Summary: The article provides an overview of decentralized physical infrastructure (DePIN) networks, which use tokens to incentivize individuals to contribute to building infrastructure, analyzing the concept, sectors, benefits, challenges, and examining case studies like Helium and Filecoin.
What is DePIN:
- Infrastructure projects using tokens to bootstrap networks in a decentralized way.
- Individuals build infrastructure and get rewarded with tokens.
- Server networks, wireless networks, sensor networks, energy networks.
Benefits of DePIN:
- Faster, hyperlocal, cost-effective infrastructure buildout.
- Permissionless, collectively owned networks.
Challenges of DePIN:
- Dilutive incentive models, long timelines, big competition.
How it works:
- Supply side bootstraps network for token rewards.
- Network then attracts demand side usage and fees.
Case studies - Helium and Filecoin:
- Both projects rallied hugely in 2021 but now declining.
- Evidence that use cases were overhyped, revenue is falling.
- Unclear if they can compete with centralized alternatives.