Exploring Decentralized Physical Infrastructure Networks (DePINs)
Table of contents
What is DePIN?
Decentralized Physical Infrastructure Networks (DePINs) or DePINs, are decentralized networks that fractionalize traditionally capital-intensive hardware infrastructure, enable anyone to become an infrastructure provider, and solve for traditionally illiquid markets through tokenization and a peer-to-peer marketplace. The DePIN ecosystem is currently valued at ~$3 billion market cap with a TAM of approximately $2.2 trillion and is projected to reach $3.5 trillion by 2028.
Given these are physical infrastructure networks, reliability of the underlying blockchain infrastructure is crucial. High TPS is important as these networks should be unaffected by network congestion on the L1 while still maintaining its security.
With Eclipse, DePINs can build their own trust-minimized rollups with high TPS, reliability regardless of base layer, and novel token mechanisms.
Fungible Vs. Non-Fungible Services:
DePINs can be categorized into fungible and non-fungible services. An example of a fungible service is Filecoin where your 1TB is the same as my 1TB of data, no matter the location of the storage device. A non-fungible service example would be WeatherXM where hardware location matters. Service providers should be rewarded more if they provide service in an area that lacks coverage which should, in turn, drive service providers to deploy in those areas until there’s sufficient coverage. DePINs that provide non-fungible services may greatly benefit from a custom tokenomics structure that enables equitable infrastructure deployment.
Value Capture Models:
Common value capture models include Burn-and-Mint Equilibrium (BME) and Stake-for-Access (SFA). The BME model creates token buy pressure as end users burn tokens to access services, and service providers are rewarded with a predefined number of tokens. The SFA model requires service providers to stake tokens to participate, with the amount of tokens staked proportional to the amount of work they can perform. As demand for the network increases, service providers will stake more tokens to earn more revenue, creating buy pressure.
What are the use cases for DePINs?
DePINs provide an incentivized mechanism for individuals and organizations to contribute resources to a shared network. This decentralized approach allows for the creation of a more efficient and cost-effective infrastructure network. Here are three potential novel use cases for DePIN:
Use Case #1: Last Mile Delivery
Last mile delivery is the most critical and expensive part of the delivery process, accounting for 53% of overall shipping costs. However, with advancements in technology such as delivery drones and autonomous delivery vehicles, last mile delivery is undergoing significant changes. DePIN could potentially be used to create a shared network of individual service providers and retailers to speed up delivery times and reduce costs. The ease of understanding last mile delivery by the average consumer could lead to quicker network adoption. The current TAM for last mile delivery is $98B and growing 16% YoY.
Use Case #2: Warehousing
A shared warehousing network could be created using DePIN where individuals and organizations can contribute storage space and resources in exchange for tokens. These tokens could be used to incentivize participation in shared warehousing networks or to enable real-time tracking and visibility of inventory. With a distributed warehouse network, delivery times can be expedited, and inventory can be tracked as NFTs or SFTs in the same ecosystem. The warehousing market is $285B and growing 7% YoY.
Use Case #3: Manufacturing Tooling
With the advancement in 3D printing technology, there is an increased adoption of additive manufacturing across a wide range of industries, including aerospace, automotive, healthcare, and consumer products. DePIN could potentially be used to create a decentralized network of 3D printers, where service providers are incentivized to contribute 3D printing resources to a shared network. This network allows for quicker turnaround times if a critical machinery part fails unexpectedly and becomes a manufacturing blocker.
In short, DePIN provides a unique opportunity for creating a more efficient and cost-effective infrastructure network across multiple industries. By incentivizing individuals and organizations to contribute resources, a shared network can be created that benefits everyone involved. These potential use cases highlight the flexibility and adaptability of DePIN to meet the needs of a variety of industries.
Current DePINs Using Eclipse:
We are excited to have several projects building decentralized infrastructure networks on Eclipse.
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