What is DePIN?

• DePINs use blockchain technology to incentivize individuals to create and maintain physical infrastructure, offering rewards for contributions like sharing resources and building infrastructure.

• DePIN tokens facilitate network operations through governance, service payments, and staking, ensuring the network's growth and ethical operation.

• DePINs promote accessibility, efficiency, and democratized ownership of infrastructure while facing challenges like technical hurdles, regulatory uncertainties, and adoption barriers.

Decentralized Physical Infrastructure Networks (DePINs) are networks that leverage blockchain technology to incentivize individuals to collectively create physical infrastructure. 

Sometimes referred to as TIPIN, PoPW, or EdgeFi, participants act as the backbone of each DePIN network, providing hardware resources in exchange for cryptocurrency rewards. 

Examples of DePIN contributions include:

• Sharing excess resources – Anyone can share their unused hardware resources (such as excess energy generated by their solar panels) within a specific network.

• Building and maintaining infrastructure – Some DePINs incentivize the construction of new infrastructure (like cellular towers for a decentralized wireless network or charging stations for electric vehicles).

• Providing services – Individuals can earn tokens by providing specific network tasks like data querying or computation.

Overall, DePIN projects aim to democratize technology by offering decentralized, crowd-sourced alternatives to traditional, centralized services.

Decentralized Finance (DeFi) is the use of blockchain technology to provide financial services without the need for traditional banks or intermediaries. Decentralized Physical Infrastructure (DePIN), on the other hand, focuses on real-world resources (RWAs).

While both concepts use blockchain technology, they aim to solve distinct problems. 

DeFi transforms how we interact with financial services by offering services like peer-to-peer transactions, lending and borrowing, and more without the use of intermediaries. 

DePIN changes how we access and use real-world resources.

DePIN tokens are vital for projects that issue them, offering incentives for participants who contribute resources to the network. This economic motivation ensures the network operates smoothly, ethically, and promotes growth. Additionally, these tokens serve several purposes:

1. Governance – Token holders can influence the direction of the DePIN project, voting on changes and upgrades to the DePIN software.

2. Payment for Services – Tokens can be used to pay for services provided by DePIN, such as accessing storage or paying for bandwidth.

3. Staking – Some DePIN tokens can be staked by validators to secure the network, and by delegators who assign their tokens to validators. Both validators and delegators are often rewarded with a share of new coins from block rewards for their contributions to the network.

For more information on crypto staking, check out our Kraken Learn Center guide, What is crypto staking

DePINs create a community-driven network where people can share their unused resources in exchange for tokens.

These pooled resources are then used by the network to offer services like improved internet access in areas with limited connectivity, decentralized cloud storage solutions, or even the power to run complex analyses for businesses or researchers. 

DePINs create a self-sustaining ecosystem where users are rewarded for their contributions, and those rewards can be used to access the services provided by the network. 

This closed-loop system incentivizes participation and helps to ensure the network's long-term sustainability.

The DePIN flywheel

The DePIN flywheel is the name given to this self-reinforcing cycle that helps any network grow and develop. 

There are a few steps associated with the flywheel: 

1. Incentivize participation – Users contribute resources to the network and earn tokens as rewards. These incentives attract more participants who contribute their own resources and expand the network’s capacity.

2. Improved services – Increased capacity translates to better services. For example, in a broadband DePIN, more participants typically means wider internet coverage and faster speeds. 

3. Network expansion – The enhanced service quality tend to attract more users, who contribute their own additional resources 

4. New resources – The network's growth and potential rising token value attracts investors who bring additional funding and support, further accelerating the network's development.

This flywheel effect can sometimes result in rapid growth and scalability, creating a thriving ecosystem where everyone benefits. Contributors earn rewards, users enjoy improved services, and the network itself becomes more valuable as new users join.

Physical Resource Networks (DePINS) vs. Digital Resource Networks (DRNs)

DePINs and DRNs both leverage blockchain technology to create decentralized networks, but their focus areas differ. While DePINs concentrate on tangible, real-world resources, DRNs handle intangible resources like data storage, computing power, and bandwidth.

DePINs offer the potential for improved access to essential services, community ownership of infrastructure, and reduced environmental impact. DRNs, on the other hand, offer enhanced data security, cost efficiency compared to centralized providers, and the potential for innovative business models based on tokenized resources. 

DePINs vs. DeRENs

DePINs and DeRENs (Decentralized Renewable Energy Networks) are two types of decentralized networks that leverage blockchain technology to incentivize the sharing and utilization of resources.

DePINs focus on a broader range of physical infrastructure with the aim to improve access and efficiency of these RWAs, as well as democratize ownership of the physical resources. DePINs often use Internet of Things (IoT) devices, sensors and smart contracts to manage and incentivize resource sharing.

DeRENs, however, specifically target renewable energy resources (e.g., solar, wind, hydro) and their associated infrastructure. 

This type of decentralized network aims to accelerate the global transition toward renewable energy. They do this by empowering people to become energy producers and create more sustainable systems. 

DeRENs typically leverage blockchain technology, smart grids and energy storage solutions to create decentralized energy markets and peer-to-peer energy trading. 

DePINs offer several key advantages over traditional, centralized infrastructure models, and aim to revolutionize the ways in which we access and use essential resources.

Enhanced accessibility

DePINs enable individuals in underserved or remote areas to connect to these networks and either contribute their resources or use other individual’s ones. 

This helps foster a more inclusive environment where anyone with a device and an internet connection can participate, which helps expand access to essential services like internet connectivity, energy, and storage. 

Importantly, by eliminating intermediaries and reducing overhead costs, DePINs can often provide these services at a more affordable rate than traditional offerings.

Increased efficiency

Traditional infrastructure often suffers from inefficiencies due to centralized control and limited resource utilization. DePINs, thanks to their distributed nature, tap into underutilized resources to optimize the use of existing infrastructure. 

This, in effect, helps minimize waste and maximize efficiency, resulting in a more sustainable and cost-effective system.

Democratized ownership

DePINs empower individuals to own and monetize their resources. Rather than relying on large corporations or governments to provide infrastructure, anyone can become an active participant and earn potential rewards for their contributions. 

This shift towards democratized ownership promotes a more equitable distribution of resources and financial benefits within the network.

Resilience and security

Centralized systems are vulnerable to single points of failure, such as outages or cyberattacks. DePINs are inherently more resilient thanks to the distribution of resources. Even if nodes or participants go offline, the network can continue to function. 

Additionally, this distribution allows DePINs to be less susceptible to censorship or control by any single entity, which helps enhance their security and privacy.

DePINs, while promising, are still in their early stages of development, which brings unique challenges:

• Technical hurdles – Unlike digital resources, physical assets require coordination and management in the real world (like dealing with hardware maintenance, connectivity issues, and geographical distribution complexities). Ensuring the efficient and secure operation of a decentralized network of diverse physical resources requires innovative solutions and robust protocols.

• Regulatory Considerations – The regulatory landscape for DePINs is still evolving. As these networks blur the lines between traditional industries and blockchain technology, they face uncertainties around token classification, taxation, and compliance. 

• Adoption Barriers – Technical complexities and the need for specialized hardware may deter non-technical users. Additionally, incentivizing participation and ensuring fair distribution of rewards can be a hurdle. Building trust and educating potential users about the benefits of decentralized infrastructure are essential steps in overcoming these adoption barriers.

The DePIN landscape is rapidly expanding, with innovative projects emerging across various sectors. Many initiatives are leveraging blockchain technology to revolutionize physical infrastructure. 

Helium (HNT)

Helium was one of the first DePIN projects. It was built with the aim to create a low-power, wide-area network for Internet of Things (IoT) devices.

Helium users can contribute by buying or building "hotspots", which are hardware devices that plug in and join the network and provide internet coverage to a specific area. In return for hosting their hotspots, they earn Helium's native token, HNT. 

Those who want to use this network purchase "data credits'' (DCs) with HNT. These are burned when spent, creating a burn-and-mint equilibrium that governs HNT's supply. With nearly a million hotspots connected by 2022, Helium pivoted to become a "network of networks," supporting other DePIN projects that build solutions for Wi-Fi, 5G, VPNs and more.

DIMO (DIMO)

DIMO empowers car owners to turn their vehicles and driving data into a source of income. 

By downloading the DIMO app, anyone can choose to share specific information about their car, such as battery health or trip details, and receive DIMO tokens as a reward. Companies can then purchase this data, such as used car platforms or ride-sharing services, to help enhance their offerings while compensating data providers directly.

Hivemapper (HONEY)

Hivemapper aims to democratize the creation of real-world maps, challenging services like Google Street View. 

Users purchase a Hivemapper dashcam, install it in their car and drive around during daylight hours to collect visual and GPS data. This data is then uploaded to the network, earning them rewards in HONEY tokens.

Companies or individuals needing access to this unique mapping data can purchase "map credits," allowing them to use specific areas or distances of coverage that have been documented by the network for their needs.

Kraken allows you to buy, sell and trade DePIN tokens like Helium (HNT), Akash (AKT), Filecoin (FIL token) and Render (RNDR) using multiple fiat and cryptocurrency options.

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