DECENTRALIZED PHYSICAL INFRASTRUCTURE NETWORK (DEPIN): AN OVERVIEW
Decentralized Physical Infrastructure Network (DePIN) refers to blockchain protocols that construct, maintain, and operate physical hardware infrastructure in an open and decentralized manner.
The DePIN industry encompasses infrastructure for data storage, wireless connectivity, computing, energy, data collection, and more.
Recent DePIN protocols have garnered interest from cryptocurrency investors due to their potential impact across various industries, including artificial intelligence (AI), the internet, energy, wireless communication, and others.
1. DePIN - What is a Decentralized Physical Infrastructure Network?
DePIN is a peer-to-peer (P2P) network addressing hardware needs through an open and decentralized marketplace.
Cryptocurrency serves as the tool to build communities, an essential component for DePIN projects. DePIN employs token rewards to attract and incentivize infrastructure providers in the real world to participate in their network.
As the value of the DePIN token rises (reflecting investors' contributions to the network), it enables service providers to offer competitive pricing. This leads to growth in the adoption and demand for DePIN services, ultimately resulting in further token value appreciation, attracting more investors, service providers, and users.
According to a report by cryptocurrency research company Messari, DePIN can be categorized into two groups:
Physical Resource Network (PRN): DePIN protocols encourage service providers to deploy location-dependent hardware to supply energy, connectivity, and geographic data for specific real-world locations. Digital Resource Network (DRN): DePIN protocols establish a location-independent backend for the cloud and incentivize service providers to offer digital resources such as computing, storage, and bandwidth.
2. Operational Framework of DePIN
DePIN operates through three key elements: off-chain network, blockchain, and protocols.
DePIN's off-chain network primarily involves users and service providers. Users in need of GPU computing power, wireless connectivity, or data storage will purchase available resources from the open market of service providers.
The blockchain connects end-users and service providers. It functions as a public ledger processing payments and executing smart contracts, ensuring accurate and traceable processing of all transactions. Every transaction between end-users and service providers is timestamped and recorded on the blockchain.
Finally, encoded rules or protocols define the key features of how DePIN operates. These rules determine the security measures of DePIN, the quantity of circulating cryptocurrency tokens, eligibility criteria for service providers, user-service provider interactions, and more.
DePIN contributes to creating an open market for hardware infrastructure that is currently dominated by centralized Big Tech corporations. These open, decentralized markets empower end-users by eliminating a central entity that can censor or arbitrarily shut down services.
DePIN showcases the importance of cryptocurrency and public blockchain technology. It provides alternative options to centralized conglomerates by establishing an open and decentralized market, where user privacy is protected, censorship is limited, and honest participation is rewarded.
Published on January 27, 2024
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