What is DePIN? Exploring Next Potential DePIN Projects in 2024

Key points:

• DePIN is one of the few sectors in the cryptocurrency space that has the potential to reach a market value in the trillions of dollars. It acts as an external infrastructure for the decentralized Internet of Things (IoT).

• DePIN is a decentralized physical infrastructure network that integrates the concept of a centralized Internet of Things with the Web3 world through a token economy.

• Famous projects in the DePIN sector include Filecoin, Render, Helium, Theta Network, and Worldcoin.

DePIN is one of the few crypto sectors with a trillion-dollar market potential. It represents an external infrastructure of the decentralized Internet of Things and is the sector where well-known projects like Filecoin and Render reside. However, as of now, most investors still have limited knowledge about the fundamental concepts of the DePIN sector. This article aims to help investors understand the future development potential of DePIN. It will detail basic concepts such as what DePIN is, its applications, and the advantages and challenges associated with it. Additionally, the article will highlight popular DePIN projects in 2024 that are worth investors' attention and consideration for investment.

1.  What is DePIN?

DePIN stands for Decentralized Physical Infrastructure Network. It represents the integration of the centralized Internet of Things concept with the Web3 world, using a token economy. DePIN applies tokenization to manage and drive the initial development phase of various infrastructure projects. In this model, many individuals contribute independently to building the infrastructure. They receive tokens as compensation for their efforts, inverting the traditional approach. Usually, large corporations in sectors such as telecommunications or energy invest heavily in developing and maintaining infrastructure. In contrast, Web3 companies aim to outsource these tasks to a group of volunteers. These volunteers are motivated by token incentives. The goal is to eventually generate revenue once the infrastructure's network is wide-reaching enough.

Currently, DePIN has emerged as one of the most prominent narratives leading into the anticipated 2024 bull run. Our FameEX Research report will delve into greater detail regarding the DePIN concept, closely monitoring the DePIN ecosystems. This will enable us to present a comprehensive game plan to our readers.

The term 'DePIN' was first introduced in the 2022 crypto report by research firm Messari. However, the concept behind it is not new to the industry. At its core, DePIN signifies the utilization of physical infrastructure to share and redistribute resources from a grassroots level in a decentralized fashion. Thus, DePIN essentially represents a hybrid of the traditional Internet of Things (IoT) and blockchain networks with merging their functionalities. In December 2022, Messari referenced this DePIN topic in their research for the first time, indicating that it would be "a key sector of cryptocurrency investment for the coming ten years.”

First time DePIN has been mentioned in a tweet, source: Messari X

As early as 2013, Filecoin emerged and significantly impacted the data storage industry. It revolutionized the sector by using token incentives to encourage users to provide storage space, thereby facilitating decentralized storage on the blockchain network. This distributed data storage approach offers not only enhanced security but also efficiently consolidates disparate storage resources, substantially improving resource utilization and reducing costs. Estimates suggest that storing 1TB of data on the Filecoin network costs just 1/120th of that on traditional servers.

Filecoin's success has inspired numerous crypto entrepreneurs to explore transforming the traditional Internet of Things (IoT). Therefore, several noteworthy DePIN projects have emerged. These include Render, which focuses on decentralized shared computing power; Helium, offering decentralized shared Wi-Fi; Theta Network, dedicated to video sharing; and Worldcoin, which specializes in decentralized data sharing. These projects, integrating traditional physical infrastructure with blockchain networks via a tokenized sharing economy, exemplify the burgeoning DePIN sector.

2. How Does DePin Work?

As discussed in the previous section, the DePIN ecosystem has the potential to encompass a diverse range of IoT industries. It integrates traditional IoT sectors like communications, computing power, storage, energy, edge computing, and smart devices with Web3 technologies. During the integration process, this decentralized approach addresses numerous challenges faced by the traditional Internet of Things. Those challenges include:

・Monopoly Issues and Exorbitant Prices in Traditional IoT Sectors: In the traditional domains of the Internet of Things (IoT), which include communications, computing power, storage, and energy, there is a notable dominance by industry giants such as Microsoft, Amazon, Google, Facebook, and Apple. This dominance has led to an oligopolistic situation, significantly impacting resource allocation. In such a centralized system, users often lose bargaining power, leading to resource inefficiencies. Take, for instance, data storage services. These platforms typically offer only a limited selection of service packages at high prices. It has been observed that the utilization rate of purchased resources is around 68%, indicating substantial wastage. In contrast, the cost of decentralized storage systems is only about 1/120th of that of centralized counterparts. Moreover, decentralized storage allows users to optimize resource usage more effectively through fragmented storage solutions. This approach could significantly counter the issues of oligopolistic control and resource wastage in traditional IoT sectors.

・Affordability and Trust Challenges for Small and Medium-Sized Enterprises (SMEs): In many industries, SMEs face a significant obstacle in competing with dominant industry oligarchs: gaining user trust. It's common for users to hesitate in entrusting their data to smaller, less-known platforms. However, this issue of trust can be effectively tackled through blockchain network integration. Such integration allows both small-scale platforms and individuals to contribute their resources, such as unused CPU processing power, bandwidth, or storage space, by connecting to the blockchain network. As a result, they can provide these resources to users across the network. This approach not only enables them to earn token incentives but also helps them overcome the direct challenge of building user trust.

・Central Allocation and Resource Waste: Approximately one-third of traditional IoT resources remain underutilized, signifying a substantial inefficiency in the deployment of resources worth hundreds of billions of dollars. The integration of smaller platforms and individuals into the network, utilizing these idle resources, effectively mitigates this issue. This approach not only maximizes the utilization of fragmented resources and minimizes waste but also fosters the development of an emerging and promising market.

To tackle the aforementioned challenges, DePIN emerges as a viable solution. DePINs utilize blockchain technology and crypto-economic mechanisms, allowing individuals worldwide to collaboratively create, manage, and operate physical networks. This approach is characterized by its transparency, openness, and programmability. The four key elements of DePINs are:

1. Physical Network Infrastructure: DePINs need tangible infrastructure for functioning. This includes various physical components like vehicles for transport networks, solar panels and batteries for power grids, wireless routers for internet networks, or servers for cloud computing systems.

2. Off-Chain Processing Infrastructure: DePINs use specialized middleware to bridge the physical world with blockchain technology. This system tracks real-world actions of users, informing their rewards calculation and distribution. Additionally, this data can be compiled for blockchain applications, like providing evidence for smart contracts or contributing to decentralized data markets.

3. Blockchain Framework: Each DePIN network integrates with a blockchain system that includes smart contract functionality. This digital ledger system manages rewards for transactions and other value exchanges within the network, like buying Wi-Fi access from a router owner.

4. Token-Based Incentives: People who contribute resources to the network (supply-side participants) receive incentives through tokens. These tokens encourage them to expand the network, sustaining it until it can generate steady revenue from users (demand-side usage).
   ・Supply-Side Participation: Anyone can be a supply-side participant in a DePIN network by setting up their own physical infrastructure and connecting it to the system. For example, a person can install a router at home to provide wireless network access.
   ・Demand-Side Utilization: Once the network is operational, end users can start paying for its services or use the collected real-world data. This creates a cycle that attracts more suppliers and investors, fostering network growth and wider adoption.

In short, Decentralized Physical Infrastructure Networks (DePIN) are instrumental in establishing networks of physical hardware in a decentralized manner. Handling necessities such as file storage, wireless connectivity, and cloud computing involves significant capital investment and operational complexities, making it a considerable challenge to expand a hardware network effectively. The use of tokens has been successful in promoting the growth of these networks, as they facilitate the coordination of decentralized hardware investments on a large scale.

DePIN Trend Overview, source: Messari Report 2022

The traditional Internet of Things (IoT) sector, a multi-trillion-dollar industry, has been instrumental in ushering in the third industrial revolution, marked by the interconnectedness of smart devices. The introduction of the DePIN concept marks a significant evolution in the IoT sphere. By embracing upgrades in concept and adopting decentralized methodologies, the IoT industry can address more challenges inherent in its widespread adoption. This ongoing evolution fosters the exploration of new operational models and cutting-edge technologies, further catalyzing the technological advancement of the traditional Internet of Things sector.

3. Top and Popular DePIN Projects to Invest in for 2024

The DePIN sector map from Messari categorizes key participants in the Web3 infrastructure field into four distinct sectors. The following list presents the top 10 companies in the DePIN category:

Source: Messari

3.1. Filecoin: A Server Network in Decentralized Storage Cryptocurrency

Filecoin has been a pioneer in the field of decentralized storage, garnering significant interest from a wide range of cryptocurrency investors and leading players in the sector. Filecoin operates as a peer-to-peer storage network, establishing a decentralized marketplace for storage capacity. In this system, users compensate for file storage, while providers earn Filecoin (FIL) in exchange for offering storage space. Nodes in the network negotiate and finance both storage and retrieval transactions. Filecoin's goal is to forge a competitive open market for data storage, challenging traditional providers through cost-effectiveness and a decentralized approach. Nevertheless, its journey has not been without challenges, particularly due to a significant downturn in the market. The value of the FIL coin, influenced by both the strategic decisions of the company and broader macroeconomic market conditions, experienced a dramatic decrease. It plummeted from a peak price of $237.6 to a low of $2.46, marking a staggering decline of 98.97%.

Source: CoinMarketCap

This tumultuous phase led to a bifurcation in perceptions about the project. On one side, some enthusiasts continue to regard Filecoin as an innovative crypto project, attributing its struggles to its niche appeal and unfortunate timing. On the other, critics dismiss it as a fraudulent venture, citing substantial losses incurred by early adopters involved in data storage and mining scams.

Following the 2021 market crash, experienced investors have often noted that the cryptocurrencies which endure both bullish and bearish phases without collapsing demonstrate greater potential for long-term investment. As of now, Filecoin's price is only 2.48% of its all-time high, indicating a significant market correction and the deflation of speculative bubbles. Despite this sharp downturn, Filecoin maintains an impressive trading volume and market capitalization. This resilience positions it as one of the most promising projects in the 2024 Decentralized P2P Network (DePIN) landscape.

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3.2. Render: Leading the Way in Decentralized Rendering Networks

Render stands out as a high-quality project in the DePIN sector with significant potential. This decentralized Graphics Processing Unit (GPU) rendering platform leverages idle GPUs provided by users to transform 2D or 3D computer models into lifelike images and scenes. Through this approach, Render establishes a system in which providers are compensated in Render tokens (RNDR) for their GPU contributions, while users benefit from decentralized rendering services. Its applications are extensive, spanning the metaverse, AR/VR, gaming, short films/movies, and 3D animation, among others. The platform's influence in these fields is substantial. As such, Render's future development potential seems boundless.

Notably, Render addresses a market need that is both technically complex and high in added value. This approach is expected to enhance the value and community consensus around the RNDR token. The partnership with industry giants like Macromedia, Disney, Warner Bros., Nickelodeon, Microsoft, Hasbro, and AT&T further amplify its added value and future growth prospects. Despite the DePIN sector still being in its beginning stages, Render merits early attention and is a candidate for long-term investment.

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3.3. IoTeX: Empower IoT with Privacy and Security

IoTeX (IOTX) is dedicated to advancing the Internet of Things (IoT) sector by developing decentralized hardware that enhances security and privacy. Positioned as a foundational platform, it specializes in Decentralized Private Networks (DePIN). IoTeX focuses on providing DePIN infrastructure solutions. They offer centralized services like W3bstream, alongside various developer tools and market-entry support, fostering the growth of decentralized network initiatives. In the realm of DePIN projects aimed at consumers, IoTeX has been a notable contributor.

The mission of IoTeX is to facilitate the empowerment of a vast array of devices and decentralized applications (DApps), bridging the gap between the physical and digital worlds. Utilizing IoTeX's decentralized devices significantly boosts user security and privacy. Moreover, through engagement with the platform, users have the opportunity to earn IOTX tokens.

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3.3. THETA Network: A Pioneer in Decentralized Video Streaming Platform

The THETA Network is a prime example of how certain cryptocurrencies can lead new trends in the DePIN sector. As a prominent player among decentralized streaming media platforms, the THETA Network holds the 66th position in cryptocurrency rankings, boasting a market value of $1,051,646,919. This positions it as a leader in the realm of decentralized streaming media.

What sets the THETA Network apart from traditional streaming platforms is its unique token model and innovative sharing approach. This model allows users to access bandwidth services from the nearest location, significantly enhancing the streaming experience. As a result, users enjoy smoother video streaming and an overall superior experience.

Given its cutting-edge approach and strong market position, the THETA Network represents a noteworthy project within the DePIN ecosystem. It's a development worth monitoring for crypto investors looking for promising opportunities.

Conclusion

The DePIN ecosystem is currently in its early stages, largely due to ongoing technological advancements and limited market demand. As it stands, the DePIN's total market value is approximately US$5 billion. This figure is modest when compared to other more established sectors. Despite this, the DePIN projects show significant market potential and technological promise, suggesting it may soon emerge as a popular and noteworthy sector. For investors, engaging in long-term planning during this nascent 'market enlightenment' phase could yield higher returns than investing during peak market periods. Nonetheless, it is crucial for crypto investors to remain vigilant about market volatility and to make well-considered decisions to mitigate potential risks.

FAQ

Q: What Is CePIN? How Does It Differ From DePIN?

A: CePIN stands for Centralized Physical Infrastructure Network. It represents a traditional approach to managing physical resources, characterized by a top-down distribution model controlled by a centralized organization. In contrast, DePIN, which stands for Decentralized Physical Infrastructure Network, operates on a decentralized, bottom-up model. This approach facilitates the sharing of traditional physical resources in a more distributed manner, deviating from the centralized control typical of CePIN.

Q: Where Can I Buy FIL Tokens?

A: There are several methods to buy FIL tokens in the market. For those new to cryptocurrency, the most common and secure approach is to purchase them via FameEX. At FameEX, you have the option to use your credit or bank card to buy USDT in the 'Buy Crypto' section. After acquiring USDT, you can proceed to the 'Spot Trading' section where you can exchange your USDT tokens for FIL tokens.

» Further details on buying FIL, please refer to the following steps in our guide: Buy Filecoin (FIL) with Credit Card or Debit Card Instantly

Disclaimer: The information provided in this article is intended only for educational and reference purposes and should not be considered investment advice. For more information, please refer to here. Conduct your own research and seek advice from a professional financial advisor before making any investment decisions. FameEX is not liable for any direct or indirect losses incurred from the use of or reliance on the information in this article.