DePIN Overview: Decentralized Physical Infrastructure Network (DePIN) combines the physical world with Web3 to lower costs and improve efficiency through decentralized technology. It is widely applied in computing, storage, wireless networks, and more, from traditional fixed devices to new generation portable and wearable devices, presenting vast market prospects.
Investment Trends and Projects: DePIN projects have shown significant growth in both bull and bear market cycles, covering various areas such as wireless networks, mapping, connected cars, agriculture, drones, weather, and energy. Investment institutions have expanded from Europe and the US to Asia, with increasing participation from institutions and investment numbers, demonstrating strong interest in the DePIN field.
Market Demand and Potential: The emerging DePIN market encompasses diverse categories, including health data, weather, energy, bandwidth, AI, and smartphones, offering enormous market space and high growth rates. Particularly, the energy and smartphone markets have tremendous potential, and the YoY growth rates of the health data and AI markets are also significant.
Project Ecosystem and Blockchain Choices: Ethereum and Solana have become the main choices for existing and emerging DePIN projects. With high performance, low cost, and strong community support, Solana has attracted numerous new projects and gradually become the preferred platform for DePIN projects. Representative projects such as Render, Helium, and Hivemapper demonstrate the diverse applications of DePIN. Core players like Solana and IoTeX provide strong technical support and an ecosystem for DePIN projects, driving its rapid development.
Modular Blockchain Trend: Modular design significantly enhances the scalability and adaptability of DePIN. Through standardized interfaces and interchangeable components, DePIN can flexibly adapt to different application scenarios and technological needs, promoting rapid deployment and maintenance of networks.
Evolution of Token Economy: From early fixed incentive models to the current dynamic incentive mechanisms, DePIN projects like Helium ensure the continuous growth and healthy development of networks through measures such as adjusting incentives for new and old devices, regional incentives, and time-based incentives.
DePIN Definition: DePIN, short for Decentralized Physical Infrastructure Network, literally means a “decentralized physical infrastructure network.” “De” represents decentralized, “P” represents physical, “I” represents infrastructure, and “N” represents network. The core definition of DePIN is to bring real-world users into Web3 and achieve cost reduction and socialization through decentralized networks. In the current world, especially in the physical business field, DePIN achieves the goal of cost reduction and efficiency improvement through decentralized technology.
Types of DePIN Projects:
Classic DePIN Devices:
Characteristics: These devices are usually immobile and fixed in a specific location.
Main Businesses: They include computing, bandwidth, and storage.
Market Characteristics: The market for classic DePIN projects tends to be technology-oriented, particularly in areas such as AI computing power, attracting significant investment and traffic. This market has a large scale but is highly competitive, resembling a red ocean.
Representative Projects: Filecoin, RNDR, etc.
Next-generation DePIN Devices:
Characteristics: These devices are small, flexible, portable, and even wearable.
Main Businesses: They provide services related to daily life, such as health monitoring, weather forecasting, and smartphone functionalities.
Market Characteristics: The market for next-generation DePIN projects is more life-oriented, low-cost, and suitable for daily applications. This market has diverse categories and wide-ranging applications, holding great untapped potential like a blue ocean.
By comparing these two generations of DePIN projects, we can see that DePIN technology is continuously developing, and its application scenarios are expanding. From traditional fixed devices to today’s more flexible and portable ones, the market prospects for DePIN are increasingly broad, covering various needs from high-tech fields to everyday life. The traditional DePIN market is large-scale but highly competitive, resembling a red ocean, while the innovative DePIN market has diverse categories and wide-ranging applications, offering enormous untapped potential like a blue ocean.
New Landscape of DePIN Investment: The number and types of DePIN projects have significantly increased in this market cycle, with emerging lightweight DePIN projects and the addition of AI, health data-collecting wearable devices such as smart bands and smartwatches, and numerous portable lightweight physical device DePINs.
January 1, 2022 – January 1, 2023:
A total of 19 DePIN projects were funded, with an average funding amount of $18 million. Excluding the large-scale funding of $200 million in Helium’s series D round, the average funding amount is $5.9 million. The projects cover wireless networks, mapping, connected cars, agriculture, drone imagery, weather, electricity markets, and DePIN infrastructure, with wireless networks having the highest number of projects, reaching 7.
January 1, 2023 – January 1, 2024:
A total of 9 DePIN projects were funded, with an average funding amount of $7.2 million, significantly lower in number compared to the bear market in 2022 but a 22% increase in funding amount. The projects include wireless networks, decentralized computing power, mapping/geospatial data, weather, and DePIN infrastructure. The number and categories of funded projects decreased significantly in the bear market (requiring more reasonable business scenarios and models).
January 1, 2024 – May 20, 2024:
A total of 26 DePIN projects were funded, with an average funding amount of $6.5 million. The number of funded projects increased significantly, while the funding amount decreased slightly. The projects include decentralized computing power, connected cars, IoT, wireless networks, FHE, mapping, weather & environment, bandwidth, DePIN infrastructure, smartphones, energy, storage, and mixed reality. There are also undisclosed funding categories such as AI, VPN, wearable devices such as smart bands/watches, and portable device projects (health data).
DePIN Project and Institution Numbers: In the previous market cycle, institutions from Europe and the US dominated the DePIN space. However, in this market cycle, more Asian institutions have emerged, demonstrating strong interest in DePIN from Asia. The number of DePIN projects has also significantly increased, with over 135 second-level projects and over 130 first-level projects.
Projects:
– Second-level market projects: 137
– >$1 billion fully diluted valuation (FDV): 20
– $500 million – $1 billion: 19
– $100 million – $500 million: 48
– $50 million – $100 million: 16
– $30 million – $50 million: 14
– $10 million – $30 million: 12
– <$10 million: 6
- First-level market projects: 133
- Since the start of the current bull market cycle (from October 2023 to present), a total of 8 projects have raised over $2 million in funds, and 6 projects have raised over $10 million.
Institutions:
Previous market cycle:
- Andreessen Horowitz (A16z)
- Multicoin Capital
- HashKey Capital
- IOSG Ventures
- Spartan Group
- Borderless Capital
- Lattice Ventures
- Variant Fund
- Delphi Digital
- Big Brain Holdings
- Cogitent Ventures
Current market cycle:
- OKX
- Animoca Brands
- JDI
- IoTeX
- FMG
- Waterdrip Capital
- MH
Market Demand for DePIN: In the previous market cycle, emerging projects in sub-sectors such as computing power, storage, wireless networks, and mapping continued to emerge. In this market cycle, new emerging sub-sectors include health data-collecting wearable devices, weather, energy, bandwidth, AI, and smartphones.
From the perspective of market demand, the energy and smartphone markets have tremendous market space. The health data market and AI market not only have large market space but also have high YoY growth rates, demonstrating significant market potential.
Market Size and Growth Rate:
- Health Market: $243 billion, CAGR 17%
- Weather Market: $7 billion, CAGR 7%
- Energy Market: $880 billion, CAGR 8.4%
- Computing Power Market: $95.7 billion, CAGR 6.8%
- Storage Market: $108 billion, CAGR 22%
- Wireless Network Market: $500 billion, CAGR 12%
- Bandwidth Market: $8.6 billion, CAGR 13.75%
- Mapping Market: $19 billion, CAGR 12.5%
- AI Market: $150 billion, CAGR 36.8%
- Smartphone Market: $484 billion, CAGR 7.3%
Public Blockchain Choices and Device Types: Currently, Ethereum has the highest number of DePIN projects in the second-level market, with a total of 70 projects choosing to build on the Ethereum blockchain, accounting for 81% overall. Among the collected first-level projects, the Solana ecosystem has 28 projects, accounting for 62% overall. Solana is gradually becoming the leading public blockchain for the new market cycle of DePIN projects.
From the perspective of device types, there are more projects in the energy and sensor device categories. There are also more first-level market projects using wearable, portable, and home devices as physical hardware.
The Full DePIN Industry Chain:
Upstream Supply Chain:
1. Hardware Manufacturing and Supply:
- Hardware Suppliers: Produce various devices and sensors for the DePIN network, such as GPUs, servers, IoT devices, wireless devices, etc. Examples include the LoRaWAN hotspots for the Helium network and the dashcams for Hivemapper.
- Specialized Hardware Manufacturers: Some manufacturers provide customized hardware for specific DePIN projects, such as storage miners for Filecoin and GPUs for the Render network.
2. Chips and Semiconductors:
- Chip Manufacturers: Companies like NVIDIA and AMD provide high-performance GPUs for computing networks like Render and Akash. These chips are the core for processing AI workloads and complex computing tasks.
3. Internet of Things (IoT) Devices:
- Sensor Manufacturers: Provide sensors required for environmental monitoring, traffic data collection, etc. Examples include Bluetooth sensors for the Nodle network and noise pollution detectors for Silencio.
- Smart Devices: Such as smartphones and other mobile devices, which can be part of sensor networks for data collection and transmission.
4. Power and Energy Devices:
- Energy Equipment Suppliers: Provide solar panels, wind turbines, energy storage batteries, etc., for decentralized energy networks. Examples include solar panels and battery systems for the Daylight Energy network.
Midstream Industry Chain:
1. Network Operation and Maintenance:
- Network Operators: Manage and maintain the normal operation of decentralized networks, including node management, data transmission, and storage. Examples include Helium and Hivemapper.
- Service Providers: Provide infrastructure services for networks, such as cloud computing and storage services.
2. Software and Platform Development:
- Blockchain Platforms: Provide fundamental blockchain technology support for DePIN projects, including smart contract execution, data storage, and verification. Examples include Solana and IoTeX.
- Software Developers: Develop software platforms and tools for managing and operating DePIN networks. Examples include Filebase, a distributed storage management platform, and Livepeer Studio, a video streaming management tool.
3. Data Processing and Analysis:
- Data Analytics Companies: Process and analyze data collected from sensor networks to provide valuable insights and services to users.
- AI and Machine Learning Services: Companies like Beam provide cloud-based AI computing services, distributing model training and inference workloads to decentralized GPU networks.
Downstream Industry Chain:
1. Applications and Services:
- Enterprise Clients: Utilize services provided by DePIN networks to enhance their own business efficiency. Examples include logistics companies using Hivemapper's map data and agricultural companies using Geodnet's high-precision positioning data.
- Consumer Applications: Examples include Teleport's ride-sharing app and DIMO's vehicle data platform, providing convenient services to consumers and rewarding them with user-contributed data.
- Smart Cities and Public Infrastructure: Utilize decentralized network data and services to optimize city management and public services, such as energy management and traffic management.
Modular/Data Layer/Middleware:
Modular blockchains optimize the scalability, security, and flexibility of blockchains by dividing core functions (such as execution, consensus, data availability, and settlement) into different layers. For example, Ethereum improves data availability and processing capacity through sharding architecture and rollups, while Cosmos enables interoperability between independent blockchains.
By analyzing the DePIN industry chain, we can see the complex ecosystem involved in the development and operation of DePIN networks, with various players contributing to different stages and aspects of the industry. This comprehensive understanding helps identify investment opportunities and potential areas for innovation and growth within the DePIN space.
