DePIN: The New Industrial Revolution

Authors: Erik Lowe, Pantera Content Director; Cosmo Jiang, Pantera Portfolio Manager; Eric Wallach, Pantera Investment Analyst; Translation: Golden Finance xiaozou

The industrial revolution is a transformative era, which improves productivity and reshapes the economic structure through breakthrough large-scale machine manufacturing. During the industrial revolution, there was a transition from primarily localized agricultural economies to urban industrial centers, and social centralization was an inevitable outcome.

However, although centralized production has improved efficiency, it has also brought challenges. Factories are easily affected by catastrophic events such as fires or other single-point failures (such as mechanical failures).

Although we have gone through a series of ‘industrial revolution’ stages driven by technological advances in the past few centuries, modern companies still face many core issues such as resource and human capital concentration. In addition, as management becomes increasingly large, regulatory processes become increasingly cumbersome, and the cost and friction of establishing large-scale businesses are also higher.

However, we now believe that a new phase is forming, namely: reimagining the composition and management of business, services, and networks. The physical infrastructure network of Decentralization (DePIN) is expected to usher in a new era of productivity, but what drives the development of this era is not centralization, but Decentralization.

1、What is DePIN?

“"DePIN, a decentralized physical infrastructure network, utilizes token rewards to incentivize hardware-based network deployment and completing real-world tasks." - Messari Classification System”

The core of DePIN is the Decentralization market, which connects resource suppliers with buyers. Unlike typical traditional models (where a company is responsible for resource production), the suppliers are a network composed of many independent operators. Through economic incentives such as Tokens or fees, these operators are motivated to contribute their resources (usually in the form of physical hardware), aligning their interests with the success and development of the DePIN ecosystem.

DePIN is highly respected for its potential to completely change the physical infrastructure network in a series of industries such as cloud computing, wireless networks and cloud storage. For example, the Helium Network is a Decentralization wireless infrastructure network for IoT (internet of things) devices, which allows operators to deploy wireless hardware to earn Helium Tokens as a reward for expanding network coverage.

A key difference between DePIN and its centralized counterparts is who the stakeholders are. The value of DePIN does not flow to rent-seeking intermediary institutions or companies, but is instead allocated to the operators who collectively own and operate the network.

Many DEP projects are innovative and interesting, but problems have also arisen: “What additional value will DEP provide to me if my existing services are running well?”

2、What are the advantages of DePIN?

The benefits of DePIN can be summarized as follows:

• Reliable, elastic, and secure - a sufficient number of Node operators are decentralized to ensure a more consistent network uptime and resistance to the inherent single point of failure of centralized physical systems. Security or fraud risks associated with closed systems can be mitigated through a transparent, immutable, and auditable Blockchain network.
• User affordability - Since the DePIN project is operated by the operator’s network, the impact of centralized operating expenses such as physical maintenance and legal fees on prices is relatively small, so the saved costs can be passed on to users.
• Community-driven decision-making—decisions made by a few corporate executives may not always serve the best interests of users and/or operators. In some cases, their decisions are primarily driven by self-interest. In DEP, decisions are made by the Tokenholder community, which may promote a healthier ecosystem and ensure that network participants benefit in a more equitable manner.
• The nature of work has changed in recent years, and more and more people want to have the freedom of independent work or to find passive sources of income. DePIN Network often utilizes potential labor supply and the ability of someone to do more without affecting established daily work - such as someone being able to deliver a few orders of takeaway on the way home from work. The gig economy is on the rise.
• Better products and services - a powerful DePIN flywheel could create better products than its centralized counterparts. As user demand increases, rise is captured by Tokens with a strong value accumulation mechanism. These Tokens in turn incentivize more operators to contribute, further improving products and attracting more users. This is the DePIN flywheel.

We believe that DEP has a bright future, but we also know that it is not without challenges. Potential obstacles such as regulatory barriers, potential security issues, and reliance on widespread adoption are all potential hurdles. However, its potential benefits make it a concept worth exploring.

3. Case Study of DePIN Project

Below we will share two case studies on the forefront DePIN revolution project.

(1) GEODNET

GEODNET is building the world’s largest Decentralization Real Time Kinematics (RTK) network, supported by a satellite Miner community, to achieve massive internet of things. It is disrupting existing enterprises by establishing an affordable global Decentralization real-time data market.

Here is our overall investment theory:

• Product Differentiation: GEODNET’s RTK network can provide better GPS data (accuracy is 1 centimeter, while standard GPS accuracy is 2 meters), and at a lower price (more than 10 times cheaper), its global community network allows for faster expansion.
• Huge market: The global satellite navigation system (GNSS) is a market with a scale of over $200 billion. The revenue of listed companies such as Trimble (Market Cap $15 billion) and Hexagon (Market Cap $30 billion) is $10 billion, and the earnings before interest, taxes, depreciation, and amortization (EBITDA) is $3 billion.
• Rise Flywheel: By purchasing and installing GNSS base stations to contribute to the network, Miners can earn GEOD tokens. These incentives have led to the addition of 5500 devices to the GEODNET network, more than any of its major publicly listed competitors.
• Development momentum: In less than three years, GEODNET’s recurring revenue has reached approximately one million US dollars, with a network of more than 7600 Miners, already catching up with or surpassing the network scale of listed companies.
• Accumulated value: 80% of GEODNET revenue is used to purchase and burn GEOD tokens.

(2) Hivemapper

Hivemapper is a Decentralization map network that uses Cryptocurrency incentives to crowdsource high-quality, up-to-date global map data. Hivemapper aims to disrupt the digital map market dominated by centralized tech giants by leveraging community contributions to provide updated, more comprehensive, and more economical map data.

Here is our overall investment theory:

• Long-term trend: Due to the continuous demand for enterprise, logistics, and emerging advanced driver assistance systems (ADAS) or autonomous driving areas, the digital map market is rising rapidly, and is expected to reach $37 billion by 2026.
• Competitive Advantage: Hivemapper’s crowdsourcing model enables map data to be updated 20-100 times faster than traditional surveying methods used by competitors, with significant cost advantages (e.g., each contributor costs around $300-550, while each Google Maps tool costs $500,000).
• Basic achievements: Hivemapper has nearly 150,000 contributors, has mapped over 14.38 million kilometers of non-overlapping roads, accounting for 24% of non-overlapping roads globally, and is 5-6 times faster than Google Maps. The network has also attracted multiple corporate clients, with some reflection on on-chain revenue.
• Catalyst: This year’s launch of the Hivemapper Bee dashcam has significantly improved data quality and user experience. With the rise of ADAS and an increasing number of autonomous vehicles, coupled with the new EU regulations requiring vehicles to be equipped with intelligent speed assistance systems, these are long-term driving factors for the demand for updated and more detailed map data.
• Main risks: competition from large established enterprises, regulatory challenges in collecting data across jurisdictions, high upfront costs from emerging market contributors, and execution risks in managing a complex Token reward system.