DePIN 2.0: What the Next Generation of DePINs Is Doing Differently

In this op-ed, Connor Lovely, who serves as the DePIN Lead at IoTeX and hosts the Proof of Coverage Podcast, contributes to CoinDesk’s new series focusing on the burgeoning sector of decentralized physical infrastructure. Prior to his current role, he worked as a consultant at BCG.

To begin with, I have a Cudis ring on my hand which monitors my health metrics and rewards me points for future airdrops. In addition, there are Helium and XNET WiFi hotspots at home that offer wireless connectivity to my devices (as well as others’) and compensate me with tokens when in use. Helium Mobile, my sole cellular provider, offers an app on my phone that pays me cryptocurrency for voluntarily sharing location data, which is utilized to enhance triangulation of data usage and network demand. Furthermore, the Grass browser extension installed on my computer generates income through airdrop points by enabling AI labs and web scrapers to browse the internet using my residential IP address. Lastly, there’s a DIMO device in my car that provides me with real-time vehicle data, makes this information accessible to third parties, and (once more) remunerates me with tokens.

If you believe this list is comprehensive, you’re underestimating the scope. The Decentralized Finance (DeFi) sector currently comprises over 1300 projects and is expanding rapidly during the market upswing. The expansion of DeFi is noteworthy, but what truly piques my curiosity is the unique approaches these new-generation DeFis are employing to construct their networks – a significant departure from their predecessors. Here’s a glimpse into the innovative strategies I’ve observed.

This generation of Deep Learning models, represented by their Dependable and Precise INterfaces (DePINs), have undergone significant advancements over the past five years through continuous learning and refinement. Here’s how they have evolved:

Being demand-led in everything

Critics often praised the initial DePINs (similar to Helium’s IoT network) for their impressive supply expansion efforts. However, a major point of contention was the lack of sufficient demand. In contrast, contemporary DePINs are focusing on securing demand even before token generation events (TGEs). Additionally, they are approaching supply growth in a more deliberate manner, allowing market demand to guide their decisions regarding where to stimulate further supply development.

As a researcher investigating the drone imagery market, I’ve come across Spexi, a company that functions as a Digital Marketplace for Aerial Imagery and Nodes (DePIN) for this specific domain. Before the Token Generation Event (TGE), they have secured contracts worth seven figures in demand. Additionally, they have dispersed cash totalling six figures among drone operators, who are eagerly anticipating the straightforward and gamified monetization of their existing drone assets through this platform.

Lowering contributors’ barrier to entry

During this cycle, there has been a surge in the adoption of Decentralized PINS (DPINs) that leverage off-the-shelf hardware for their supply side. An alternative approach to boosting the supply side growth is by integrating with everyday activities people are accustomed to performing. A case in point is Natix, which repurposes smartphones installed in vehicles as dashcams to capture street-level imagery. Instead of encouraging new behaviors that require incentives (a more costly proposition for token incentives), Natix focuses on capitalizing on existing activities like driving. For comparison, consider wireless DPINs such as Helium, which aim to encourage contributors to install CBRS radios on their rooftops – an entirely new behavior that requires motivation and incentives.

Leaning into the speculation

Incentives play a crucial role in driving actions and behaviors in today’s world. DePIN has long recognized this principle, but we’ve witnessed an escalation in its impact during this current cycle. The introduction of point systems to recognize and reward contributor efforts prior to the Token Generation Event (TGE) has proven highly effective and provides our generation of DePINs with increased flexibility and time for comprehensive data analysis before finalizing token economics. Referral programs, which offer contributors a fixed amount or percentage of points or tokens for each referral they bring in, have ignited explosive viral growth on the supply side. Grass is an illustrious example of a thriving points program fueled by incentivized referrals.

Staying centralized, longer

A project, notion, or invention won’t take flight without a committed individual or team promptly making decisions, refining, and advancing it. Ideas are particularly susceptible yet adaptable during their initial phases. Our goal is to identify Decentralized Autonomous Organizations (DAOs) or projects that swiftly discover product-market fit (PMF), efficiently manage supply and demand, and generate revenue on the blockchain. We’re less concerned with decentralization until there are early indicators of success. It’s only worthwhile to decentralize something once it has proven effective.

Founded by an innovator, 3DOS is a Decentralized Production-as-a-Service (DePIN) platform in the realm of manufacturing using 3D printers. This visionary entrepreneur developed a widely-adopted operating system for 3D printers, enabling seamless networking and remote control of print jobs. His solution gained significant traction in the Web2 environment, with notable clients such as NASA, Google, and approximately 40% of American universities.

As a researcher studying emerging technologies, I bring up 3DOS due to its innovative potential. However, it’s essential to note that we are still in the early stages of its development. John Dogru, the founder, holds significant influence over the concept, software, network, and demand-side at this point. This centralized control is crucial during this initial phase, ensuring progress and preventing stagnation since there isn’t much decentralization worth pursuing yet.

The DePIN industry is relatively new but has gained sufficient experience from its initial phase to make advancements. In the current scenario, DePIN companies are focusing on meeting demand as soon as possible, expanding their supply sides rapidly by reducing entry barriers, and maintaining centralization for swifter delivery.

As a crypto investor, I’m excited to witness the rapid launch of new Decentralized Autonomous Organizations (DAOs) based on the DeFi Pulse Index (DePIN). The evolution and progress of DePIN continue to be one of the most groundbreaking concepts in the crypto space, acting as a positive disruptor in the real world. I eagerly anticipate the success of the DePIN 2.0 cohort and will be looking forward to updating my perspective on DePIN 3.0 in just a few short years!

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.