Tokens for noise and a Web3 alternative to Google Maps: the most interesting DePIN projects

At the end of 2023, leading analysts and funds, as is customary, published their investment forecasts for the coming year. Many converged on the appeal of decentralised physical infrastructure (DePIN). This article by Sergey Golubenko explains how the segment works and why investors are focusing on it now.

What is the idea?

In the 2010s Uber and Airbnb stirred up their industries by weaving elements of decentralisation and incentives into their businesses. That let them avoid the cost of buying and servicing vehicle fleets, hiring estate agents and cleaning teams—aligning the interests of service providers and consumers. DePIN builds on this by using the blockchain as the basis for a transparent, decentralised economy and by opening access to the full range of DeFi tools. 

DePIN is a way to create and manage physical infrastructure (PI) with mutually beneficial incentives for all parties in the IoT economy via Web3 technologies. Here, physical infrastructure effectively covers everything that surrounds and connects people in the digital world. A balanced, decentralised approach to building, maintaining and governing that infrastructure is DePIN’s cornerstone. Physical infrastructure typically includes: 

• telecommunications; 
• data storage and processing centres; 
• router nodes; 
• wireless networks; 
• device networks for monitoring climate, air quality, urban traffic, and so on. 

DePIN can also be seen as a bridge from the Web 2.0 internet of things to Web3, and as a link between the real world and the blockchain.

The term was first proposed in 2022 by analysts at Messari, who argued such an important sector needed a name; crypto communities promptly adopted it. A dedicated DePIN category later appeared on CoinGecko, CoinMarketCap and other monitoring platforms. Other directions at the IoT–Web3 intersection are also taking shape, including RWA, ReFi, DeSci and DeSoc. 

How do DePIN projects work? 

DePIN incentivises stakeholders to build physical infrastructure networks used by people—and even machines—without demanding huge upfront investment. Project tokens, in turn, motivate the rollout of hardware.

The model is straightforward. Individuals earn by renting out new or existing equipment to those who need it. With no intermediaries, processes take less time and cost less. 

DePINs typically comprise four core elements: 

• physical network infrastructure; 
• off-chain processing infrastructure to connect the physical world with blockchain technology; 
• a blockchain platform; 
• token-based incentives.

Now to the key characteristics DePIN projects tend to share.

Efficiency. By integrating small platforms and individuals into a network, idle resources are used more effectively. That not only minimises waste, but also nurtures a promising new market.

Trust and rapid scalability. Individuals and small platforms can contribute resources such as unused compute, bandwidth and storage. This raises trust in lesser-known platforms and startups that users might previously have shunned for data storage. And by crowdsourcing physical infrastructure, DePINs can scale faster and more cheaply than traditional projects, spreading costs across participants and offsetting them with future growth and revenues.

Anti-monopoly. Once built, networks are open to ordinary consumers rather than reserved for big corporations or government agencies. That mitigates monopoly pricing for infrastructure products and curbs the ability to distort information for the benefit of specific market players. 

Open governance. Traditional infrastructure projects often suffer—and even fold—under rigid management and terms dictated by centralised organisations. DePINs, by contrast, strive to be open, democratic and accessible.

DePIN enables the joint creation, management and operation of physical networks—balancing the interests of network builders, infrastructure vendors and, crucially, consumers.

Which projects to watch?

By early 2024, Filecoin and Helium lead the segment. They have travelled a long road and can be considered among the earliest DePIN projects. 

Filecoin by Protocol Labs is a decentralised data-storage network that uses IPFS. Messari’s reports also highlighted several other DePIN projects from the company:

• WeatherXM — climate sensors;
• Bacalhau — a platform for distributed computing that uses a Compute over Data architecture;
• Saturn — a content delivery network.

At the time of publication (February 21), Filecoin’s native token tops CoinGecko (DePIN category), with a market capitalisation of ~$3.7bn. 

Helium is an infrastructure network that provides coverage for IoT and 5G wireless connections. Users can purchase Helium hotspots operating on the LoRaWAN protocol and receive the native token HNT for providing services. According to the project, more than 980,000 wireless internet and mobile devices are active worldwide. At the time of publication HNT’s market capitalisation is ~$1.3bn.

Other notable projects in decentralised data storage and compute include: Akash Network (AKT), Arweave (AR), Siacoin (SC), Crust Network (CRU), Storj (STORJ), Aleph.im (ALEPH), iExec RLC (RLC), Flux (FLUX), Cudos (CUDOS).

Of particular note is Render Network — a decentralised GPU rendering platform. The RNDR token currently ranks second by capitalisation among DePIN, at around ~$2.4bn. 

THETA also sits in the top five by coin capitalisation. The market capitalisation of the decentralised video-streaming network Theta is estimated at ~$2.1bn.

Competition is gradually intensifying in the bandwidth networks segment. Among tokens with a market capitalisation above $30m, Orchid Protocol (OXT) and Sentinel (DVPN) stand out.

One project that stands out is Grass from Wynd Networks. It is in alpha testing and currently occupies a small niche of web proxies operating on DePIN principles. Even so, Grass has already raised around ~$3.5m in a funding round.

Its model provides a decentralised marketplace for unused internet bandwidth. Buyers are firms training AI models that need vast resources for web scraping. Any internet-connected computer user can be a seller. At the current bandwidth “mining” stage, participants accrue points that are expected to convert into tokens.  

Important intermediaries for the market include micropayments and infrastructure platforms that help startups and uphold DePIN’s ethos. Among them are IOTA (market capitalisation of ~$860m) and the decentralised hardware developer IoTeX (~$520m).

Another DePIN niche is geospatial networks that use sensor hardware (devices with sensors, smartphone cameras and car dashcams) to build alternative global maps and fresh, uncensorable data on air quality, road traffic and more.

One leader in the segment is Hivemapper. The project is building a dynamic world map, positioning itself as a potential competitor to Google Maps. Drivers with Hivemapper dashcams (devices start at $300) record their surroundings and receive HONEY tokens as rewards. Cameras have already covered more than 128m kilometres, and the HONEY token has a total capitalisation of about ~$162m at the time of writing.

The next project is DIMO. It allows users to monetise vehicle data via a hardware device. Such data can be used by the automotive, financial, insurance, maintenance and other sectors. Users earn the native DIMO token while optimising their car’s condition and resale value. The token’s market capitalisation is around ~95m at the time of publication. 

Silencio collects data on noise pollution. It taps microphones in users’ devices; those who install the Silencio app receive the Noise Coin token as a reward. The coins are promised to be distributed via an airdrop after mainnet launch. Noise pollution data are valuable not only to researchers but also to a wide range of businesses. 

What are the risks?

In closing, it is worth noting DePIN’s weak spots:

• hardware and network-usage costs, as well as the pace of market adoption, must be considered. All affect the future value of an investment;
• if a DePIN project fails to attract enough users or partners, its crypto-economy suffers, hitting returns;
• DePIN’s physical infrastructure is exposed to international and domestic regulations. Legal uncertainty can cause operational and developmental problems;
• liquidity risks can trigger price volatility and undermine investors’ financial security.

Conclusions

From analysts’ reports we see that DePIN, as a substantial industry, could add roughly $10trn to global GDP over the next decade. That is an impressive figure. But the sector is still at an early stage and must stand the test of time. According to CoinGecko, the value of the DePIN category at the time of writing is above $15bn. With a favourable trajectory, multiple increases in value could arrive over the next two years. We may even witness a clash between the telecoms and cloud giants and young, democratic and fast decentralised networks.