Archaeology DePIN: Searching for the "orthodoxy" of the track

In the crypto world, every public chain pursues legitimacy. Legitimacy is the starting driving force of development, or the source of "belief", which can make everything clear and justified. The role of "legality" can be fully exerted in every process, from concept to practice to application.

If we use this method to find the legitimacy of DePIN, it seems that we cannot find it in Messari's definition of DePIN. The main reason is that the attribute of "physical computing facilities" in the definition is too broad, but fortunately, we can still find common logic in a variety of project types as the legitimacy of DePIN.

In this article, we will try to explore the logical legitimacy of DePIN and infer the structural development of DePIN. We believe that with the help of "legality", DePIN will bring some power to Crypto that does not originally belong to this field.

Current DePIN

Today's DePIN track combines many old tracks. After Messari proposed the concept, although it was generally defined by the attributes of physical computing facilities, there are too many projects in this category on the market.

First, the storage and computing tracks can be counted. There are old storage projects such as Filecoin, Storj, and Arweave. The nature of storage projects is special. Most of them can be directly transformed into computing networks, forming a form similar to cloud services. In this way, we can see the emergence of 4everland and Sia. At the same time, there are a number of old projects with computing networks as the main goal, such as iExec, Phala, Akash, etc. There are also projects that are very sensitive to concept transformation, such as THETA, which is directly classified into this track with the concept of game cloud services.

Secondly, the Internet of Things projects can be counted. Because of the large number and extremely suitable attributes, they have almost become the mainstream of DePIN, such as IOTA, Helium, IoTeX, Livepeer and other old projects, as well as new projects such as Helium Mobile and Helium IOT.

Finally, we can count new AI projects and newly emerged projects with obvious DePIN characteristics.

AI is one of the tracks that attract attention in this cycle. Because it requires a lot of computing power, it still needs the support of special computing equipment in the construction of the network layer, so it is included in DePIN.

Whether it is storage, computing, IoT, or AI, they are almost all integrated into the DePIN track by their attributes. What are the projects with obvious DePIN characteristics?

These projects emerged with market demand. Judging from their attributes, they almost completely belong to the DePIN track. More prominent examples include W3bstream launched by IoTeX, DePHY invested by IoTeX, Wicrypt and WiFi Map incubated in the ecosystem, or Hivemapper and IoTeX Pebble, which are focused on the application side.

Among these related projects, W3bstream and DePHY belong to the "middle" layer, while Wicrypt, WiFi Map, Hivemapper, and IoTeX Pebble belong to the application layer. The logic behind their emergence is that the infrastructure is sufficient from the chain level and the quantity is sufficient. In terms of the choice of device data on the chain, in addition to building a self-built network, the best option is direct connection. This requires the industry to solve this market demand and provide more B-end users with the fastest way to enter DePIN. This also gives rise to the role of middleware based on the industry middle layer to provide solutions, tools, etc.

These new projects are completely in response to industry needs, and their attributes are completely DePIN projects.

After querying the information of each project, it can be seen that among the solutions provided by W3bstream and DePHY, W3bstream focuses on solving the part of device access to the blockchain, while DePHY, in addition to solving the part of access to the blockchain, also provides solutions for hardware. From an analysis point of view, the main reason is probably that IoTeX has launched standardized hardware products and access to various hardware product data API tools, and hardware manufacturing and combination solutions, which are more upstream services in the supply chain, can be supplemented by investing in DePHY.

Among them, most of the application-side project examples such as Wicrypt, Wifi Map, Hivemapper, and IoTeX Pebble are model copies of mature cases. For example, IoTeX Pebble is a hardware device designed by IoTeX to solve terminal data protection. It can be used in many projects that use terminal devices to collect data, while Wicrypt and Wifi Map are based on the successful experience of wireless networks. The largest case before is Helium.

Therefore, compared with the form of Messari directly attributing the corresponding projects, some changes have taken place in the entire industry. Projects based entirely on the needs of the DePIN industry have emerged, and the industry structure has also changed from "chain + IoT network" to "chain + middleware + application". This is a change in industry demand and also represents that DePIN has reached a more critical stage.

In addition, the projects we saw in the early days were almost all aimed at Crypto. For example, Filecoin and Storij only completed the infrastructure part of the communication layer and resource layer, and did not carry out a lot of development and adaptation for the application side. The overall goal of the network was to build a cryptocurrency network and use the token economy as the core of operation. Users built mining machines to mine coins.

At present, there are enough such networks, including storage networks, distributed cloud computing networks, and distributed AI networks after the rise of AI. From the network layer to the blockchain layer, the model is almost the same. Because of the high network requirements, such projects will also have a design inertia, that is, the cost of joining will be designed to be very high.

Therefore, facing such a background, many projects have become the main demand for "establishing DePIN projects" and "using blockchain for traditional smart device projects". This is also the main demand faced by the industry in the growth stage. Fortunately, the existence of middleware and tool projects is to solve this demand. With the help of these roles, the application layer can release business possibilities.

The simplest understanding is that some project parties in the ecosystem must be prepared to meet the needs of new roles entering the track. This is the current DePIN.

Archaeological concepts and main logic

At present, DePIN will be perfected and developed in the trend. To analyze the structural nature of the overall development, we must start from the macro perspective.

In the previous article, we basically described all the mainstream project types. Based on Mesarri's summary of the DePIN track, we can find many project types, including computing, storage, AI, IoT, sensors, wireless, GPU, data, CDN, smart cities, geographic location, environment, etc.

All of these tracks meet the definition of physical computing facilities in the DePIN concept. Each business must use hardware devices in the supply chain. These devices will have computing capabilities. Different hardware device functions and computing capabilities will determine different network functions. Therefore, based on computing capabilities, we can infer the form of the business and the logic after joining the blockchain.

And when we continue to trace back along the concept of physical computing facilities, it is the computing network of the Internet. In Wyz Research's previous article "How to Use Technical Logic to Disassemble Global Projects", we wrote that the characteristics of public chains are the same as those of current cloud services, and the DePIN model is similar to that of cloud services.

After the emergence of the Internet, large network nodes, or "servers", supported the operation of the network. In the early days, servers were all physical machines, and a large number of physical machines formed subsequent computer rooms, computing centers, supercomputing centers, and regional resource pools.

After the cloud service model was promoted by AWS, the concept of cloud became mainstream, and cloud platforms that cooperated with computing center operations continued to add various functions to the platform, so that this method of integrating cloud platform deployment with other tools became the main form of development and operation.

In this development process, we can see the connection process is:

Computing host (forming the network)--cloud platform--developer

After substituting into the public chain of cryptocurrency, it is:

Node (forming the network layer)--blockchain--developer

Let's look at the process of IoT device connection under traditional technical conditions:

Device--routing/Internet--management backend/server

The process after substituting into DePIN is:

Computing device--Internet--Blockchain--Developer

Or:

Computing device--Middleware platform--Blockchain

Comparing the four processes, the mode of combining DePIN and blockchain is consistent with the logic of cloud service network. The only difference is that due to different functions, there are two different connection methods and usage methods. Among them, those that tend to provide infrastructure, such as the old project Filecoin and the new project Render, are connected through special equipment access, providing storage and computing power sharing, which is consistent with the cloud service function. In addition, there is a mode that provides wireless bandwidth sharing at the far end of the infrastructure (the end of the network topology), such as Helium's wireless sharing.

The other one is to complete the connection and data communication, rather than sharing computing power. For example, the device Peddle designed by IoTeX, after connecting to the blockchain, will become a terminal, representing a user, and its device will no longer share computing power, but transmit data back to the management end and the chain, releasing other capabilities on the chain. This is another way to access the application layer in addition to infrastructure capabilities.

In the logic of these two products, computing power sharing and data communication are used respectively, and the corresponding businesses are also through shared computing power mining and shared data mining.

But from a technical point of view, although both use blockchain as a bookkeeping tool, the cloud service part records the workload, and the data part records the data sharing volume, the data sharing part will also use blockchain as an open export, hoping to introduce data into the public environment to obtain more value performance.

In summary, DePIN can obtain legitimacy from the Internet cloud service and the Internet of Things working mode, and this legitimacy is actually the "legacy" of the public chain network in functional application, that is, sharing resources (computing power, storage, bandwidth, data) in an open environment.

This is the legitimacy of the use of functions in addition to the "financial legitimacy" of cryptocurrency based on tokens. This is why Messari stated in the report that DePIN's revenue will be driven by practicality in the future, rather than just speculation.

Looking for the sword in the boat, extending the structuring of DePIN

What kind of industry structure can meet the industrial needs of DePIN in the future? The answer lies in: from cryptocurrency to the outside, solve the device connection problem, from the Internet of Things to cryptocurrency, solve the chain and function problems. Once this problem is solved through the project, the industry structure can still be based on the three-layer structure of the basic layer, the middle layer, and the application layer, and the three major mainstreams of computing power storage bandwidth sharing, cost reduction and efficiency improvement middleware, and diversified intelligent device applications.

In Messari's report statistics, there are more than 650 DePIN projects. In Coingekco's category statistics, there are about 79 tokens, and in IoTeX's ecological statistics, there are about 65.

It can be said that there are various old chains in the entire DePIN track, which means that the L1 market is almost saturated, but each DePIN project must make its own main network (because it needs to process device communication data and total status), and when there are already many basic chains, it will move to the middle layer and application layer.

This is the clear phenomenon we have seen. The number of DePIN projects that provide frameworks and solutions has increased, and the industry will use such projects as tools for standardized replication.

In the above, we gave the examples of the main representatives W3bstream and DePHY. One of the two projects was launched by IoTeX, and the other was invested by IoTeX. Both of them aim to reduce costs and quickly replicate standardized DePIN projects.

The entire process that can be completed after the combination of the two is:

1. Solve the design cost problem of computing equipment;

2. Complete the connection between hardware and blockchain;

3. Solve the combination of on-chain businesses.

For the first question, we take the solution of DePHY as an example.

When a device joins the network, the cost requirements for the device under different goals are very wide. The solutions are roughly divided into: data communication/secure data communication, bandwidth sharing, storage sharing, and computing power sharing. The cost of several solutions ranges from hundreds of dollars to tens of thousands of dollars.

For example, when only the smart switch is required (in a non-secure environment), it is only necessary to use the general access method of the device to connect and collect data. Without other computing requirements, the cost is the lowest.

When it comes to bandwidth sharing, such as Helium and WifiMap's wireless sharing, specially designed equipment is required, and the cost reaches hundreds of dollars.

In storage sharing and computing power sharing, for example, the cost of Filecoin mining machines has reached tens of thousands of dollars, and if cloud services or GPUs are used for a long time, the continuous cost may be higher.

High cost means high entry barriers. Therefore, for projects entering DePIN, the greater growth in the future is likely to be concentrated in the second type of data sharing mentioned above. At present, in order to provide data sharing, most devices require the installation of nodes to ensure data security. This is the lowest threshold, but it also raises the requirements for the simplest network access devices.

By consulting DePHY's open source hardware solution, it can be found that if encrypted communication or communication modules such as TEE are used, the data communication security of small devices can be improved while ensuring low costs. The simplest access device costs about $10-15.

The second question is the part of connecting to the blockchain.

Currently, projects in the industry have chosen different blockchain networks for direct access, but they also need to face the situation of device access, data collection, management, and subsequent overall status maintenance. Here, the middle-layer role needs to intervene.

W3bstream and DePHY can both implement this part and provide developers with access management of devices. The principle is based on various modular tools and open source tools, such as DID for device management. In terms of device connection, both use self-built off-chain networks to connect devices. In this part, they will assume the role of a "relay" to connect the overall status with various public chains to provide support for various businesses.

Although both will show multiple networks in the solution, they will have some bias towards public chains. The reason is that the performance of public chains is also the key to providing the best user experience for DePIN, so they will tend to use public chains with higher concurrency capabilities, such as Solana.

The third question, which is also the last step, is to release the business part on the chain.

In addition to the decentralization of control, the biggest advantage of blockchain is openness, which is the second major feature. DePIN business needs to use cryptocurrency business on the chain to realize the release of potential.

We currently see that in addition to the native business of tokens, only data services are the best developed in cryptocurrency. The best scenario is the oracle, which provides price data required by DeFi or other applications, and its data security requirements are very high.

In addition to data transmission, the data market that provides data transactions for machine learning business in AI is also the most likely scenario in the future. What we see now, such as federated learning and deep learning, may be closely related to DePIN in the future. Unfortunately, there is still a lack of cases in the business part.

Of the above three parts, it can be determined that the first two parts are complete and can provide standardized process replication for the generation of projects. We have seen many projects born based on this model, such as EnviroBLOQ based on Pebble of IoTeX, Dimo ​​and Drife based on W3bstream, and Starpower and Apus based on DePHY.

Conclusion

Messari has made DePIN a relatively large track by grouping projects, but there is still a big gap in the future volume. Most predictions focus on this industry absorbing the value of the real world to achieve the overall market value growth of the industry.

However, based on the current situation, there is not much incremental growth in the industry, which is also the main reason for the low market value. There is indeed a high threshold problem in the industry. The cryptocurrency field may not understand the hardware industry, and the hardware industry cannot quickly enter the use of blockchain and cryptocurrency as tools. However, with the help of the middle-layer role, growth is expected, and with the help of the middle-layer, it is not difficult to enter the market for various applications.

In the future, when DePIN brings the "legitimacy" of real-world business into the crypto world, the DePIN project will be on par with the public chain. This is our greatest expectation for this track.