The New Infrastructure Wave: Analyzing the Opportunities and Challenges of the DePIN Track

DePIN stands for Decentralized Physical Infrastructure Network, which encourages users to share personal resources through token incentives to build an infrastructure network in areas such as storage space, communication bandwidth, cloud computing, and energy. In simple terms, DePIN crowdsources infrastructure that was originally provided by centralized companies and distributes it to numerous users globally.

According to the data, the current market value of the DePIN field has reached $5.2 billion, surpassing the $5 billion of the oracle field, and is showing a continuous upward trend. Whether it is the earliest Arweave and Filecoin, the Helium from the last bull market, or the recently highly regarded Render Network, they all belong to this field.

DePIN has recently garnered attention again, mainly for three reasons:

1. The infrastructure has improved compared to a few years ago, paving the way for the depin track.
2. At the end of last year, Messari introduced the new concept of DePIN, believing it to be "one of the most important areas for crypto investment in the next decade," which has added narrative heat to this sector.
3. People used to pin their hopes of breaking through the web3 barrier on social media and gaming, but with the arrival of the bear market, they began to explore other directions, with DePIN, closely connected to web2 users, becoming an important choice for web3 practitioners.

So is the DePIN track just old wine in new bottles, or a new opportunity for Web3 to break through? This article will deeply analyze DePIN from five perspectives: why DePIN is needed, the token economic model, the current state of the industry, representative projects, advantage analysis, and limitations and challenges.

Why is DePIN necessary?

Current status of the traditional ICT industry

The traditional ICT industry infrastructure is mainly divided into: hardware, software, cloud computing and data storage, and communication technology. Among the top ten companies in the global market value, six belong to the ICT industry, occupying half of the market.

According to data, the global ICT market size reached 439 billion USD in 2022, with data centers and software showing growth trends in the past two years, influencing our lives in various ways.

The dilemmas of the traditional ICT industry

However, the current ICT industry is facing two significant dilemmas:

1. The industry has a high entry barrier, limiting full competition, which leads to pricing being monopolized by giants.

In fields such as data storage and communication services, companies need to invest substantial funds in hardware purchases, land leasing for deployment, and personnel hiring, among other expenses. The high costs mean that only giant corporations can participate, with major players like AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud collectively holding nearly 70% of the market share in cloud computing and data storage. This results in pricing being monopolized by these giants, and the high costs will ultimately be passed on to consumers.

Taking cloud computing and data storage costs as an example, they are quite expensive. According to data, total spending by enterprises and individuals on cloud services reached $490 billion in 2022, and it is expected to exceed $720 billion by 2024. 31% of large enterprises spend more than $12 million annually on cloud services, while 54% of small and medium-sized enterprises spend more than $1.2 million. As companies increase their investment in cloud services, 60% of enterprises report that cloud costs are higher than expected.

The current situation in the cloud computing and data storage service sector shows that after prices are monopolized by giants, the spending pressure on users and enterprises is increasing. In addition, the capital-intensive nature restricts sufficient competition in the market, which can also affect innovation and development in the field.

The utilization rate of centralized infrastructure resources is relatively low.

The low utilization of centralized infrastructure resources is a significant challenge in today's business operations, especially prominent in cloud computing environments.

According to recent reports, on average, 32% of companies' cloud budgets are wasted, meaning that one-third of resources are idle after cloud spending, resulting in significant financial losses.

This misallocation of resources can be attributed to various factors. For example, companies often overestimate demand for resource supply to ensure continuous availability of services. In addition, more than half of cloud waste cases are due to a lack of understanding of cloud costs, getting lost in complex cloud pricing and packages.

On one hand, the monopoly of giants leads to excessively high prices; on the other hand, a considerable portion of corporate cloud spending is wasted, putting enterprise IT costs and utilization in a double bind, which is very detrimental to the healthy development of the business environment. However, this also provides fertile ground for the development of DePIN.

Faced with the high prices of cloud computing and storage, as well as the dilemma of cloud waste, the DePIN track can effectively address this demand. In terms of price, decentralized storage ) such as Filecoin and Arweave ( is several times cheaper than centralized storage; regarding the cloud waste dilemma, some decentralized infrastructures adopt a tiered pricing model to differentiate between various needs. For example, the Render Network in the decentralized computing track matches GPU supply and demand most efficiently through a multi-tiered pricing strategy. The following project analysis section will detail the advantages of decentralized infrastructure in solving these two dilemmas.

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DePIN's Token Economic Model

The core logic of DePIN is to incentivize users to provide resources through tokens, including GPU computing power, deploying hotspots, storage space, etc., to contribute to the entire DePIN network.

Since the early tokens of DePIN projects often have no real value, users participating in the network by providing resources are somewhat similar to venture capitalists. On the supply side, they select promising projects among numerous DePIN projects and then invest resources to become "risk miners," profiting by increasing the number of tokens acquired and the appreciation potential of the token prices.

These providers are different from traditional mining; the resources they offer may involve hardware, bandwidth, computing power, etc., and the income tokens are often related to network usage, market demand, and other factors. For example, low network usage may lead to reduced rewards, or an unstable network due to attacks may result in resource waste. Therefore, risk miners in the DePIN track need to be willing to bear these potential risks and provide resources for the network, becoming a key component in the stability of the network and the development process of the project.

This incentive mechanism will create a flywheel effect, forming a positive cycle during favorable development; conversely, it can also easily lead to a withdrawal cycle during unfavorable development.

1. Attract supply-side participants through tokens: Attract early participants to network construction and resource provision through a good token economics model, and provide token rewards.

2. Attract builders and network consumers: As resource providers increase, some developers begin to join in building ecological products. Meanwhile, after providing certain services on the supply side, consumers are also starting to be attracted to join due to the lower prices offered by DePIN compared to decentralized infrastructure.

3. Forming positive feedback: As the number of consumer users increases, this demand incentive brings more revenue to the supply-side participants, forming positive feedback, thereby attracting more people to participate on both sides of the supply.

In this cycle, the supply side has more and more valuable token rewards, while the demand side has cheaper and more cost-effective services. The value of project tokens aligns with the growth of participants on both the supply and demand sides. As the token price rises, it attracts more participants and speculators, forming value capture.

Through the token incentive mechanism, DePIN first attracts suppliers, then attracts users to use it, thereby achieving the project's cold start and core operation mechanism, which can further expand and develop.

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Current Situation of the DePIN Industry

From the earliest established projects, such as the decentralized network Helium) in 2013, decentralized storage Storj( in 2014, and Sia) in 2015, it can be seen that the earliest DePIN projects were primarily focused on storage and communication technologies.

However, with the continuous development of the internet, Internet of Things, and AI, the requirements for infrastructure and the demand for innovation are increasing. From the current development status of DePIN, DePIN projects are mainly focused on computing, storage, communication technology, as well as data collection and sharing.

Looking at the top 10 projects by market capitalization in the DePIN field, most belong to the Storage and Computing sectors. Additionally, there are some notable projects in the telecommunications sector, including the industry pioneer Helium and the rising star Theta.

Representative Projects in the DePIN Industry

According to market capitalization rankings, this article will focus on analyzing the top five projects: Filecoin, Render, Theta, Helium, and Arweave.

( Filecoin & Arweave - Decentralized Storage Track

In the traditional data storage field, the high pricing of centralized cloud storage on the supply side and the low resource utilization on the demand side create dilemmas for users and businesses, and there are also risks such as data leakage. In response to this phenomenon, Filecoin and Arweave provide lower prices through decentralized storage methods to break the deadlock and offer users a different service.

Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through tokens. Within about a month of going live on the testnet, its storage capacity reached 4PB, which has now grown to 24EiB. Filecoin is built on top of the IPFS protocol, which is already a widely recognized distributed file system. Filecoin achieves decentralized and secure data storage by storing user data on the nodes within the network. Additionally, Filecoin leverages the advantages of IPFS, giving it strong technical capabilities in the field of decentralized storage, while also supporting smart contracts, allowing developers to build various storage-based applications.

At the consensus mechanism level, Filecoin adopts Proof of Storage, including advanced consensus algorithms such as Proof of Replication)PoRep( and Proof of Spacetime)PoSt###, ensuring data security and reliability. Simply put, Proof of Replication ensures that nodes have replicated client data, while Proof of Spacetime ensures that nodes have consistently maintained storage space.

Currently, Filecoin has established partnerships with many well-known blockchain projects and companies, such as NFT.Storage, which utilizes Filecoin to provide a simple decentralized storage solution for NFT content and metadata, and the Shoah Foundation and the Internet Archive, which use Filecoin to back up their content. Notably, the world's largest NFT marketplace, OpenSea, also uses Filecoin for NFT metadata storage, further promoting the development of its ecosystem.

Arweave shares some similarities with Filecoin in incentivizing the supply side, by using tokens to encourage users to provide storage space, with the reward amount depending on the volume of stored data and the frequency of data access. The difference is that Arweave is a decentralized permanent storage network; once data is uploaded to the Arweave network, it will be permanently stored on the blockchain.

Arweave uses a "Proof of Access" mechanism to demonstrate the accessibility of data within the network. In simple terms, it requires miners to provide random selections during the block creation process.