In anticipation of 2025 delivering on the promises of decentralization, last week we published an overview of the various ways in which it improves resource allocation, removes intermediaries, and optimizes processes. Now, we continue our exploration, diving into the burgeoning world of DePINs.
DePINs, or Decentralized Physical Infrastructure Networks, represent a shift in how we think about physical systems. DePINs offer decentralized alternatives, enabling communities, individuals, and organizations to build, manage, and operate physical infrastructure in a more democratic, transparent, and efficient manner.
This blog post will take you through the different types of DePINs and industries they are already disrupting, and will demonstrate the transformative power of decentralization.
What are DePINs?
The term DePIN may refer to any network leveraging blockchain technology, tokenization, and smart contracts to allow for peer-to-peer (P2P) coordination of information, work, and resources. Such networks eliminate the need for traditional intermediaries and centralized entities, and thus introduce unparalleled efficiency, transparency, and optimization.
From wireless internet to renewable energy, from data storage to AI training, and from noise pollution sensors to natural disaster alerts, the range of physical infrastructure disrupted by DePINs is boundless. It’s no wonder how ubiquitous DePIN projects have become in the world of blockchain and Web3: for reference, check out DePINScan tracking over 300 projects.
DePIN Characteristics
There are a few important concepts lying at the heart of DePINs, beyond the integration of blockchain and P2P technologies. First and foremost, that’s the notion of ownership, and more specifically, shared ownership. Instead of a single company or government entity controlling the infrastructure, DePINs allow for distributed ownership and participation. Thus, they enable users to become co-owners of power grids, gaming behemoths, and internet providers.
This fundamentally shifts the balance of power, giving individuals the ability to create and monetize infrastructure that was once the domain of large, centralized organizations. In the case of data and AI-related DePINs, their existence is a direct threat to the business model of Big Tech, or companies like Google, Meta, and Microsoft.
The second important concept we should mention here concerns the optimal utilization of resources. DePINs allow individuals spread all across the globe to tap into their underused or idle hardware and software resources, and lend them to those in need. Whether that is wireless or mobile connectivity, data storage, computational capacity, temperature sensors or mobility cameras, users can share them all. What’s more, participants gain monetary incentives to contribute to DePINs, turning unused resources into passive income.
Types of DePINs and Their Impact on Various Industries
Decentralizing Energy Grids
One of the most exciting applications of DePINs is in the energy sector. Traditionally, energy grids are controlled by monopolistic utility companies that determine pricing, production, and distribution. DePINs, however, are allowing individuals and communities to become producers and consumers of energy in a decentralized way. Projects like Powerledger are creating blockchain-based solutions that enable peer-to-peer energy trading, where users can buy and sell excess energy generated by solar panels or other renewable sources.
Advantages over the centralized system:
- Empowering consumers: DePINs give consumers more control over their energy consumption and production. By enabling the trading of energy credits or surplus power, individuals can profit from their investments in renewable energy.
- Increased sustainability: With more participants in the energy market, there is greater incentive to invest in clean energy technologies, accelerating the transition to sustainable power sources.
Decentralizing Telecommunications Networks
Telecommunications are another industry ripe for decentralization. Companies like Helium have developed decentralized wireless networks that allow individuals to set up “hotspots” in their homes or businesses, providing internet access in exchange for rewards in the form of cryptocurrency. These networks operate on the principles of decentralization by eliminating the need for central internet service providers (ISPs) and enabling users to become their own internet providers.
Advantages over the centralized system:
- Lower costs: Decentralized telecom networks can potentially lower the cost of internet access, especially in underserved or rural areas where traditional infrastructure is expensive or unavailable.
- Global connectivity: By enabling anyone to participate in the creation and maintenance of the network, DePINs make it easier to expand internet coverage to remote locations.
Decentralizing Data Management and Storage
Data is one of the most valuable assets in today’s digital economy, yet it’s mostly stored and controlled by centralized corporations like Google, Amazon, and Microsoft. DePINs are providing decentralized alternatives to this model by creating networks where users can store, access, and manage data without relying on centralized data centers. Filecoin and Arweave are just two of the numerous prominent DePINs revolutionizing data storage. These networks incentivize users to contribute their unused storage space to create a global, decentralized data repository. On the other hand, projects like iExec empower users to securely share and monetize their personal data.
Advantages over the centralized system:
- Privacy and control: DePINs in data storage give individuals control over their data, allowing them to choose where and how it’s stored, and to whom it’s shared.
- Lower costs: By eliminating the need for centralized data centers, DePINs can lower the costs associated with data storage, especially for smaller companies and individual users.
- Resilience and censorship resistance: Data stored in decentralized networks is more resistant to censorship and outages, providing greater security and reliability.
Decentralizing Computational Resources for Gaming and AI
The growing demand for computational resources, particularly for artificial intelligence (AI) training and inference, and for gaming, has led to a concentration of power in the hands of cloud service providers like Amazon Web Services (AWS) and Google Cloud. However, DePINs are enabling the decentralization of computational resources by allowing individuals to contribute their processing power to a global network. They are creating decentralized marketplaces where users can rent out their spare computing power for AI tasks or gaming applications. Projects offering decentralized cloud computing infrastructure include Golem Network, Aethir, Io.net, and Phala Network.
Advantages over the centralized system:
- Cost-efficient AI training: DePINs can help democratize access to AI training by reducing costs for small developers and researchers who may not have the resources to afford large-scale cloud infrastructure.
- Better gaming experiences: In gaming, decentralized computation can reduce latency and enhance the gaming experience by tapping into a distributed network of resources rather than relying on centralized servers.
- Fostering innovation: With decentralized access to computational resources, new AI and gaming applications can emerge that might have otherwise been stifled by high infrastructure costs.
The Fruits of Decentralization in Practice
Although the list above is non-exhaustive, at the core of all DePIN applications inevitably lies the principle of decentralization. DePINs enable participants to own and govern infrastructure that was traditionally controlled by centralized entities, and even profit from it. However, beyond providing passive income for users, DePINs delivers a number of additional benefits:
- Transparency: Blockchain technology ensures that all actions and transactions are publicly recorded and verifiable, creating a more transparent system.
- Security: With no central point of failure, decentralized networks are more resistant to attacks and corruption.
- Enhanced Optimization and Opportunities for All: While decentralizing the allocation of resources, DePINs make them much more accessible, in terms of both availability and price. The computational capacity is a simple example: with the rise of AI technology, GPUs needed for computing training and inference of AI models became so expensive and scarce that only the largest corporations could afford them. DePINs are what actually made possible the existence of small experimental AI ventures.
DePINs are reshaping how industries operate by making physical infrastructure more accessible, efficient, and democratic. From energy grids to mobility and AI, these decentralized models are disrupting traditional systems and empowering individuals and communities to take control of their own infrastructure. In fact, the DePIN revolution is just beginning: Messari’s State of DePIN 2024 report indicates that the DePIN sector is expected to grow 100-1000x over the next decade.
As the world continues to move toward decentralization, the future holds immense potential for innovation across industries. By embracing these new technologies, we may be on the verge of a new era in which the power to build, manage, and profit from physical infrastructure is more evenly distributed, creating more sustainable, resilient, and inclusive systems for everyone.
The DCF will continue to champion and shed light on the groundbreaking innovation brought about by decentralized technologies. This was only the second edition of our blog post series dedicated to the transformative power of decentralization, so stay tuned for more. In the meantime, make sure to explore the rest of our publications and subscribe to the DCF monthly newsletter — the best source of Agoric, Inter Protocol, and Tribbles news.