Blockchain-powered systems are set to kick off the next wave of Web3 adoption
In an increasingly uncertain global economy marked by an uneven pace of recovery, the crypto revolution is reshaping how we view money, technology, and the physical environment around us. Once lamented as too intangible and unrealistic by critics, blockchain technology has withstood the test of time to prove its value and transformative nature.
Traditional blockchain systems have focused on consensus mechanisms such as Proof of Work (PoW) or Proof of Stake (PoS), but DePIN is different. DePIN stands for Decentralized Physical Infrastructure Network (DePIN), a concept that centers on reward-based systems for providers using crowdsourcing methods on traditional physical infrastructure services. DePIN projects such as Helium Network, use Proof of Coverage, where their miners run hotspots to achieve consensus.
The rise of DePIN projects have the potential to disrupt huge, yet lucrative, business sectors traditionally monopolized by a few big companies. For instance, users are often limited to purchasing wireless plans from a handful of major companies. Not only do these plans frequently offer subpar services, but the highly centralized nature of the technology also poses significant security risks.
This is where DePIN projects come in. With contributors spread across multiple locations, the network is theoretically not only more robust and resilient but also offers users a more competitive fee. As the scale of the projects grows, more users will be included, widening the access to people in need. With that being said, it is key to understand both the potential and challenges of DePIN projects before getting more involved.
DePIN projects, such as Helium and Filecoin, often use a token reward system to encourage users to contribute to their network. These projects tend to have a wide range of focus from traditional utility sectors such as wireless to data storage. These include, but are not limited to: IoT devices (sensors), EV chargers, GPU, mobile devices, wireless internet, etc. These reward-based systems can potentially provide net-positive value through network and scale effects.
One of many advantages of DePIN projects compared to an average crypto protocol is that it has wider options for financing options as their business is inherently traditional and easier to be understood by investors. The clear focus on serving targeted communities presented by DePIN projects is appreciated by traditional finance investors on measuring business performance and success. According to a report by Crypto.com, about $1 billion has been raised among DePIN projects.
While challenges remain in attracting enough users required to kick off the projects, founders are actively looking for new ways to market their startups at a time when the AI boom is transforming the energy sector. Besides, the higher barrier to entry makes it difficult for new startups to build. Many believe as DePIN keeps growing, the door to entry will eventually become wider.
DePIN has the potential to improve user experience in a range of industries, such as telecoms. The network benefits from democratizing both access to participation, and access to use these networks, are yet to be fully understood. But that is the beauty of any kind of innovation. DePIN represents a new era of innovation for traditional financial instruments. The closer alignment of real-world assets and blockchain technology offers the public more options to participate and get rewarded in a network. Not only will the system become more resilient, but also more transparent, offering investors and users confidence in DePIN’s long-term viability.
With Contribution from Lachlan Webb.
Yiwei Wang is an avid blockchain enthusiast with a focus on the intersection of crypto, economics, and public policy. He was previously the Global PR Lead at Babel Finance and he began his career at Ogilvy in Beijing. He is currently the Head of Global PR at Metalpha.
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