DePins are projected to grow to a 3.5 trillion industry by 2028. This is because as the demand for digital currencies and Web3 services continue to grow, the need for physical hardware to support the data centres and networks that power them also rises. This is where Decentralised Physical Infrastructure Networks (DePin) come in.

What are DePins?

DePins are networks that reward users with crypto tokens for participating in the physical infrastructure of a blockchain network. By maintaining physical resource networks such as sensors and wireless devices, users can earn tokens in exchange for their contributions.

This model incentivises individuals to contribute to the network by providing resources that are essential for its operation. Supporting the digital resource networks such as the computing power, bandwidth, and AI storage can also result in earning rewards.

Finally, the DePIN module itself is also a component of the overall landscape of DePins. Web3 wallets would fall under this category, as they are an essential part of the decentralised ecosystem. These networks are built on decentralised principles, meaning that there is no central authority controlling them. Let's explore more about DePins and how they function.

How do DePins work?

The way DePins work is actually quite simple. Supply-side users allocate their resources in exchange for token rewards from the network. These rewards motivate network participants to expand their infrastructure further.

Start-up capital from founders will also flow into the flywheel to build momentum alongside the community (as they are incentivised by the same token rewards). Investors also will fund the project, increasing the token's value to make it more alluring for the community to participate. Miners/Deployers will also be adding value via production capital for the DePin platform.

These DePin platforms will need dApps and that's where third party developers come in to build their own dApps on the DePin platform. This 'human capital' creates utility for the end users who will be appreciative and incentives to support the DePin protocol, thus completing the flywheel effect.

Importance of Decentralised Physical Infrastructure Networks

Physical infrastructure has traditionally been monopolised by big corporations as the running and maintenance costs made it unfeasible for individual entities to participate. However, with the emergence of blockchain technology, DePins have been created to provide a decentralised alternative to traditional infrastructure networks.

DePIN (decentralised physical infrastructure networks) offers numerous advantages compared to centralised solutions in four main ways:

  1. Reduce costs
  2. Horizontally scale
  3. Reward network contributors
  4. Enhance security

Applications of DePin

Decentralised storage is one of the applications of DePins. With this storage system, projects build a marketplace for unused storage capacity. These providers will offer computing resources for token incentives. The projects will then encrypt & split up client data across this network. Finally, clients pay the network to store and retrieve their information.

Decentralised computing also makes use of DePins. In this situation, decentralised compute networks enable users to borrow GPU power to run complex computations on the cloud. This is useful because it reduces or eliminates the need to invest heavily in expensive infrastructure, and also gives developers access to a much larger computing power pool.

AI's growth in the past few years is no secret. With that comes the need for artificial intelligence infrastructure. With the lack of specialised hardware, inefficient collaboration and poor data storage solutions, DePins provides a solution. By distributing computing resources, DePins can offer much more efficient and cost-effective infrastructure for AI development.

What is the future outlook for DePins?

The future looks bright for DePins because they solve major problems that the current centralised infrastructure networks face. DePin networks are expected to be around 78% cheaper than traditional networks, and the ability to horizontally scale means that they are more efficient in handling traffic growth.

Centralization also creates a single point of failure. If this fails, the entire network is at risk. With a decentralised infrastructure, multiple nodes are working together to maintain the network, reducing vulnerability and enhancing security.

With more and more individuals becoming familiar with blockchain and the potential it holds, decentralised solutions such as DePins are likely to see widespread adoption and continued growth in the future. The crypto token reward model also helps to incentivise individuals and organisations to participate in the network, further driving its success.