What is DePIN? Defining Decentralized Physical Networks in Crypto

Decentralized Physical Infrastructure Networks (DePINs) represent a novel concept within the realm of decentralized finance (DeFi) and blockchain technology. These networks integrate physical infrastructure with decentralized protocols, enabling the seamless exchange of value and services in the real world.

Unlike traditional centralized systems, DePINs operate on blockchain networks, promoting transparency, security, and efficiency in various industries. In this guide, we will further provide in-depth answers to “What is DePIN?” and explore its advantages and disadvantages within the crypto ecosystem.

How Do DePINs Work?

DePINs operate through a combination of blockchain technology, Internet of Things (IoT) devices or Off-chain networks, and decentralized governance protocols. Firstly, smart contracts are deployed on blockchain networks to automate the management of physical assets and infrastructure, such as energy grids, transportation systems, and supply chains.

Then, IoT devices are equipped with sensors and connected to the same blockchain network, collecting real-time data on asset utilization, performance, and maintenance needs. Lastly, protocols in the form of decentralized governance models allow network participants to collectively make decisions regarding asset management, protocol upgrades, and resource allocation.

So now you have a better understanding of what is DePIN in crypto, let’s explore how exactly they are used.

What are DePINs Used For?

DePINs have a wide range of use cases across real world services and industries, including energy, logistics, telecommunications, and urban planning. In the energy sector, DePINs can optimize the distribution and consumption of electricity through peer-to-peer energy trading and decentralized grid management.

In logistics, DePINs can enhance supply chain visibility and traceability, reducing inefficiencies and mitigating counterfeiting risks. Additionally, DePINs can facilitate decentralized communication networks, enabling secure and censorship-resistant communication channels.

Here are some examples of how DePINS are used:

• Energy: Energy DePINs focus on decentralizing the management of energy grids and distribution systems. By integrating renewable energy sources, energy DePINs enable peer-to-peer energy trading, optimize grid efficiency, and reduce reliance on centralized utilities. Examples include projects like Power Ledger. According to Messair, Power Ledger enables participants to contribute green energy resources within the network.
• Logistics: Logistics DePINs aim to streamline supply chain management and enhance transparency in logistics operations. These networks utilize blockchain technology to track and trace products throughout the supply chain, ensuring authenticity and provenance. VeChain is a good example of logistics DePINs.

• Data Storage and Computing: DePINs also extend to decentralized data storage and computing networks. Projects like Filecoin enable users to rent out unused storage or computing power and earn tokens in return. This decentralized approach reduces reliance on centralized servers, enhances data security, and promotes resource-sharing among participants. Additionally, these platforms offer cost-effective solutions for developers and businesses seeking scalable and reliable storage and computing services.

The DePIN Cycle

The DePIN cycle encompasses the lifecycle of decentralized physical and digital infrastructure networks. From the incentivization to create them, to their initial deployment and ongoing operational maintenance. Let’s explore this cycle in a step-by-step format.

Step 1: Token Incentivization – DePINs leverage tokens to incentivize individuals to deploy physical infrastructure networks. These tokens act as rewards for participants who contribute hardware or resources to the distributed network itself.

Step 2: Deployment of Hardware – The cycle continues with the deployment of smart contracts and physical infrastructure such as energy grids, transportation systems, or supply chain tracking devices. This hardware forms the backbone of the decentralized infrastructure network and provides services to other off-chain network participants.

Step 3: Service Provision –  The deployed hardware offers services to other participants within the DePIN ecosystem. For example, energy grids may offer peer-to-peer energy trading, transportation systems may provide ride-sharing services, and supply chain devices may enable product tracking and verification.

Step 4: Earning Opportunities – Participants on the supply side earn rewards for providing their hardware or services to others within the DePIN network. These rewards come in the form of tokens, which can be exchanged or used within the ecosystem.

Since DePINs operate without intermediaries, interactions between participants are direct and transparent. By eliminating intermediaries and optimizing resource allocation, goods, and services within the DePIN ecosystem are often cheaper and faster than traditional models. This affordability and efficiency attract more participants and drive further growth within the network.

Examples of DePINs

The most prominent examples of DePIN projects currently in the market are Filecoin, Render, and Graph. However, there are some lesser-known DePIN coins and projects that play a pivotal role in the ecosystem. Let’s take a look at some.

1. Power Ledger – Pioneering Energy Revolution

Power Ledger  energy trading platform that’s driven by blockchain technology. It allows users to buy and sell renewable energy via a peer-to-peer system. The platform enables decentralized energy trading, and grid optimization, and incentivizes renewable energy generation.

Utilizing this approach of decentralization gives priority to renewable energy adoption, reduces reliance on traditional energy providers, and incentivizes individuals to invest in solar panels or other renewable energy sources. According to a recent article by Forbes, Power Ledger’s innovative platform has gained significant traction, with pilot projects and partnerships established worldwide.

Its native token POWR has a market capitalization of $148 million and a daily trading volume of $12 million. POWR operates on the Ethereum blockchain as an ERC-20 token.

2. VeChain – Transforming Supply Chain Dynamics

Next, we have VeChain, which is a blockchain platform focused on supply chain management and product traceability. The VeChainThor blockchain enables businesses to track and verify products throughout the supply chain, ensuring authenticity and quality assurance.

By leveraging blockchain technology, VeChain enables businesses to enhance supply chain efficiency, combat counterfeiting, and build trust with consumers. An article published by CoinDesk highlights VeChain’s partnership with Walmart China, demonstrating its effectiveness in real-world applications and its potential to transform various industries through decentralized infrastructure.

According to DePIN Hub, Vechain could hit an all-time high in 2024. Currently, the VET token is trading at $0.039, which is roughly 85% away from its previous record high of $0.2782.

3. IOTA – Revolutionizing IoT Connectivity

IOTA is a distributed ledger technology designed for the Internet of Things (IoT) and machine-to-machine communication. The IOTA Tangle facilitates decentralized data transfer and microtransactions, enabling applications in smart cities, transportation, and energy management.

With its feeless transactions and scalability, IOTA empowers smart cities, transportation systems, and energy management networks. According to a recent report by TechCrunch, IOTA’s innovative approach to decentralized infrastructure has garnered attention from industry leaders and researchers, positioning it as a key player in the emerging IoT landscape.

The IOTA native token is a top 100 cryptocurrency and currently has a market capitalization of $752 million. At its peak, one token was priced at $5.69. At the time of writing, IOTA is trading at $0.2332.

Advantages and Disadvantages of DePINs

As we dive deeper into the DePIN narrative the advantages and disadvantages are somewhat clearer. However, let’s break them down below.

Advantages

• Decentralization: One of the primary advantages of DePINs is their decentralized nature. By leveraging blockchain technology, DePINs eliminate the need for intermediaries, enabling direct peer-to-peer interactions. This decentralization fosters trust, transparency, and autonomy within the network.
• Cost Efficiency: DePINs offer significant cost savings compared to traditional centralized infrastructure models. With reduced overhead costs and no middlemen, users can access services at lower prices, making them more accessible to a broader audience.
• Incentivization: DePINs employ token incentives to encourage participation and network growth. Through staking, users can earn rewards for contributing their resources to the network, fostering a self-sustaining ecosystem. This incentivization model promotes network expansion and resilience, as evidenced by the success of projects like Power Ledger.

Disadvantages

• Scalability Challenges: Despite their promise, DePINs face scalability challenges, particularly in handling large transaction volumes and network congestion. As more users join the network, scalability issues may arise, leading to slower transaction speeds and increased costs. These scalability limitations pose a significant hurdle to widespread adoption.
• Regulatory Uncertainty: DePINs operate in a regulatory gray area, facing uncertainty regarding compliance and legal frameworks. Regulatory ambiguity can hinder investment and innovation in the DePIN space, creating barriers to growth and adoption.

DePINs Pros and Cons

In a nutshell, DePINs offer unparalleled decentralization, cost efficiency, and incentivization, making them a disruptive force in the crypto landscape. However, scalability challenges and regulatory uncertainty pose significant obstacles to their widespread adoption and long-term viability.

So for those looking to participate within this ecosystem, both these advantages and potential drawbacks must be taken into consideration.

DePINs vs DeFi

DePINs and DeFi (Decentralized Finance) both harness the power of blockchain and decentralization but serve distinct purposes within the crypto ecosystem. DeFi predominantly revolves around financial services, offering decentralized alternatives to traditional banking and investment platforms.

Popular DeFi applications include lending protocols like Compound and decentralized exchanges like Uniswap, which enable users to borrow, lend, and trade assets without intermediaries. Read our guide to learn more about some of the best decentralized exchanges currently in the market.

In contrast, DePINs extend the scope of decentralization beyond finance to encompass physical infrastructure networks. These networks facilitate peer-to-peer interactions and resource sharing in areas such as energy trading, supply chain management, and IoT connectivity. For example, Power Ledger employs blockchain technology to enable peer-to-peer energy trading, allowing users to buy and sell renewable energy directly. Similarly, VeChain leverages blockchain for supply chain management, ensuring transparency and authenticity throughout the product lifecycle.

While DeFi focuses on financial services, DePINs address broader infrastructure challenges, offering solutions that transcend traditional boundaries. Despite their differences, both DeFi and DePINs represent innovative approaches to decentralization, driving the adoption of blockchain technology across various sectors.

Conclusion – The Role of DePIN in Crypto

Now that you have a better idea of what is DePIN crypto, let’s conclude. DePINs represent a groundbreaking innovation in the crypto space, offering decentralized solutions to real-world infrastructure challenges. Despite facing scalability and regulatory hurdles, DePINs hold immense potential to reshape industries ranging from energy and supply chain management to IoT connectivity.

As the ecosystem continues to evolve, DePINs are poised to play a pivotal role in driving the adoption of decentralized technologies and reshaping traditional business paradigms.

DePIN Crypto FAQs

What is DePIN narrative?

The DePIN narrative centers around the concept of Decentralized Physical Infrastructure Networks (DePINs), which represent a fundamental shift in how physical infrastructure networks are owned, operated, and shared.

What is an example of DePIN in crypto?

An example of DePIN in crypto is Power Ledger, a blockchain-driven energy trading platform that offers P2P energy trades, supporting renewable energy and grid optimization.

What coins are DePIN?

Coins associated with DePIN projects include Power Ledger’s POWR token and Filecoin’s FIL token, which power their respective blockchain networks for energy trading and supply chain management.

What are the top DePIN networks?

Top DePIN networks include projects like Filecoin, Render, Power Ledger, Theta Network, and IOTA, which offer innovative solutions for energy trading, supply chain management, and IoT connectivity, respectively.

References

1. What is Power Ledger (Messari)
2. Power Ledger: It’s Time To Excubate Blockchain Technology (Forbes)
3. VeChain partners with Walmart China (Coindesk)
4. VET poised for all-time high in 2024 (DePIN Hub)
5. IOTA’s innovative approach to decentralized infrastructure (Techcrunch)