Anyone can become a base station! Explaining “DePIN” in layman’s terms
As 5G networks gradually become mainstream, some users have complained that their phones often fail to connect to a 5G signal and instead revert to 4G, resulting in wasted money and energy. The limited coverage of 5G base stations is mainly due to the fact that the construction of these stations is mainly concentrated in the hands of specific telecom operators, which limits the speed of construction.
But what if everyone could participate in building network base stations and get paid for it? Would that make the speed much faster? This concept is exactly what the recent hot Web3 project “DePIN” aims to achieve.
DePIN, short for “Decentralized physical infrastructure networks,” is a concept that uses token rewards as incentives to encourage people to participate in building physical infrastructure in the real world.
Taking the decentralized wireless service Helium Mobile as an example, this project not only launched its own telecommunications service but also allowed the public to purchase hotspots for installation indoors or outdoors, ensuring that telecommunications service customers have network connectivity wherever they go.
As providers of hotspot networks, users can also receive token rewards when their networks are connected. As more and more people own hotspots, the network coverage can expand.
DePIN extends the spirit of decentralization to tangible infrastructure, and many experts believe that DePIN has a higher chance of entering people’s lives and is a good “breaking barriers” channel.
According to the definition by the analysis and research company Messari, DePIN mainly consists of two types: Physical Resource Networks (PRN) and Digital Resource Networks (DRN).
Type 1: Physical Resource Networks (PRN)
This type incentivizes participants to provide geographically limited goods and services in the real world using location-based hardware such as GPS devices. Examples include local energy, geospatial data, and local wireless networks.
Type 2: Digital Resource Networks (DRN)
This type incentivizes participants to provide digital resources that are not limited by geographic location, such as computing power and storage space.
Breaking down the four key components of DePIN’s operation
In general, DePIN operates based on a decentralized blockchain framework, effectively distributing control and rewards throughout the entire network, providing benefits to participants who contribute computing power, network connectivity, storage capacity, and other resources.
To ensure the smooth operation of DePIN, four key components are required: physical network infrastructure, off-chain computation systems, blockchain frameworks, and token reward systems.
Key Component 1: Physical Network Infrastructure
This refers to the specific components or elements that make up the network. It includes all the physical assets necessary for the network to function properly, such as servers and transportation systems.
Key Component 2: Off-chain Computation Systems
These systems gather and analyze data on participants’ activities or contributions in the real world and integrate this data with the incentive system on the blockchain.
Key Component 3: Blockchain Frameworks
These are transparent and tamper-proof distributed ledgers that use smart contracts to manage network transactions. They can clearly record each contributor’s workload, reward distribution, and transaction records between demand and contribution.
Key Component 4: Token Reward Systems
The token reward system incentivizes contributions to the infrastructure and promotes the early development of the project. It is a crucial factor in encouraging people to “get involved.”
Where can DePIN be applied?
Cloud and Storage Networks
This includes services such as file storage and virtual private networks (VPNs). Projects like Filecoin are examples of decentralized cloud networks, where participants can rent out their computer storage space to others, who then pay for that space. Contributors receive cryptocurrency rewards in return.
Wireless Networks
This includes technologies such as 5G and Low-Power Wide-Area Networks (LoRaWAN). Helium, mentioned earlier, is a typical example.
Sensor Networks
These involve devices equipped with sensors that collect real-time data from the environment, including geographic information systems (GIS). For example, Hivemapper is a platform that allows users to map their communities and encourages individuals to share local information and capture real-time data through dashcams.
Energy Networks
DePIN’s decentralized energy networks allow for the direct sale or trading of surplus energy or related data within communities. Arkreen is an example of such a project. It allows energy suppliers to declare the amount of renewable energy they produce, store, or consume on the platform, making their energy production transparent. Other participants in the market can view and access this data for research purposes or integrate it into future services or products.
What are the advantages and challenges of DePIN?
Advantage 1: Scalability
Compared to traditional frameworks, DePIN’s mechanism of public participation enables faster and more cost-effective scalability. It allows for immediate adaptation to changing demands while maintaining efficiency.
Advantage 2: Community Empowerment
Unlike centralized platforms controlled by a few, DePIN allows individuals to own and manage their own hardware (such as the aforementioned Helium hotspots), promoting collaboration and community participation. Contributors who hold governance tokens can also vote on certain decisions, giving everyone equal status and power in a democratic manner.
Advantage 3: Reward Mechanism Promoting Network Development
Within the DePIN framework, the reward mechanism provides opportunities for passive income to contributors and encourages participation and growth. These measures further promote the expansion of the entire project ecosystem.
Challenge 1: Vulnerability to Hacking Attacks
As the entire DePIN system operates on the blockchain, there is a possibility of being hacked during this era of rampant Web3 hacking. This could potentially affect the funds circulating on the chain.
Challenge 2: Improper Token Price Volatility
The reward mechanism is a double-edged sword. An increase in token price can attract more people to join the DePIN network, making the construction more complete. However, if the price drops, contributors may face the dilemma of leaving.
Challenge 3: Can the Emerging DePIN Compete with Traditional Centralized Enterprises?
Although DePIN can address the issue of power concentration in large enterprises in areas such as infinite networks and storage space, the current stage of DePIN is still in its infancy, making it difficult to compete with big companies that provide high-quality products.
Although DePIN is still in the early stages of development, according to a report by Messari, by 2023, the number of projects in the DePIN space will exceed 650, with a total market value of over $20 billion. It is still a track worth keeping an eye on.
Sources:
Techopedia, Crypto.news, CoinTelegraph
Editor: Gao Jingyuan