DePIN 101 Practical Guide: How to Create a DePIN Project from 0 to 1

Author: Peng Zhao (Founder of Zhifang, Co-founder and Partner of Yunhe Capital) IoT Think Tank Original

This is my 320th column article.

During this week's "2024 Hong Kong Web3 Carnival," DePIN has become one of the most eye-catching narratives, representing a new direction with immense potential that is beginning to enter the public eye.

DePIN opens a new era of intelligent IoT, providing a decentralized approach to building and managing IoT networks by combining real-world sensors, artificial intelligence, and blockchain technology. This innovative model is expected to break data silos, enhance security, and improve operational efficiency across various industries, from manufacturing to smart cities.

The focus of DePIN lies in the infrastructure and services of the physical world, bridging IoT devices with Web3 incentive mechanisms, effectively linking to the real world, and helping to achieve a "two-way rush" between Web3 and the real world.

At the DePIN-themed forum of the "2024 Hong Kong Web3 Carnival," Xiao Feng, Chairman of Wanxiang Blockchain and Chairman and CEO of HashKey Group, stated in his speech that blockchain is inherently built on DePIN, and Bitcoin hardware is a primitive version of DePIN.

The relationship between DePIN and blockchain can be divided into three stages: The first stage is Bitcoin and the PoW phase; the second stage is the previously proposed trusted data foundation, aimed at connecting IoT devices among many organizations to ensure data credibility; the third stage, following the emergence of AI large models in 2024, will require distributed storage, distributed computing, and distributed data collection through DePIN and hardware to adapt to the AI productivity revolution. I believe there will be a fourth and fifth stage in the future, and the value of DePIN will be greater, deeper, and broader.

Dr. Xiao also mentioned that DePIN has natural advantages in the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta region, as these are global manufacturing bases for smart devices.

I also delivered a speech titled "DePIN 101: How to Create a DePIN Project from 0 to 1," with core content distilled from our latest research report in collaboration with Future3 Campus.

Today, I will share the content of this speech with you.

The Concept and Origins of DePIN

Currently, there is a lack of analysis on DePIN projects in the Asia-Pacific region and reports explaining how to build DePIN projects from scratch. Therefore, we conducted extensive research and compiled the content of this report.

The report consists of six parts. First, let's understand the concept of DePIN. Next, we will overview the ecological landscape of DePIN. Then, we will focus on the core content of the report: how to build a DePIN project from zero to one, the risks and challenges faced, and the corresponding solutions. Additionally, we will showcase how DePIN integrates with various industries and highlight the advantages of developing DePIN in the Asia-Pacific region, particularly in the Guangdong-Hong Kong-Macao Greater Bay Area.

The DePIN market has experienced astonishing growth in just six months. Its market value has tripled to $32 billion; annual on-chain revenue has surged to $15 million; and the number of projects has skyrocketed to 1,000.

These figures clearly demonstrate the immense potential of DePIN and the rapid trend of its adoption. However, for many, the concept of DePIN remains relatively unfamiliar. So, what exactly is DePIN? Why is it so important? How will it develop in the future?

Ethereum co-founder Vitalik Buterin stated that the category of DePIN has existed for ten years. Later concepts such as PoPW, TIPIN, and EdgeFi emerged, and in November 2022, community members voted to adopt the name DePIN. Today, DePIN continues to evolve rapidly.

Before the name DePIN was established, many similar terms represented this concept, such as PoPW (Proof of Physical Work), TIPIN (Token-Incentivized Physical Infrastructure Networks), and EdgeFi. All of these help us understand the definition of DePIN.

The essence of DePIN is a physical infrastructure network based on decentralized principles. Unlike traditional top-down infrastructure construction methods, DePIN adopts a bottom-up approach, sharing and managing resources in a distributed manner through blockchain technology.

This model empowers individuals and communities to participate in the creation and maintenance of the network, forming a more inclusive and collaborative ecosystem. Through incentive mechanisms, DePIN allows anyone to contribute to the infrastructure and receive rewards, reducing reliance on centralized entities and promoting a fairer distribution of benefits.

Next, let's test what kind of projects can be classified as DePIN projects. A project can only be considered a DePIN project if it meets the following criteria.

It can be said that the emergence of DePIN is timely.

Currently, Web3 and blockchain technology have reached a mature stage, providing the necessary decentralized tools for DePIN. At the same time, the Internet of Things is experiencing explosive growth, with billions of smart devices becoming interconnected.

With the development of AIoT, a brand new era is quietly approaching. According to authoritative reports, the number of IoT connections in some countries has already surpassed the number of human internet connections. AIoT is transitioning from 1.0 to 2.0, shifting from a focus on connectivity to a pursuit of intelligence and value.

In the AIoT 2.0 era, many mainstream devices will become intelligent and value-oriented. DePIN will combine Web3 and AIoT, using decentralization to securely connect AIoT devices and address current security and privacy issues.

The Ecological Landscape of DePIN

Looking at the ecological landscape of DePIN, we can categorize projects into two main types: standard infrastructure service networks and non-standard infrastructure service networks. Standard networks include computing, storage, and bandwidth, while non-standard networks encompass wireless, geospatial information, energy, and mobility.

Let's take a closer look at standard infrastructure service networks. These networks focus on the homogenization of deployed hardware and services, creating unique data resources.

Case studies of standard infrastructure service networks include Filecoin, EMC, and Ebunker. Filecoin is a decentralized storage network that allows users to rent out unused storage space. EMC is a decentralized GPU computing network based on an AI ecological layout. Ebunker provides professional Ethereum node solutions to meet staking services and native Web3 demands.

Now let's look at non-standard infrastructure service networks, where we see innovations in decentralized communication networks such as 5G, WiFi, and IoT. These networks also involve mobility, geospatial information, and energy.

Notable cases in non-standard infrastructure service networks include Helium, Roam, and Arkreen. Helium is a global decentralized wireless infrastructure project that provides remote wireless networks for various devices. Roam has built a decentralized global WiFi roaming network that integrates telecommunications infrastructure and blockchain technology. Arkreen connects and monetizes globally distributed renewable energy resources to promote carbon reduction applications.

How to Build a DePIN Project from 0 to 1

If you are interested in starting a DePIN project, after interviewing multiple projects, we have summarized several key steps:

• First, gain a deep understanding of DePIN and its economic model.

• Second, identify the real needs.

• Third, balance demand and supply.

• Fourth, focus on ecosystem building and community engagement.

• Fifth, seek technical cooperation and partnerships.

• Finally, develop effective branding and marketing strategies.

However, it is important to recognize the challenges that DePIN projects face during the promotion phase. Regulatory and compliance issues in various regions around the world may pose obstacles. The lack of leading high-value projects may make market recognition and demand validation difficult. Additionally, reliance on cryptocurrency speculation and skepticism from traditional Web2 investors may also hinder progress.

Of course, the path of DePIN development is not smooth sailing. Projects face challenges in regulatory compliance, market recognition, and demand validation during the promotion phase, and there are also systemic and non-systemic risks during the implementation phase.

However, as long as appropriate response strategies are adopted, a deep understanding of DePIN and its economic model is achieved, real needs are identified, supply and demand are balanced, ecosystem building and community engagement are prioritized, technical cooperation and partnerships are sought, and effective branding strategies are developed, DePIN projects can overcome these difficulties and achieve sustainable development.

To address these challenges, DePIN projects can adopt various response strategies.

Looking ahead, there are exciting opportunities for DePIN to integrate with other technologies and industries.

For example, DePIN+AI holds immense potential, as the infrastructure provided by DePIN can unlock broader AI application scenarios.

DePIN+ReFi, or regenerative finance, allows more institutions and individuals to participate in climate action and environmental sustainability efforts. DePIN will play a crucial role in supply chain integration, energy management, and smart transportation, promoting the deep integration of the real economy and the digital economy.

To further explore the application scenarios and industrial chain map of DePIN, we can refer to the AIoT map proposed by the IoT Think Tank.

The AIoT industry map presents four components: connectivity, perception, intelligence, and value capabilities, along with corresponding enterprises. DePIN occupies an important position in the value capabilities section, which is also the intersection of AIoT and Web3, namely Web3+AIoT=DePIN.

Opportunities and Challenges for DePIN in the Greater Bay Area

At the Hong Kong Web3 Carnival in April 2023, Arkreen, HashKey, and DePIN ecosystem partners jointly launched the DePIN Hong Kong Initiative. The goal is to collaborate with projects, builders, research and investment institutions, and equipment suppliers within the DePIN ecosystem to jointly promote the development of the DePIN ecosystem in Hong Kong, striving to make Hong Kong a global center for the DePIN ecosystem.

The Asia-Pacific region, especially the Guangdong-Hong Kong-Macao Greater Bay Area, has unique advantages in the development of DePIN.

The rise of Web3 and the embrace of sustainable finance by major cities in Asia lay the foundation for the widespread application of DePIN in the region. DePIN is expected to become an important driving force for supply chain integration in the Greater Bay Area, promoting regional economic integration. Hong Kong, as an international financial center and innovation technology hub, is seizing the opportunity to actively lay out the DePIN ecosystem, striving to establish itself as a global center for the DePIN ecosystem.

When discussing DePIN in Asia and the Greater Bay Area, there are both opportunities and challenges.

The rise of Web3 and the embrace of sustainable finance by key cities in Asia (especially Hong Kong and Singapore) have played an important role in promoting the widespread acceptance and advocacy of DePIN. DePIN will drive supply chain integration in the Greater Bay Area.

However, DePIN projects in Asia and the Greater Bay Area also face challenges. The high dilution of incentive models and the time required to establish applications and meet demands far exceed those for ordinary consumer applications. The success of projects does not solely depend on the close correlation between supply chain and cost factors. In fact, the impact of project costs is quite limited.

Conclusion

Despite various challenges, overall, DePIN represents a groundbreaking technology that is reshaping the landscape of decentralized infrastructure. Its unique value proposition, rapid market growth, and diverse application scenarios open up new possibilities for industry transformation and value creation.

As more and more projects emerge, the DePIN ecosystem is becoming increasingly prosperous, and we have reason to believe that DePIN will play an increasingly important role in promoting the development of the digital economy, achieving inclusive finance, and building a sustainable future. In this revolution of decentralized infrastructure, everyone can contribute their part to create a more open, efficient, and resilient new era of value interconnection.