative, and attract supply-side users to participate through a series of operational means, including pre-selling "mining machines" and offering airdrops for purchases. This shifts the substantial infrastructure costs to be borne by the supply-side users, achieving a low-cost and lightweight startup. Supply-side users also become "shareholders" of the project by holding hardware, while helping the project team deploy the hardware network with the expectation of earning money from mining in the future.

Moreover, unlike traditional centralized device providers, the updates and maintenance of DePIN devices are carried out jointly by project parties and miners, meaning that device providers are only responsible for the research and sale of device updates, while updates and maintenance are handled by supply-side users. In the collaborative maintenance and construction of the hardware network, the interaction with project parties and middleware strengthens the sense of community identity among miners (supply-side users) and their recognition of the DePIN project.

If a DePIN project can smoothly run through narrative marketing, mining machine sales, and community operation; then, the project's own first growth curve elements will be gathered, ultimately forming an increase in network coverage scale ------ an increase in token incentives ------ attracting more miners to join the first curve.

The following is the current data on the number of active nodes, with Hivemapper, Helium, and Natix ranking in the top three, all having deployed over 100,000 nodes worldwide.

Among them, the node deployments of Hivemapper, Helium, Natix, and Nodle have exceeded 100,000, with Helium and Hivemapper showing particularly impressive 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 partnership with T-Mobile and TEF.

• The $20 communication plan service launched in collaboration with T-Mobile on January 25 increased the number of subscribers from 0 to 93,000 in just 5 months.

• Collaborating with one of Mexico's telecommunications 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 designed to create a global, real-time updated mapping ecosystem through blockchain technology and crypto-economic incentives. Hivemapper's main business includes HiveMapper Dashcam------a dashcam that allows users to collect geographic data while driving by installing this device.

• This device is priced at $549. Based on the current number of node deployments, it can be roughly estimated that Hivemapper has already generated over sixty million dollars in revenue solely from hardware sales.

• As of now, the map data collection network established by Hivemapper has covered most regions in Europe and America. Hivemapper's data service revenue has also seen significant growth.

In terms of hardware revenue, there are other projects that have taken a different approach to achieve good growth. For example, Jambo has made smartphones its selling point and has achieved excellent sales performance in the African market. OORT