Decentralization offline
Theoretical research in the world of cryptocurrencies has long predicted that encryption tools, which today are embodied in the blockchain, will sooner or later find application not only on the Internet, but will be able to directly influence the world of things. For example, at the end of the last century, Nick Szabo wrote that smart contracts will be able to automatically manage physical objects.
A quarter of a new century has already passed since then, and blockchain technology is firmly entrenched in our world.. First of all, thanks to cryptocurrencies: Bitcoin now continues to set records, it is supported by a huge physical infrastructure in the form of mining farms based on complex and specialized equipment, primarily ASIC. It would seem that this is it, a real physical presence in the world. However, the boundaries of decentralized technology in our world continue to expand with solutions like DePIN.
What is DePIN
DePIN is an acronym for Decentralized Physical Infrastructure Network.. A decentralized network of participants who, using a public registry (blockchain) and cryptocurrency, create and support a specific real infrastructure project.
Simply put, DePIN involves using blockchain to run and maintain decentralized networks of equipment such as sensors, network devices, physical data storage, wireless infrastructure, energy networks, and basically anything that can be used to achieve some common goal.
DePIN is trying out a system of rewards for work done that has long been proven in the world of cryptocurrencies – to stimulate participation in physical infrastructure networks. For active contributions to the project, participants receive project tokens (or, theoretically, another cryptocurrency).
This allows you to build a network based on decentralized and horizontal connections, and not in a hierarchical order, as is usually the case with large infrastructure projects (the construction of bridges or roads, for example). Building and operating physical infrastructure networks is expensive and complex and has historically been in the hands of large corporations or states because they have the capital and resources.
DePIN offers voluntary cooperation of participants as an alternative. Individuals participate in DePIN networks using either their own equipment or purchasing specialized equipment designed specifically for a specific job. The range is very different: from simple hard drives to weather stations. But as a rule, DePINs are currently built around opportunities available to the general public.
What are DePINs?
There are two types of DePIN: physical resource networks (PRN) and digital resource networks (DRN).
PRNs are localized decentralized networks where providers provide hardware resources on site (for example, install a sensor or distribute the Internet). These resources are location-specific, their contribution to the network varies by location, and are therefore not fungible.
DRNs are networks whose providers provide resources based on their function rather than location. It doesn't play a role here. Examples of such resources: computing power, bandwidth, data storage.
Helium
Let's look at the mechanism of DePIN using Helium as an example.. It is a protocol that encourages people to build and operate physical telecommunications networks, such as wireless towers. The Helium network is created by hosts who mine HNT, the native token of the Helium protocol, in exchange for increased coverage and data transmission across the network. The Helium network launched in August 2019, and has since grown to more than 600,000 locations worldwide (by comparison, the entire US telecommunications industry has 417,000 cell towers).
Proof of Physical Work
Sometimes DePIN is described through the Proof of Physical Work protocol (proof of physical work). It is more of a descriptive term than a technical name for a specific digital protocol. This is a situation where a blockchain protocol rewards users for performing physical work that can be proven and measured.
Pros of DePIN
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Horizontal scalability. The network can simultaneously include a huge number of participants (so large that it can compete with large centralized projects), and the blockchain allows for effective and mutually beneficial cooperation.
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Decentralization. In the crypto world, decentralization is recognized as an absolute blessing. Here, the absence of a center allows a well-organized network to remain flexible and not have the growth ceiling that centralized projects can hit.
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Economic efficiency. Network costs due to the use of blockchain should be lower than those of centralized solutions. Moreover, such networks are extremely attractive to new participants because they offer a clear procedure for joining and generating income.
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Pricing. Compared to centralized solutions, DePIN has lower costs and therefore can offer consumers competitive prices.
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Security. DePIN projects, due to the fact that they use real equipment in their work to perform useful tasks, can boast that their capitalization and price are to a certain extent ensured by the equipment and the work that it performs.
Of course, the advantages described above are not absolute.. Unlocking the full potential of DePIN is not possible everywhere and not always, so using the concept without the necessary calculations and awareness is a bad idea.
Cons of DePIN
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Complexity. When we talk about global infrastructure projects, DePIN is far from a guarantee of success. For the network to really become effective, it needs to be properly organized, create an attractive reward system for participants and incentives for users.
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Novelty. It is important to understand: DePIN is breaking into a market where there are already players to compete with. Decentralization is an absolute blessing in the eyes of the crypto community. However, a wider audience may easily prefer familiar centralized solutions.
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Regulatory uncertainty. Blockchain is able to offer solutions that can compete where the state has declared its monopoly (money, property titles). Therefore, when blockchain begins to propose projects in the real world, it cannot but attract the attention of the state. Whether it will allow him to develop freely is an open question.
Examples of DePIN
For clarity, we will give a number of examples of human activity where DePIN projects have already found their application.
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Filecion, Arweave: Decentralized file storage providers where users share the available disk space of their computer with those who need secure and decentralized storage.
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Hivemapper is a decentralized mapping service whose users are rewarded for filming the roads they drive on with a specially designed video recorder.
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Render is a decentralized graphics rendering platform where users can lend the unused power of their graphics cards to others to render motion graphics and visual effects.
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Nunet – artificial intelligence computing marketplace. The goal is to efficiently utilize idle computing resources.
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Power Ledger – Peer-to-Peer Energy Trading Platform. The goal is to decentralize the energy network. Participants find each other to realize the excess of real electricity they receive.
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PowerPod is a decentralized electric vehicle charging network that allows owners of private chargers to share with other drivers for a reward.
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DIMO is short for Digital Infrastructure for Moving Objects, a platform that allows vehicle owners to monetize data and telemetry collected from their vehicles' sensors.
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Healthblocks rewards users for providing health-related data, helping healthcare companies and private practices. Users can connect their fitness devices (such as wristbands) to the app to collect data and track fitness goals. Users are rewarded with HEALTH tokens for completing quests or providing data.
Conclusion
The emergence of DePIN as a category describing the applied use of blockchain for the implementation of large decentralized infrastructure projects means global changes for the crypto community. This confirms the number of already existing DePIN projects. DePIN has a serious chance of becoming a separate sector of the crypto-economy.