Unlocking Sustainability in DePIN: The Crucial Strategy

• Decentralized Physical Infrastructure Networks (DePIN): The Future of Crypto Mainstreaming?
• DePIN in Action: Examples of Success Stories
• Risks and Challenges Facing DePIN
• Key Lessons from Hivemapper
• Understanding the Static Rewards Trap
• Designing Dynamic Rewards
• A Case Study: Hivemapper's Approach
• Conclusion

Decentralized Physical Infrastructure Networks (DePIN): The Future of Crypto Mainstreaming?

Several of the leading minds in the cryptocurrency domain are of the belief that Decentralized Physical Infrastructure Networks (DePIN) may be the first use cases that bring cryptocurrency to the mainstream. They anticipate a surge in growth comparable to that of Non-Fungible Tokens (NFTs) or stablecoins. This projection stems from the remarkable capabilities of DePIN in leveraging cryptocurrency incentives to harmonize the efforts of millions of participants and create new products that would otherwise be impossible.

DePIN in Action: Examples of Success Stories

Ariel Seidman, who holds the position of CEO and co-founder at Hivemapper, leads one of the most rapidly expanding mapping communities globally. Hivemapper, along with other projects, have successfully utilized DePIN to achieve significant accomplishments. For instance, in December, Helium$6.74 6.56% Mobile launched a nationwide $20-per-month unlimited cell plan, powered by community-owned 5G hotspots. In less than half a year, during the global GPU crisis, Render Network established an efficient, permissionless ML cloud. These milestones were brought to life thanks to DePIN crypto-economics.

Risks and Challenges Facing DePIN

While DePIN holds exciting potential for the future, there are lessons to be learned from early adopters to ensure it is not just another passing trend. The pioneer DePIN projects experimented with various models, made numerous mistakes, and learned from them. However, these lessons seem to have been forgotten, leading new DePIN projects to risk causing a boom and bust cycle that could tarnish the entire sector.

Key Lessons from Hivemapper

To aid DePIN in charting a more sustainable course, it is essential to share key lessons learned from projects like Hivemapper. This information is crucial not only for new projects but also for anyone considering participating in DePINs, as it provides critical insights for assessing whether a DePIN project is likely to succeed in the long term.

Understanding the Static Rewards Trap

Tokens in DePINs gamify rewards, encouraging contributors to collectively build a product greater than the sum of its individual parts. However, for a DePIN project to sustain itself, it needs a solid strategy for generating supply and, more importantly, a genuine demand for the product. Without these, the demand for the token becomes merely speculative, which can lead to the trap of static rewards. It is therefore crucial to find product-market fit, preferably by focusing on real pain points that a decentralized approach can uniquely solve.

Designing Dynamic Rewards

The design of dynamic rewards across most DePIN projects usually involves four main elements: geography (where infrastructure is more valuable), contributor productivity and quality (higher deserves more rewards), and network progress (a more useful network should generate more rewards overall).

A Case Study: Hivemapper's Approach

When designing the Hivemapper Network, the team implemented these principles with a geography-based system that rewards customer demand in a region, and contributor productivity and quality systems based on driving distance and data freshness and accuracy. Network progress is measured by map progress, determining the size of the weekly rewards pool.

Conclusion

While incentive design isn't easy, with focus and accountability, DePIN builders can fulfill the potential of DePIN, creating a world where more of humanity's critical infrastructure is owned and operated by the people who use it.

Edited by Jonathan Stoker