By Fred, Ryze Labs

1.Introduction: What is DePIN

DePIN stands for Decentralized Physical Infrastructure Network,**It encourages users to share personal resources through token incentives to build infrastructure networks, including storage space, communication traffic, cloud computing, energy and other fields. **

Simply put, DePIN distributes the infrastructure originally provided by centralized companies to many users around the world in a crowdsourcing format.

According to CoinGecko, the current market value of the DePIN field has reached $5.2 billion, exceeding the $5 billion in the oracle field, and it continues to rise. Whether it's Arweave and Filecoin that emerged first, Helium, which took off in the last bull market, and the Render Network, which has recently attracted much attention, they all belong to this space.

Some readers may be wondering if these projects have been around before, and Helium was caught in the last bull market, but why has DePIN started to attract attention and enthusiasm recently?

The reasons can be roughly summarized into three aspects:

1. The infrastructure has been much better than a few years ago, which paves and empowers the Depin track;
2. On the other hand, at the end of 22, Messari first proposed the new concept of DePIN as "one of the most important areas of crypto investment in the next decade", and the new definition and expectation also added a new narrative heat to this track; In addition, people once pinned the new narrative of web3 breaking the circle on social and games, but with the arrival of the bear market, people began to explore more possibilities in other directions, and the DePIN track, which is also closely linked with web2 users, has gradually become an important choice for web3 builders.
3. So is the DePIN track a new bottle of old wine, or a new opportunity for Web3 to break the circle? This article will give you an in-depth analysis of DePIN from five perspectives: why you need DePIN, DePIN's token economy model, industry status, representative projects, advantage analysis, and limitations and challenges.

**2.Why do I need DePIN? **

So why do we need DePIN? What problems does DePIN solve compared to traditional ICT infrastructure?

2.1 Current Status of Traditional ICT Industry

In the traditional ICT industry, we can divide infrastructure into the following categories: hardware, software, cloud computing and data storage, and communication technology.

Six of the top 10 companies in the world by market capitalization currently belong to the ICT industry (Apple, Microsoft, Google, Amazon, NVIDIA, Meta), accounting for half of the total.

According to Gartner, the global ICT market size has reached $4.39 trillion in 2022, and data centers and software have shown growth trends in the past two years, affecting our lives in all aspects.

2.2 The Dilemma of the Traditional ICT Industry

However, the current ICT industry faces two significant dilemmas:

**1) The high barrier to entry in the industry restricts full competition and leads to pricing being monopolized by giants. **

In areas such as data storage and communication services, companies need to invest a lot of money in hardware purchases, leased land deployment, and maintenance personnel. These high costs have led to only giant enterprises being able to participate, such as AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud in cloud computing and data storage, which have a combined market share of nearly 70%. As a result, pricing is monopolized by giants, and high costs are eventually passed on to consumers.

The price of cloud computing and data storage, for example, is quite expensive:

According to Gartner, spending by businesses and individuals on cloud services totaled $490 billion in 2022 and is expected to continue to grow in the coming years, exceeding $720 billion by 2024. According to RightScale, 31 percent of these large enterprises spend more than $12 million annually on cloud services, and 54 percent of small and medium-sized businesses spend more than $1.2 million on cloud services. As enterprise investment in cloud services increases, 60 percent say their cloud costs are higher than expected.

Just based on the current situation of spending in the field of cloud computing and data storage, it can be seen that after the price is monopolized by the giants, the spending pressure of users and enterprises will also increase. In addition, the capital-intensive nature limits full competition in the market, while also affecting innovation and development in the field.

**2) Centralized infrastructure resource utilization is low. **

The low utilization of centralized infrastructure resources is a significant challenge in today's business operations. This problem is especially acute in cloud computing environments, where companies often allocate large budgets for cloud services.

According to Flexera's most recent report (2022), there is a worrying trend where, on average, 32% of a company's cloud budget is wasted, meaning that a third of a company's resources are idle after spending on the cloud, resulting in huge financial losses.

This misallocation of resources can be attributed to a variety of factors. For example, with the supply of resources, companies tend to overestimate their needs to ensure continuous availability of services. In addition, according to Anodot, cloud waste in more than half of the cases is due to a lack of understanding of cloud costs, getting lost in complex cloud pricing and a variety of packages.

On the one hand, the monopoly of giants leads to excessive prices, and on the other hand, a considerable part of the company's cloud expenditure is wasted, making the IT cost and IT utilization rate of the enterprise into a double dilemma, which is very detrimental to the healthy development of the business environment. However, everything has a double-edged sword, which also provides the soil for the development of DePIN.

In the face of the high price of cloud computing and storage and the dilemma of cloud waste, DePIN track can solve this demand well. In terms of price, decentralized storage (e.g. Filecoin, Arweave) is several times cheaper than centralized storage; In terms of cloud waste dilemma, some decentralized infrastructures have begun to adopt a layered pricing approach to distinguish different needs, such as the Render Network of the decentralized computing track to match GPU supply and demand most efficiently by adopting a multi-level pricing strategy. The advantages of decentralized infrastructure in addressing these two dilemmas will be detailed in the following chapter of the project analysis.

3.DePIN's token economy model

Before understanding the current situation of the DePIN track, let's first understand the operation logic of the DePIN track. The core question is: why are users willing to contribute their resources to the DePIN project?

As mentioned in the introduction, the core logic of DePIN is to promote users to provide resources, including GPU computing power, deployment hotspots, storage space, etc., through token incentives, to contribute to the entire DePIN network.

Since in the early days of DePIN projects, tokens often have no real value, so the behavior of users participating in the network to provide resources is to some extent similar to venture capitalists, the supply side selects promising projects in many DePIN projects, and then invests resources into becoming "risk miners", and makes profits by obtaining an increase in the number of tokens and the appreciation of token prices.

These providers differ from traditional mining in that the resources they provide may involve hardware, bandwidth, computing power, etc., and the tokens they earn are often related to network usage, market demand, and other factors. For example, the network usage is low, resulting in reduced rewards, or the network is attacked or unstable, resulting in their resources being wasted. Therefore, risk miners in the DePIN track need to be willing to take these potential risks and provide resources for the network, becoming a key part of the process of network stability and project development.

This incentive method will form a flywheel effect, forming a positive cycle when the development is good; Conversely, when development is downward, it is easy to create a cycle of withdrawal.

1. Attract supply-side participants through tokens: Attract early participants to participate in network construction and provide resources through a good tokenomics model, and give tokens in return.

2. Attract builders and online consumer users: With the increase of resource providers, some developers began to join the ecological construction products, and after providing certain services on the supply side, consumers began to be attracted to join because DePIN provided a lower price than decentralized infrastructure.

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

**Under this cycle, the supply side has more and more valuable token returns, the demand side has cheaper and more cost-effective services, the token value of the project is consistent with the growth of participants on both the supply and demand sides, and as the token price rises, more participants and speculators are attracted to participate and form value capture. **

Through the token incentive mechanism, DePIN first attracts suppliers and then attracts users to use, thus realizing the cold start and core operation mechanism of the project, so that it can further expand and develop.

4.DePIN Industry Status

From the earliest projects, such as the decentralized network Helium (2013), decentralized storage Storj (2014), Sia (2015), it can be seen that the earliest DePIN projects basically focus on storage and communication technology.

However, with the continuous development of the Internet, Internet of Things and AI, there are more and more requirements and innovative needs for infrastructure. From the perspective of the development status of DePIN, the current DePIN projects mainly focus on computing, storage, communication technology, and data collection and sharing.

From the current top 10 projects in the DePIN field by market capitalization, most of them belong to the field of Storage and Computing, and there are also some good projects in the field of telecommunications, including industry pioneer Helium and late-stage star Theta, which will be further interpreted in the later project analysis.

5.DePIN Industry Representative Project

Based on the depin market cap ranking on Coingecko, this article will focus on the top five projects: Filecoin, Render, Theta, Helium, and Arweave.

First of all, let's take a look at Filecoin and Arweave in the decentralized storage track, which are also two projects that everyone is more familiar with.

5.1 Filecoin & Arweave – Decentralized Storage Track

As mentioned in the dilemma of the traditional ICT industry at the beginning, in the traditional data storage field, the high pricing of centralized cloud storage on the supply side and the low resource utilization rate on the consumption side have caused difficulties for the interests of users and enterprises, and there are also risks such as data leakage. In the face of this phenomenon, Filecoin and Arweave break the game by providing lower prices through decentralized storage and provide users with different services.

Let's start with Filecoin. From the supply side, Filecoin is a decentralized distributed storage network that incentivizes users to provide storage space through token incentives (providing more storage space is directly related to getting more block rewards). Within about 1 month of the testnet, its storage space reached 4PB, of which Chinese miners (storage space providers) played an important role. At present, the storage space has reached 24EiB.

It is worth noting that Filecoin is built on top of the IPFS protocol, which itself is already a widely recognized distributed file system, Filecoin enables decentralization and security of data storage by storing users' data on nodes in the network. In addition, Filecoin leverages the advantages of IPFS to make it strong in the field of decentralized storage, while also supporting smart contracts, allowing developers to build a variety of 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) to ensure data security and reliability. In simple terms, Proof of Replication ensures that the node replicates the client's data, while Proof of Spacetime ensures that the node maintains storage space at all times.

Currently, Filecoin has partnerships with many well-known blockchain projects and businesses, such as NFT.Storage utilizing Filecoin to provide a simple decentralized storage solution for NFT content and metadata, while the Shoah Foundation and Internet Archive utilize Filecoin to back up their content. It is worth noting that OpenSea, the world's largest NFT market, also uses Filecoin for NFT metadata storage, which further promotes the development of its ecosystem.

Let's take a look at Arweave, which has some similarities with Filecoin in terms of incentive supply side, through token incentives, users provide storage space, the amount of rewards depends on the amount of data stored and how often the data is accessed.

The difference is that Arweave is a decentralized permanent storage network that once data is uploaded to the Arweave network, it will be kept in the blockchain forever.

So how does Arweave motivate users to provide storage? At its core, a proof-of-work mechanism called "Proof of Access" is used to prove the accessibility of data in the network. Popularly understood as requiring miners to provide a randomly selected previously stored block of data during block creation as "proof of access".

At present, the official provides a variety of solutions, including permanent storage of files, creation of permanent profiles and web pages, etc.

(Source: Arweave official Website)

In order to quickly understand the differences between Arweave and Filecoin, a table has been made to help everyone understand.

As can be seen from the above table, Filecoin and Arweave have obvious differences in storage methods, economic models and consensus mechanisms, which make them have their own advantages in different application scenarios, but due to the lower storage price, Filecoin is currently in a leading position in market performance.

Overall, with the popularity of big data and artificial intelligence applications, the amount of data generated has increased exponentially, and the demand for data storage has also increased, and in the context of high pricing of centralized storage, the demand for decentralized storage has become more and more.

Under the same storage conditions of 1TB for a month, the price of decentralized storage is on average less than half that of Google Drive, which is one-tenth of Amazon S3.

In addition to the price advantage, decentralized storage is more secure, data is distributed across multiple nodes, reducing the risk of single points of failure, and there is also higher censorship resistance.

In terms of data privacy, users retain absolute ownership and control over their data in decentralized storage. Users may access, modify or delete their data stored on the network at any time; In centralized storage, users host their data to a service provider, so the service provider may have some control over the data, and users need to comply with the service provider's terms of use and privacy policy.

In terms of disadvantages, decentralized storage has many technical challenges, including data storage and retrieval efficiency, node reliability and other issues that need to be solved. Compared to the high availability and performance guarantees of centralized storage, the availability and performance of decentralized storage may be affected by participants in the network, so there may be some fluctuations that affect the user experience.

5.2 Helium – Decentralized Wireless Network

Now that we understand the decentralized storage circuit, let's take a look at Helium, a much-watched decentralized wireless networking project. Founded in 2013, it is also a veteran and pioneer of the DePIN circuit.

Why is decentralized wireless networking important? In the traditional IoT industry, due to the difficulty of covering revenue due to infrastructure costs, network providers of IoT devices have not yet emerged as giants, and there is no integrated market. There is demand and difficult supply provides the soil for Helium's development in IoT.

Since the most difficult card point is the infrastructure cost, it has become DePIN's natural advantage in this area to share the cost by participating in the "crowdfunding" of users on the supply side. Through token incentives, to attract global users to participate in the purchase of Helium's network equipment to form a network to achieve network supply. Its technical strength gives it a significant advantage in the field of Internet of Things (IoT), with the number of hotspots exceeding 900,000 in August last year, and the number of monthly active IoT hotspots reaching 600,000, 20 times the 30,000 hotspots of The Things Network, the head player of traditional IoT networks. (Even if the number of active hotspots today falls to 370,000, there is still a clear advantage)

After making progress in the IoT field, Helium hopes to further expand its network business territory and start entering the 5G and WiFi market. However, as can be seen from the data in the figure below, Helium is currently performing well mainly in the IoT space, while the performance in 5G is mediocre.

Why is Helium outstanding in the IoT space, but slightly weak in the 5G space? Let's break it down from the market and compliance side.

In Helium's IoT space, LoRaWAN technology, a low-power wide-area network technology, is characterized by low power consumption, long transmission distance, and excellent indoor penetration. Such networks often do not require specific authorization, making them an affordable option for large-scale IoT deployments.

For example, in agricultural scenarios, farmers only need to monitor whether soil moisture and air temperature exceed a certain threshold to implement intelligent irrigation and crop management. Similarly, there are many prospects in smart city scenarios such as smart light poles, trash cans, and parking sensors.

Moreover, the IoT network market is difficult to cover revenue due to wide coverage but low data transmission, and industry giants have not yet emerged. Helium seized this opportunity by combining web3 technology with IoT networks to cleverly solve the problem of high funding barriers through DePIN. Through everyone's participation, the heavy cost of early IoT construction can be distributed to each user, so as to achieve a lightweight start-up. At present, some indoor and outdoor positioning devices, smart farms such as Abeeway, Agulus, etc. have begun to adopt Helium, and as of August last year, the number of hotspots has exceeded 900,000.

On the other hand, Helium has been involved in the 5G market for a year, and its current performance is not satisfactory, and the root cause can be summarized as the dual dilemma of compliance and market ceiling.

In terms of compliance, the allocation and licensing of frequency bands in the United States is strictly regulated by the Federal Communications Commission (FCC). The low bands of 600MHz and 700MHz, the mid-band of 2.5GHz and 3.5GHz, and the 28GHz and 39GHz bands are subject to rigorous vetting before authorization. For example, T-Mobile is licensed to deploy 5G in the 600MHz band, and Verizon is deploying 5G using the 700MHz band. As a latecomer, in order to reduce deployment costs and solve compliance challenges, Helium chose the unlicensed CBRS GAA band, which has slightly smaller coverage than the mid-band and does not show significant advantages over US carriers.

In terms of market ceiling, it is worth noting that 5G is an area strictly regulated by national policies, and network operators in most countries around the world are state-owned, and only a few are private companies and have close ties with the state. Therefore, from a large market perspective, it is difficult for Helium to replicate its 5G market experience in the United States overseas.

In addition, the opacity of cooperative equipment is also an experience problem on the supply side. Since Helium's equipment is open source, the performance, price and installation process of different cooperative manufacturers are different, and the opaque performance and price opacity are a big problem for the suppliers participating in Helium, and there is also the phenomenon that merchants use second-hand equipment to fill up indiscriminately. How to optimize the supply-side experience and balance the transparency and affordability of open source and device performance price is also a challenge for the Helium project.

Notably, on March 27 this year, Helium began migrating from its own Layer 1 blockchain to Solana. The reasons for migration can be summarized as follows:

1. The core of the Helium team wants to do is the network, and after evaluating the importance of maintaining Layer 1, it was decided to leave the maintenance of the underlying blockchain to people who are good at it, so that the team's focus can be liberated on the construction of the Helium network;
2. Solana was chosen mainly from the ecological aspect, Solana has many high-quality ecological projects and developers, and Helium's token HNT is natively compatible with other innovative projects in the Solana ecosystem, so that token holders can have more use cases;
3. In addition, Solana's latest state compression feature enables a large number of NFTs to be minted at a very low cost, allowing Helium to migrate to Solana for nearly 1 million NFTs to mint for only $113, saving a lot of fees. These NFTs can be used as Helium's network credentials and verify hotspots, and can also integrate the functions of the entire ecosystem, including token gating and access rights for hotspot owners, which is very efficient and convenient.
4. In terms of future planning, there are also many cooperation spaces with Helium in Solana Mobile Stack, Saga mobile phones that Solana wants to launch, etc., which is a win-win situation for Solana, who wants to make mobile phones, and Helium, who wants to develop 5G service providers.

In the long run, Helium's exploration of IoT is a 0-to-1 innovation that is extremely valuable in solving the needs of the Internet of Things. Although there will be many challenges in this process, Helium decentralized network solutions may be more widely used as IoT devices become more popular and application scenarios continue to expand. It is believed that in the future, smart agriculture, smart city and other fields, it will play a huge potential.

5.3 Render Network – Decentralized Computing

Render Network is a decentralized GPU rendering platform that refers to the transformation of two- or three-dimensional computer models into realistic images and scenes. Render Network has previously caused heated discussions at Apple Vision Pro conferences, as well as during the metaverse and AR/VR boom.

Some readers may wonder why PCs are not enough to edit videos and produce animations, and Render Network is needed. The reason is that for small projects such as short videos or micro-movies, the requirements for computing power are relatively low. However, for many large projects, the computing resources required for rendering are huge and often need to rely on centralized cloud service providers such as AWS, Google Cloud, Microsoft Azure, etc., but the price of the giants is often not cheap.

For customers, the most concerned price, Render Network uses multi-layer pricing to make the supply and demand of GPUs match most efficiently.

Render Network focuses on the price aspects that customers care about the most, and adopts a multi-level pricing strategy to match GPU supply and demand most efficiently.

The rendering service is quantified in OctaneBench units and times, adjusted according to OctaneBench4 and standardized to €1. This pricing model is based on the current cost of GPU cloud rendering services on centralized platforms such as Amazon Web Services (AWS). Specifically, an RNDR worth 1 euro is equivalent to 100 OctaneBench4 per hour.

Tier2 offers 2 to 4 times the total OctaneBench workload compared to Tier1 and 200-400% more computing power than Tier 1 RNDR tokens. Layer 2 rendering work takes precedence over tier 3 in the render queue, allowing parallel rendering services to be accelerated. Tier3 provides 8 to 16 times the OctaneBench workload. However, Layer 3 services have the lowest priority in the render queue and are not recommended for time-sensitive rendering tasks.

(Source: Render Network Knowledge Base)

In simple terms, the pricing formula for each tier is fixed, but the pricing unit OctaneBench fluctuates based on market performance. The cost and effectiveness of Tier1 is comparable to centralized cloud rendering services such as AWS, while Tier2 and Tier3 achieve lower prices through lower requirements for speed. For price-sensitive users, Tier3 can be chosen, while for users who pursue high efficiency, Tier1 is a preferred choice, and the middle can choose Tier2.

In addition, Render Network emphasizes the full use of GPU idle resources. Because most GPUs are underutilized when they are idle locally. At the same time, artists and developers are working tirelessly to scale up cloud rendering and computing. The decentralized rendering network provides an efficient two-way marketplace for the supply and demand of global GPU computing, which is a very efficient way to match resources.

5.4 Theta Network – Decentralized Video Network

Steve Chen, co-founder of Theta Network, is a former co-founder of Youtube and has a strong industry background. The core function of the project is the use of blockchain-based optimized content distribution network, which significantly reduces the cost of video content transmission and improves the efficiency of content distribution.

For a better understanding, let's compare traditional content delivery networks (CDNs):

In a traditional distribution network, all video viewers connect directly to POP servers (network nodes distributed around the world) for video viewing. At present, most platforms such as Netflix and Facebook obtain services through centralized CDNs. However, for those geographies that are far from the POP server, video streaming tends to suffer. Theta Network's model allows users to contribute their bandwidth and computing power to become caching nodes to distribute videos closer to viewers.

This allows the final video viewer to get a better experience, while bringing token rewards to users who provide bandwidth and computing power, and also reducing the cost of the video platform. With the continuous increase in video content consumption and the rise of online live broadcasting, game live streaming and other industries, Theta Network is expected to be used in more application scenarios. At present, in the field of decentralized video streaming, Theta Network will also face competition from Livepeer, VideoCoin and other projects.

Of course, in addition to the top 5 projects analyzed above by market capitalization, there are many projects worth mentioning, such as IoTex, which provides the underlying infrastructure for IoT projects, SDKs for developers in the DEPIN track, and recently launched the beta version of the data platform DePINscan to help analyze the data of the DePIN track.

In addition, Ketchup Republic, the champion project of this year's Wanxiang Blockchain Week hackathon, aims to create a popular review based on web3, directly giving traffic fees purchased by merchants to users, providing better traffic and experience for merchants and consumers...

These noteworthy projects that have sprung up from the DePIN track have sprung up, and the breaking lap that everyone desires may give birth to a new summer on the DePIN track, but due to the cost requirements of the combination of software and hardware, the summer may come slower. But I believe that the belated spring is also spring.

6.Advantages of DePIN

Looking at the mechanism of various DePIN projects, the most essential core is resource integration: ** Incentives for users to share resources through tokens, so that resources can flow efficiently to the demanders. Compared with centralized traditional infrastructure, DePIN is like DeFi compared to CeFi, which somewhat weakens the role of middlemen, making resources more unimpeded between the supply side and the demand side.

6.1 Shift from a capital intensive industry to a P2P/P2B model

The mechanism presented by the DePIN project is essentially a revolutionary market revolution. Its decentralized nature means that the threshold for enterprise participation will be significantly lowered, and it will no longer be subject to the monopoly of a few centralized giants. This groundbreaking change will give SMEs and start-ups greater participation and provide an opportunity to compete on an equal footing with industry leaders.

In the field of infrastructure construction, the oligopoly problem of centralized market was prominent. Especially in the traditional storage and computing field, which is obviously a capital-intensive industry, AWS, Azure, Google Cloud and other giants sit on the price, users often lack bargaining power, forced to accept high prices, and even lack real choice.

However, the advent of DePIN has brought new life to this situation. Whether it's Filecoin, Arweave or Render Network, by incentivizing user tokens and allowing users to provide resources to form a network, the transition from a capital-intensive industry to a P2P or P2B model is achieved. This greatly lowers the threshold for enterprise participation, breaks the price monopoly, and makes users have more affordable choices. DePIN makes the market more open, transparent and competitive by incentivizing users to share resources and build an ecosystem of free competition.

6.2 Reuse idle resources to promote better social development

In the traditional economic model, many resources sit idle and fail to realize their potential value. This waste of resources not only has a negative impact on the economy, but also causes significant pressure on the environment and society, including idle computing power, storage, and energy. Taking the cloud as an example, according to Flexera's report, the effective usage rate of enterprise cloud purchases in 2022 is only 68%, meaning that 32% of cloud resources are wasted. Considering that Gartner expects cloud spending to reach nearly $500 billion in 2022, that means a rough estimate of $160 billion in cloud spending is wasted.

However, the advent of DePIN offers a new solution to this dilemma. Many users hold a lot of idle resources, whether it is storage, computing power, or data, and the key is how to mobilize these resources. Through incentives, DePIN encourages users to share and utilize their resources, maximizing resource utilization. This includes not only resources such as data storage and computing power, but also environment-related resources, such as React Protocol, which connects batteries and electricity markets into a community network, helps stabilize the grid by connecting batteries and sharing users' excess electricity, on the one hand, contributing to the supply of clean energy, on the other hand, for users with limited resources, there is also an additional way to make money and monetize, which has to be said to be a win-win. This initiative will not only reduce the waste of resources, but also bring more sustainable development to society.

6.3 Eliminate middlemen, money flows more efficiently

In addition to the transformation of decentralized storage, computing and network and the reuse of idle resources, in some recent emerging DePIN projects, the vision and characteristics of O2O projects such as Meituan, Dianping, and Didi that want to be made into web3 have been found.

For example, Ketchup Republic wants to use the location relationship between consumers and merchants (using Bluetooth) to help merchants attract offline traffic. Merchants can configure their own token incentive methods to users, and marketing settings can be made in terms of location, frequency, distance, etc. Compared with the merchant-platform-user incentive model of Meituan and Dianping of web2, in Ketchup Republic, the marketing fee of the merchant directly hits the user's pocket, thereby reducing the wear and tear of marketing fees.

This emerging DePIN project aims to replace web2 infrastructure projects, allowing users of the data provided directly to be paid by the merchant, eliminating the middleman.

This means that DePIN enables direct transfer of value by building a decentralized ecosystem that directly connects the supply and demand sides, and funds and resources can flow more quickly, thereby improving the efficiency and transparency of transactions. This mechanism will not only reduce transaction costs, but also bring more opportunities and flexibility to market participants.

7.Limitations and Challenges of DePIN

The DePIN track covers a wide range of categories, including storage, computing, data collection and sharing, communication technology, etc., and these existing markets present varying degrees of competition. The development of DePIN also faces many limitations and challenges:

7.1 Experience level: Lack of standards in the early days of the industry, poor developer and user experience

At present, the DePIN industry is still in its early stages of development, lacking a complete infrastructure, and each project needs to be developed by itself. In addition, the project's understanding and use threshold for user participation is relatively high, and users need to learn and hold tokens, as well as purchase and configure some hardware. These factors have led to the average user experience of DePIN projects in the current market, and companies need to aggregate and simplify the threshold of user participation and use to improve the usability of the network in order to have more possibilities of breaking the circle.

For example, Filecoin announced the launch of Filecoin Data Tools (a suite of computing and storage technologies based on its network) to enhance the developer experience and provide a comprehensive solution for data service needs; In terms of infrastructure, IoTex is also working on toolkits such as the Move to Earn SDK, hoping to reach some standards and consensus at the DePIN level to promote the development of the industry.

7.2 Competitive Dimension: Lack of Competitive Moat

The lack of competitive moats poses a challenge to the long-term stability of the network. Users who are resource providers may easily move to other networks once more options emerge in the market. For example, at present, in the 5G track, Pollen has entered, and some miners from the Helium community have also begun to deploy Pollen's mining machines, and as a decentralized mobile network provider, how to enhance its own irreplaceability and competitive barriers is a long-term exploration process.

In addition, how to prevent cheating is also very important for sustainable development, such as cluster mining cheating encountered in the Helium project, GPS location modification cheating in geodata-related projects, etc., is also a very important part. For example, Helium fell from a peak of 600,000 monthly active hotspots to the current 370,000 monthly active hotspots, how to reverse the decline and provide better services is an urgent problem to solve.

The current projects mostly attract users from the aspect of token incentives, such as adjusting the token incentive amount from multi-dimensional settings such as coverage and availability, but there is no sustainable and effective plan, how to continue to attract user participation, form a positive flywheel effect, there is still a way to explore.

7.3 Extended Level: Regulatory Limits for Regulatory Compliance

Since the DePIN field involves infrastructure and has an impact on users in the web2 world, regulatory compliance becomes an unavoidable issue. For example, in the communications sector, 5G technology is subject to strict regulatory requirements. In many countries, network operators are operated by state-owned enterprises and private companies maintain close ties to the government, so obtaining authorization can be challenging. Even if some countries open up some frequency bands, such as the CBRS GAA band opened by the United States, there is no obvious advantage over other operators due to band restrictions.

On the contrary, in the field of IoT, there is no mature giant solution, so there is room for Helium to play. The current DePIN is still in its early stages, on the one hand, in areas that are currently unsolved by web2, such as IoT networks, new tricks can be tried; On the other hand, there are more mature solutions in web2, such as 5G, data security, etc., which also need to grow together with the development of regulations, and the speed of this growth is unknown and full of changes.

7.4 Construction Level: Talent Barriers

When communicating with some DePIN track project parties, I found that the common pain point and challenge of everyone is the scarcity of talents.

The DePIN field needs people with comprehensive skills to understand both the Internet of Things and how the web3 marketplace works. However, such talent is relatively scarce in the industry at present.

To some extent, the temperament of the steady development of the Internet of Things and the radical and innovative style of Web3 have also become more difficult and slightly contradictory qualities for talents. Most talents with IoT experience may prefer to develop in traditional industries, while those who understand IoT while understanding the Web3 market and operations are more scarce. The difference between the two makes team recruitment and collaboration a challenge.

Overall, the DePIN space faces challenges in the short term, including product experience, moat establishment, regulatory compliance, and talent shortage. However, in the long run, the emergence of DePIN will have a profound impact on the market, whether from the perspective of lowering barriers, innovating or using idle resources and money flows, and the market changes it brings will affect the evolution of supply chains, industrial landscapes, and the entire economic ecosystem. As DePIN continues to grow and mature, there is reason to believe that it will be a key force capable of making real difference for society, businesses and individuals.