DePIN means Decentralized Physical Infrastructure Network. It refers to the use of blockchain technology and decentralized systems in physical infrastructure.
How does the application of blockchain technology benefit physical systems? Does DePIN even matter?
Find out in this beginner-friendly article.
DePIN in Crypto Explained
It is no news that blockchain technology has steadily gained significant popularity in recent years. Also, considering the notable growth of decentralized finance (DeFi) and non-fungible tokens (NFTs), it can be said that the decentralized space has expanded over the years. It still aims at continuously transforming the digital space.
While the points above are true, the decentralized space can evolve even more. This is because its growth should not be limited to the digital or online space. It should also be extended to the physical world and this is where the concept of DePIN comes in.
Decentralized Physical Infrastructure Network, or DePIN for short, expands decentralization and blockchain technology beyond the digital space. It allows for the inclusion of the physical world in systems that pertain to blockchain technology such as smart contracts.
Similar to Decentralized Science (DeSci) which aims to improve the science field with the use of decentralized tools, the concept of DePIN aims to create a significant impact on physical infrastructure with the use of blockchain technology.
A Statista report shows that physical infrastructure, such as real estate, supply chain management, and healthcare can benefit from the application of blockchain technology and decentralization. Other areas where DePIN can be applied in real life include telecommunication for smooth internet access and data storage systems for secure data management.
Some of the benefits of this application include enhanced security, transparency, efficiency, data confidentiality, and most importantly, decentralization within the physical systems.
In the area of supply chain management, DePIN can perform the role of providing permanent records of goods and services, thereby maintaining integrity and transparency right from the first stage of the supply chain to the last. Similar benefits can be said for other physical infrastructures, including the renewable energy industry.
How, though, does DePIN work?
How DePIN Works
Simply put, DePIN works by using blockchain technology to manage a physical organization instead of depending on a central or single entity to do the job.
For example, DePINs can be applied in the solar energy industry in the form of a decentralized energy grid. A decentralized energy grid will allow people to produce solar energy directly from their homes.
Apart from simply producing electricity, individuals can also sell extra energy to the energy grid and other homes. They can do all of these by themselves without depending on a centralized electricity distribution company to help them.
You may wonder, though, how is this even possible? To answer this question, let us look at what DePIN does behind the scenes.
In the area of renewable energy, smart contracts carry out automated transactions involving the production and sale of solar energy. DePIN ensures that all transactions performed are recorded on a blockchain.
In every physical infrastructure where DePIN is applied, all transactions made are documented on the blockchain for transparency purposes between both parties, leading to a more efficient and reliable system.
Why DePIN Matters
DePIN focuses on building decentralized networks for different aspects of the real world. While it is an emerging trend, the application of blockchain technology in the physical world has great potential.
In the cryptocurrency space, DePINs can function as Decentralized Finance (DeFi) platforms. Here, financial services such as trading, borrowing, lending, and staking can be done freely without depending on an intermediary or being controlled by an external organization.
In the energy industry, DePIN does much more than ensure transparency and reliability of transactions. It also promotes more use of renewable energy and a more sustainable environment.
DePIN allows individuals to produce their electricity and even sell it when they have extra energy. This creates easy and faster access to electricity as people will no longer have to depend solely on centralized electricity authorities.
Decentralized Physical Infrastructure Network (DePIN) also matters in real estate. This is because, with DePIN, digital tokens can be used to represent real estate assets. This process is known as asset tokenization.
Just as digital tokens can be traded and owned or held on DeFi platforms, Decentralized Physical Infrastructure Networks (DePINs) can facilitate faster and decentralized buying and selling of actual real estate properties in the form of the digital tokens that represent them.
Top DePIN Crypto Projects You Should Know
At the time of writing, the total market cap of DePIN crypto projects is over $32 billion.
Here are some top DePIN coins by market capitalization and their networks.
- Render (RNDR): The Render Network is a DePIN crypto project that allows artists and developers to make use of a decentralized cloud computing platform at a faster speed and cheaper rate when compared to centralized platforms. Render also allows certain users, known as Node Operators, to earn rewards in the form of RNDR tokens when they participate in the network.
- Filecoin (FIL): Filecoin is a decentralized storage network designed to ensure data security, and storage reliability. It was also developed to serve as an alternative to traditional cloud storage services. Users can earn FIL tokens when they rent out their unused hard drive space to the Filecoin network. To increase your chances of earning more rewards as a miner on the network, you may join mining pools which will allow you to work together with other miners.
- The Graph (GRT): The Graph Network allows developers to build applications that can run efficiently without a centralized server. Users who participate in the network either as an Indexer, Curator, or Delegator, earn GRT tokens as rewards for the services they provide.
- Arweave (AR): Arweave is a decentralized data storage network that aims to create a secure storage environment that is free from censorship and manipulation. The AR token, which is the native token of the network, is used to pay fees for transactions made on the network.
DePIN Use Cases
Here are some of the use cases of Decentralized Physical Infrastructure Network (DePIN).
- Decentralized Computing: By leveraging blockchain technology, DePIN aims to produce decentralized computing services that can be used in place of certain cloud computing services owned and controlled by big organizations. An example of a DePIN coin that falls under this category is Render (RNDR). It introduced a decentralized and scalable cloud computing platform that can be used by individuals and developers at a rate cheaper than what is presently obtainable on traditional platforms.
- Decentralized Storage: DePIN can provide decentralized data storage solutions that can be used as an alternative to centralized cloud storage providers. Two examples of DePIN crypto projects that fit into this category are Filecoin (FIL) and Storj (STORJ). Filecoin (FIL) leveraged blockchain technology to provide a decentralized storage system where participants earn rewards when they rent out their unused data storage space.
DePIN and DeREN. Any Difference?
Both DePIN and DeREN are concepts that involve decentralized networks. However, there are some differences between these two as explained below.
- DePIN means Decentralized Physical Infrastructure Network while DeREN means Decentralized Resource Network.
- DePIN focuses on applying decentralized systems and blockchain technology in physical infrastructures such as the energy industry, supply chain management, telecommunication, real estate, healthcare, and so on. On the other hand, DeREN focuses on decentralizing the management and exchange of resources such as storage and financial assets.
- DePIN involves physical infrastructure while DeREN involves resources.
Should I Invest in DePIN?
Before deciding whether to invest in DePIN or not, you need to consider some important features that ensure growth and sustain the integrity of DePIN crypto projects.
These features are explained below:
- Security: Security is a critical aspect of DePIN. Scalable DePIN applications need to be highly equipped with security mechanisms that will help to protect the confidential information they carry.
- Scalability: Good DePIN crypto projects must be highly scalable. This means that its underlying blockchain infrastructure must be built in such a way that it will be able to handle high volumes of transactions.
- User-friendly Interface: DePIN applications should not be too complex to use. Rather, they should be designed to be user-friendly so that people with basic knowledge of DePINs can make use of them.
- Interoperability: A DePIN application should be interoperable with other blockchain networks for easy data access and exchange.
- Low Cost: The cost of processing transactions on highly scalable DePIN applications should be low. In other words, transaction fees on DePIN applications should be minimal.
All five features explained above are very important for a sustainable DePIN application. Hence, potential investors should ensure that DePIN crypto projects considered for investment should possess all the characteristics listed above.
As DePIN continues to evolve, the concept has some great potential for the future. To make this potential a reality, there is a need for the support of investors and stakeholders.
To obtain this needed support, users earn rewards when they invest in certain DePIN crypto projects. For instance, some decentralized energy systems reward users in the form of cryptocurrency tokens whenever they contribute energy to the network.
These rewards help to encourage potential investors to invest in DePIN to promote and sustain the growth of the system.
Summary
Decentralized Physical Infrastructure Network (DePIN) focuses on the application of blockchain technology and decentralized systems in physical infrastructure. It aims at revolving different areas of the physical world by extending blockchain technology beyond the digital space.
DePIN matters because it can be applied in different areas in the physical world such as the energy industry, real estate, healthcare, supply chain management, and many others.
Although DePIN is still relatively new, it has some great potential. For instance, it can be used to provide decentralized computing services and storage solutions that can replace their centralized alternatives.
Before investing in a DePIN coin, its security, scalability, design, interoperability, and transaction costs should be carefully looked into. To encourage potential investors, some DePIN crypto projects reward users in the form of digital tokens.
Faith | November 5, 2024
