Why have DePIN’s outbreak conditions been met?

Author: Wyz_Research

On March 8, Vitalik raised a question on the Warpcast platform. The question mainly expressed his concern about the concept of DePIN that has existed for ten years but has not yet been established. Start” doubts.

DePIN  is very popular. From Messari proposing the concept in the first quarter of 2023 to the fourth quarter of 2023 the market prices of multiple DePIN projects are soaring. DePIN has become one of the most watched tracks in 2024 and this new bull market cycle. But this still cannot eliminate the industry's doubts about the new concept. Vitalik's doubts are also the main background issues faced by practitioners entering the track.

In this article, we will explain from three directions that currently DePIN has met the outbreak conditions.

There are three directions:

1. The market education of blockchain and Web3 has taken shape.

2. The hardware industry is mature, product choices are abundant, and low-cost construction solutions have emerged for DePIN networks.

3. Blockchain and cryptocurrency business models are diversified, and DePIN ’s business implementation has scenarios.

The market education of blockchain and Web3 has taken shape

In the DePIN report written by Messari it pointed out the development timeline of DePIN the earliest The project is filecoin, a distributed storage project that appeared in 2014 (only a concept at this time).

But in fact, the development of industries related to the Internet of Things can be traced back to at least 2005-2008. After the release of the Bitcoin white paper and the launch of the network, blockchain and cryptocurrency began to educate users. Both have long-term industry development and user education to date.

Relying on the cyclical performance of cryptocurrency in the secondary market, a batch of innovators have entered the cryptocurrency and Web3 markets with projects and ideas. After the entry of traditional financial capital, cryptocurrency has become an integral part of global financial markets.

Over the years, the blockchain industry represented by cryptocurrency has continued to break through, spawning cases that are combined with multiple industries. Some of these industry cases were reported in the 2023 Messari research DePIN was formed in the newspaper. Including distributed storage, distributed computing, wireless networks, AI, sensor networks, etc., the process of continuous integration with cryptocurrency is the result of the external market's attempt to use the financial logic of cryptocurrency itself.

When we look back, we will find that multiple events during the development cycle of the industry also had an impact on DePIN .

The first is the mining industry formed by Bitcoin and other cryptocurrencies, which is related to the development of the global computing hardware industry. However, since 2020 the mining industry has been restricted due to energy issues. Adjustments and rising mining costs, and after Ethereum is completely converted to PoS in 2022, the mining industry tends to shift from mining machines to more common types of equipment.

Secondly, with the emergence of  NFT  technology, the market’s understanding of the application of blockchain has returned to its recognition of its own technology applications, and mainstream enterprises and institutions have become more accepting of blockchain. the first step.

What follows is a breakthrough in the compliance issues of cryptocurrency in financial supervision. Bitcoin's superior trading liquidity and yield have won the favor of Wall Street financial capital, and have gained popularity among cryptocurrency companies and  After many confrontations with regulatory authorities such as the SEC, the adoption of the Bitcoin ETF has recognized the huge value of cryptocurrency in the financial field.

Most traditional business enterprises have seen the positive effect of the economic model of cryptocurrency and began to explore the Web3 model to solve the industrial power problem, which has become the development and reality of the  DePIN track seen today. The background of the world of hardware and cryptocurrency.

The hardware market is mature, and the cost of DePIN network construction is low enough

The project concept of distributed storage in the cryptocurrency industry emerged in 2014 and in 2014  In 2016, it was difficult for us to identify distributed storage as a DePIN track.

At that time, storage and IoT were different fields. IoT was still in its early stages, and the price and cost of smart devices were very high. For example, smart speakers were not yet able to recognize voice offline and It has not yet been put into circulation in the market in large quantities. From the perspective of production capacity, the IoT devices on the market are still in the period of "larger-sized devices". In order to realize device networking, a computing device requires many combinations of hardware, which are sold on the market. The number of ordinary smart devices is very small, and the industrial chain is not yet mature.

With the explosion of mobile devices that began to emerge after 2017 , within a few years, smart speakers, smart watches and other smart wearable devices or the smart home industry rapidly emerged and developed more maturely , the corresponding industrial chains around the world are booming, standards are constantly updated, technology is iterated, and smart devices begin to enter a stage of rapidly becoming smaller, faster, and smarter.

Today, various types of IoT and smart wearable devices have kept the cost of a device with DePIN communication and computing capabilities at a stable and low price.

Under such a hardware background, the technical cost of connecting physical computing devices to Web3 is further reduced, which will allow many entrepreneurs to add the concept of cryptocurrency based on the smart device model to the maximum extent and try DePIN  ; Concept track.

After dismantling the network construction process of projects such as distributed storage, distributed computing, and distributed AI or wireless networks, it can be found that the requirements for the equipment that make up these networks are very high. Many still maintain the characteristics of the early cryptocurrency mining industry, with high hardware investment, forming a high threshold.

For example, both distributed storage and computing require projects with large storage space. The storage space in the hardware composition must be large. Some storage projects or AI may also require computing power. CPU and GPU requirements will again increase costs. Even most wireless network (such as LoraWAN low-power network) projects require a device to build a network access node, and a single device will cost at least US$100 to achieve access.

For ordinary users and even hardware brands, this is the cost of accessing the web3 world. But today, lower-cost solutions have emerged. For hardware brands, such as smart lights, smart switches, smart watches and other devices, they can already connect to the Web3 network in a low-cost way.

The smallest commonly used smart home device or wearable device, the minimum cost of accessing the web3 network is US$3, which requires a certain amount of computing power and is reliable. The minimum can be controlled at around US$10.

There are scenarios for DePIN ’s business implementation

Under the above two backgrounds, DePIN will still have driving forces in the industry after 2024 , which come from  Extensive business needs within the Crypto market.

First of all, Crypto can digest the resources brought by DePIN in hardware mode. These resources are related data generated around users. And Defi, Gamefi, Socialfi and other application forms can be directly combined with the user identity and data brought by DePIN to form some services or functions, such as device DID authentication, computing power sharing, bandwidth Sharing and oracles, data markets, data mining or NFT, games, in addition to these applications, today's DePIN network provides computing power and storage and is even related to federated learning, which are all directions that can be tried.

The above is technical support. Beyond technology, the smart hardware itself is extremely functional and has a closed-loop economic model for sales operations. In addition to its use value, cryptocurrency Can give more financial performance. Most DePIN projects will hope that through the incentive mechanism brought by cryptocurrency, they can form a closed loop from using hardware, supporting market value, to obtaining token rewards, and secondary market transactions.

It can be seen from some products similar to  DePIN , such as  Worldcoin, whose market value has increased under the wave of  AI . It promotes personal iris data and distributed network models. It can also be one of the cases of DePIN .

The growth momentum of the DePIN industry

The background conditions for the outbreak of DePIN  have been met, and the industry will then increase in size. We need to find the growth momentum within the DePIN track. .

First of all, in the face of the continuous growth of the bull market market value, global capital also needs to find corresponding project carriers. DePIN  is one of the important tracks in the new bull market cycle. Most of the DePIN projects we have seen so far are transformed from the original projects of various tracks. These projects have diversified attributes and can be imitated. Secondly, subsequent projects can also try the corresponding model while enjoying the new lower access solution. Currently, there are multiple projects that can help projects that want to enter DePIN to be quickly established through standardized modular technical frameworks. This is the inherent development power of the industry.

Throughout 2023 the number of DePIN track projects has increased by hundreds, with a total market value of approximately 200 billion (full market value, non-trading market value), but this number is still It is far from enough. Among the new projects that emerge, projects that provide technical frameworks and solutions in the form of middleware will play an important role in the growth period. There are many such examples in the past development process. The Cosmos SDK has allowed the Cosmos ecosystem to grow rapidly, Polkadot's Substrate has increased the number of parachains, and Optimism's OP Stack has made successful Models can be copied quickly, and for example, RiscZero can copy zkVM and other capabilities equally.

Industry middleware is already reducing various costs and accelerating industry growth. At present, we can see that modular frameworks and solutions such as W 3bstream and DePHY are focusing on this part.

A DePIN project can be roughly divided into three parts: DePIN equipment, message network and blockchain network. Among them, the hardware part requires ensuring that the hardware is connected to the network under the premise of ensuring computing conditions.  IoT Network, hardware part requirements change with network functional requirements. The IoT network mainly completes the data transmission of hardware devices to ensure stable transmission efficiency. The blockchain network is responsible for calculation and overall status maintenance.

W 3 bstream  and DePHY  can provide standard technical solutions in a modular manner in several parts. These modular functions together form the core of the two projects Hub , the upstream is the brand and manufacturer of hardware equipment, and the downstream is the web3 network. When the development team wants to quickly set up a DePIN project, they can use modular construction to quickly implement the corresponding parts.

However, what is interesting is that W 3 bstream does not mention device-side assistance in the document. It seems to focus more on the relevant parts of the device accessing the blockchain network and interacting with various web3 networks. ; DePHY mentioned in the technical architecture low-cost open source hardware solutions, the entire process of IoT network communication and blockchain network interaction, and will use TEE to achieve device trust.

Written at the end

At present, we can boldly predict the development trend of the project that DePIN will present.

1. The types of IoT devices that can be connected to the blockchain network will extend from computing devices with high computing power and high storage (such as mining machines, computers, high-performance routers) to small, On smaller but more common smart devices (such as speakers, desk lamps, switches, watches, mice).

2. Hardware devices can quickly connect to the Web3 network, and seamlessly interact with current Solana, Ethereum and other chains to conduct business with ecological applications.

3. Cryptocurrency and the real world begin to have two-way interactions between technology and economic models.

In Messari 's prediction of industry size, DePIN will contribute 10 trillion in growth to global GDP in the next ten years. There is no doubt about the development trend. At this point where the development of DePIN is booming, the question raised by Vitalik hits the target. Because of this, it is also the moment to awaken the industry to think and face the background issues of this "mixed multiple attribute project" track.

Under the conditions of technology, user education, market popularity, development trends and other conditions, "background issues" are no longer a problem. As the bull market progresses, DePIN 's fire will become stronger and stronger. . As of press time, on Coingecko, the DePIN track shows that the circulating market value has just exceeded US$30 billion, with an increase of more than 30% in seven days. It is time for DePIN to become popular.