Interpretation of Messari 2023 DePIN Market Report

Author: Sami Kassab, Salvador Gala; Compiler: Shenchao TechFlow

Recently, Messari and Escape Velocity (EV3) jointly released a document called " The research report "State of DePIN 2023" provides a detailed and comprehensive explanation of the current status, applications, supply and demand situation, technological changes and development differences between regions of the DePIN track.

Since the original report is presented in PDF and has a long English content, and each picture in it has a very high information density, Shenzhen TechFlow has revised the report It has been compiled, and the key charts, content and ideas in the original report have been processed to a certain extent and presented and interpreted in a more readable form.

The following is the content of the original report.

DePIN’s definition, current situation and industry landscape

• DePIN = Distributed physical infrastructure network that uses cryptographic incentive mechanisms to efficiently coordinate the construction and operation of critical infrastructure.

• In general, DePIN can be composed of the following components:

• DePIN can be more efficient, more resilient and perform better than centralized infrastructure and is the preferred way to expand global infrastructure

• The comparison between DePIN and traditional centralized infrastructure is as follows

• DePIN’s growth flywheel = infrastructure networks become stronger as they scale.

• DePIN’s flywheel is enough to add +$10 trillion to global GDP over the next decade, and +$10 trillion the decade after that $100 trillion

(Note: Due to PDF translation issues, the " "First" should be understood as "first")

• DePIN assignment and incentivize citizens’ rights to improve surrounding public infrastructure.

• In a world of untrustworthy institutions and incompetent bureaucrats, DePIN returns wealth and power to citizens and Community

• We divide DePIN into six categories, each category Disrupting an industry worth over $1 trillion.

• RWAs (real world assets) and blockchain infrastructure networks (oracles and RPC) are related areas of DePIN, but are outside the scope of this report.

• Smart money in cryptocurrencies is making dozens of moves on the DePIN track With this bet, venture capital funds have also made large-scale financing.

• DePIN infrastructure winners are starting to emerge, with Solana leading the way.

• Solana's integrated infrastructure and performance-focused developer community are attracting DePINs of all stages

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DePIN’s demand, revenue and typical use cases

DePIN relies on on-chain verification and/or settlement , to provide critical web resources to consumers, developers, and resellers willing to pay for them.

• DePIN’s north star = revenue driven by utility --- not speculation.

• Onchain revenue means that users exchange products/services/goods by purchasing and locking/destroying tokens.

DePIN generates over $15 million in annualized on-chain revenue across six core business models.

In the last cycle, DePIN’s income proved to be the most resilient of all on-chain incomes.

• The largest DePIN is transforming into a platform with diverse use cases.

• These are not overnight successes: platformization tends to be the 5th to 10th in global decentralized network expansion occurred in the year.

The following are the specific situations of use cases in the 6 DePIN tracks:

Computing Market

• The computing market is the oldest and most successful DePIN business model.

• The storage network needs more demand, the compute network needs more supply, and the retrieval network needs density to compete with web2.

(Note: Due to PDF translation issues, the text in the upper left corner of the picture should be understood as : What features are brought about by encryption technology)

• Data storage looks like is an obvious use case for cryptography but development has been slow.

• So far, the best customers for decentralized storage networks have been other crypto networks.

• The end game of storage is always about data calculations.

• The third phase of Filecoin’s main plan will begin in the first quarter of 2023, and the Filecoin Virtual Machine (FVM) will be launched simultaneously.

• Unlike most DePINs, GPU cloud services are supply-constrained rather than Demand restrictions.

• However, price competition in GPU cloud services may be faster than anything we have seen before.

(Note: In the pricing unit of LLM pricing in the figure, the token should be understood for Token)

• CPU cloud services are becoming the outlet for animal spirits in the crypto field .

• Speculation on the Proof-of-Work blockchain has led to fortunes from speculators to arbitrageurs and DePIN token holders transfer.

• Decentralized CDN faces fierce competition: Cloudflare already has something like DePIN Flywheel effect.

• Cloudflare benefits from a DePIN-like flywheel effect through its free CDN service, which supports 20% of the world's websites.

• Retrieval is the hardest part of decentralization, but early signs show Out of hope.

• The results in early 2023 prove that decentralized CDN has the potential to match or even exceed the performance of web2.

(Note: Filecoin’s Saturn should be its project name Saturn)

Wireless coverage

• In the global economy, the market for wireless services is larger than the market for computing.

• Over the past 25 years, global data transfer has grown at a compound annual growth rate of 30-35%, with no signs of slowing down .

• Each vertical of DeWi has different underlying economic drivers .

• The mobile market is by far the largest (in dollar terms), but fixed internet and WiFi are the largest in terms of usage (Calculated by GB and users).

(Note: DeWi means decentralized wireless network, and the key to unlocking is PDF translation problem should be understood as "the key to unlocking the problem")

• Crypto MVNOs (Virtual Telecommunications Operators) leverage tokens to fundamentally improve traditional wireless economics.

• MVNO acquires and manages customer relationships while paying wholesale network access fees to traditional telecommunications operators (MNOs).

(Note: The picture above should really be Really, a telecommunications service operator Helium Mobile’s early momentum shows a path to millions The user's path.

The question is: can Helium start making profits before running out of money? ...we think the answer is yes.

(Note: Helium refers to Helium, and data offload refers to Data Offload. To use complementary network technologies to transmit data originally carried by cellular networks)

• Mobile Internet connects people to people, fixed Internet connects places and places.

• The number of ISPs (Internet Service Providers) in the United States will grow from 3,000 to more than 15,000 in the next five years, global opportunities Even more huge.

• Fixed Internet is probably the most ambitious plan in DeWi.

• Andrena’s testnet will enable consumers and SMEs to become micro-Internet service providers owning the last mile of Internet infrastructure .

• With billions of daily active users, WiFi is the most used The widest range of connectivity protocols.

• In 2023, WiFi Map airdropped $WIFI tokens to 225k of the most active contributors in 190 countries around the world.

Wholesale Data (Wholesale Data)

• Data sales can take many different forms, some more valuable than others.

• Data is most valuable when:

1) There are a lot of buyers who want it

2) These buyers are making a lot of money from it,

< p style="text-align: left;">3) Better data is the limiting factor in making more money.

Cartographic mapping is undoubtedly the most powerful real-world example of global cryptographic coordination.

The Hivemapper community has made more progress in supply, demand, and validation in 2023 than most networks have in 3-5 years.

• DePINs are beginning to tap into the potential of mobile sensors.

• Mobile phones are very powerful sensing devices...but mobile data as a business faces several challenges, see figure below Specific explanation:

• Contradiction between data collection and privacy

• Low retention rate

• Data collection accuracy issues

• High-value traffic is questionable

• Token rewards may not be reasonable

AI x Cryptocurrency for DePIN Sensor /Data networks create an alternative outlet.

Networks can monetize valuable data sets through intelligent mining or computing beyond the data marketplace, rather than competing upstream.

Service market

• Horizontal service market Leverage crypto incentives to attract the world’s top talent.

• Whether it is based on people or agents, excellent service market:

< p style="text-align: left;">1) Attract & retain the best talent,

2) Effectively match supply and demand.

• Vertical service markets are disrupting the web2 gig economy.

• Companies such as Uber/Doordash are built on permanently extracting economic benefits from the local economy; web3 does this by combining ownership and Control is given back to local operators to rewrite the script.

• On-chain security services will become the most popular in '24-'25 The clear winner.

• In the last crypto cycle, Certik laid the blueprint for an on-chain security services market worth more than $10 billion.

(TAM refers to the maximum accessible market size)

Vertical advertising

• Vertical Ad networks give ownership and control of data back to users.

• Excellent ad networks combine:

1) Viral user acquisition,

2) Proprietary, contextual data streams,

3) Large terminal market.

Energy

• Decentralized Energy The supply chain may prove to be DePIN's toughest challenge yet.

• Regulatory overhead in the energy industry makes experimentation slow/difficult/expensive... but the toughest challenges attract the toughest entrepreneur.

DePIN supply, token economy and incentive model

DePINs utilization Crypto incentives to coordinate capital, equipment, and labor to scale critical infrastructure around the world.

• DePINs adds 600,000+ nodes in 2023, covering wireless, computing and sensors network.

• In addition to those shown in the figure below, dozens of emerging DePINs have added 100-500 nodes this year and are expanding rapidly to 2024.

• DePINs are becoming more efficient at expanding supply.

• The new generation of DePINs focuses more on capital efficiency—sometimes at the expense of decentralization.

• We have seen 3 methods of token issuance: time-based, Supply based K PI and demand based.

• Most DePINs combine three strategies, using different issuance plans for different tokens at different times.

• What hardware DePINs work well for: Targeted mining reward bursts / promote.

• DePINs with higher capital requirements benefit from using off-chain data & decisions to incentivize high-value deployments.

• Aspects where software DePINs work well: May become tokens Points or credits.

• Leading software-based DePINs have scaled to tens or even hundreds of thousands of active users before actually launching their tokens.

• What works well for DePIN investors is: Differentiating market capitalization and FDV.

• The best networks will mainly trade on the market capitalization of the circulation market, while the upside of low-quality networks will be occupied by FDV limit.

Looking to the future: the integration of DePIN and other crypto tracks in 2024

By 2024, we will see DePIN begin to experiment more deeply with new cryptographic fundamental components including ZK, meme coins, on-chain AI, and on-chain games.

DePIN x Artificial Intelligence

ZK-verifiable GPU cloud computing expected in 1- On-chain reasoning economy will be realized within 2 years, and centralized service providers will be unable to provide services.

(Note: Due to PDF translation format issues, the second category in the above picture should be translated as "decentralized AI")

DePIN x Meme

Like it or not, meme coins is becoming a real catalyst for mass adoption of DePIN.

DePIN x ZK

• Web3 pair Web2's vampire attacks will become the next gold rush.

• As developers build on the emerging high-performance ZK infrastructure , there are opportunities to create user-consistent clones of the most popular Web2 applications

• These infrastructures is built by:

DePIN x game

• As more and more DePIN activities move on-chain, the design space for real-world infrastructure and on-chain games will grow faster than anyone expects.

DePIN x Privacy

• ATOR will fork the Tor network in 2024, aiming to create a scalable, high-performance ecosystem for privacy-focused developers to build applications.

DePIN x Asia

• DePIN is a global movement: Asia’s DePIN ecosystem is exploding

• We expect Multiple top 10 DePINs to come from Asia in '24-'25

• Some noteworthy ones from Asia Institutions such as: FutureMoney, HashGlobal, Hashkey and Fenbushi Capital, etc.

(Note: FutureMoney is a leading blockchain venture capital and consulting research institution. The investment direction covers the blockchain The basic public chain, application protocols and financial services in the chain ecosystem, and provide a full range of post-investment services for invested projects)

Appendix: Practical resources for understanding DePIN

1. On-chain data analysis: https://depin.ninja/

2. DePIN project filter: https://messari.io /screener

3. Research Podcast: https://podcasters.spotify.com/pod/show/proof-of-coverage

4. < p>Newsletters and Events:

1. DePIN Summit: https://www.depinsummit.xyz/

2. Escape Velocity Blog:

   https://us21.campaign-archive.com/home/? u=d0453576cac1958c64f3c9e43&id=6196cdb18d