The internet’s infrastructure is heavily concentrated in the hands of a few powerful companies that have significant scale advantages and regulatory protection. These companies control the flow of data, communication, and digital services, which has led to decreased competition, rising prices, and fewer choices for end-users.
A New Model for Infrastructure: Decentralized Physical Infrastructure Networks (DePIN)
Decentralized physical infrastructure networks (DePIN) are a new set of platforms that aim to return control of the internet’s infrastructure to the people it is supposed to benefit most – users. Built on public blockchains, DePIN allows individuals to contribute their labor or resources in exchange for micropayments. This innovative model enables protocols to create massive infrastructure footprints without shouldering the upfront costs.
How DePIN Works
In a traditional business model, companies invest heavily in infrastructure and then charge users for services. However, with DePIN, contributors provide their own resources (e.g., electricity, internet connection) and are rewarded with micropayments. This shifts the focus from big upfront fixed costs to manageable long-term variable costs.
DePIN’s Competitive Advantage
Unlike Uber, which pioneered a similar concept by crowdsourcing drivers, DePIN companies use tokens to reward contributors not only with cash but also with ownership. By leveraging this model, DePIN introduces an entirely new paradigm for building networks that delivers value to customers while reducing costs.
The Potential of DePIN
Several factors have made DePIN more viable today:
- The increasing demand for cloud services and digital commodities
- The growing awareness of the need for more affordable and accessible internet infrastructure
- The emergence of new technologies, such as public blockchains, that enable secure and transparent collaboration
DePIN in Action: Filecoin and Other Projects
Filecoin (FIL) is one of the pioneers of DePIN. It provides a decentralized storage network that allows businesses to store data at a fraction of the cost of traditional cloud services. Other projects, like Akash Network and Helium, offer compute power and bandwidth, respectively.
The Impact of DePIN on Incumbent Businesses
DePIN’s business model disrupts the traditional approach to providing digital commodities. By leveraging crowdsourced supply and eliminating upfront costs, DePIN companies can offer pay-as-you-go solutions that better suit the needs of customers.
Conclusion
Decentralized physical infrastructure networks (DePIN) have the potential to transform the way we access and utilize internet services. By empowering individuals and communities to contribute resources and receive rewards in tokens, DePIN creates a more equitable and efficient model for building networks. As this technology continues to evolve, it may pave the way for increased societal welfare by driving down the price of digital commodities and promoting broader use of internet services.
Author Bio
Mahesh Ramakrishnan is the founder of Escape Velocity, a Boston-based VC firm, and a 2018 graduate of Harvard University. He previously worked as a private equity associate for Apollo Global Management and as an investment banking analyst for Goldman Sachs. His personal cryptocurrency holdings include Filecoin, but no other projects named in this column.
Acknowledgments
This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect those of Cointelegraph.
References
- "The Rise of Decentralized Physical Infrastructure Networks" by Mahesh Ramakrishnan
- "Decentralized Storage Networks: A New Paradigm for Cloud Services" by Jorge Tamayo
