The Rise of Decentralized Physical Infrastructure Networks (DePIN)

DePINs (Decentralized Physical Infrastructure Networks) are a powerful application of blockchain technology. However, the success of these networks relies on long-term tokenomics, according to the co-founder of Hivemapper.

Building a sustainable DePIN requires this key.

🌍 Many people in the crypto world believe that Decentralized Physical Infrastructure Networks (DePIN) will be the next big thing in the industry. 🚀 Just like the rise of NFTs and stablecoins, DePIN has the potential to revolutionize how we build new products and services. But what exactly is DePIN, and why are experts so excited about it?

The Power of DePIN

DePIN projects leverage crypto incentives to bring together millions of participants and create revolutionary products. The possibilities are endless! 🙌 For example, Helium Mobile recently introduced a nationwide $20 unlimited cell plan powered by community-owned 5G hotspots. Render Network built a robust permissionless ML cloud during a GPU crisis. And my company, Hivemapper, mapped 10% of the world’s roads in less than a year. These incredible achievements were made possible through DePIN crypto-economics. 💪

💡 But for DePIN to become more than just a passing trend, new projects must learn from the pioneers in the field. The early DePIN projects made mistakes, experimented with different models, and learned from their experiences. Unfortunately, these valuable lessons seem to have been forgotten. This puts new projects at risk of creating a boom-and-bust cycle that could tarnish the entire sector. So, let’s dive into some of the most important lessons we’ve learned at Hivemapper. These lessons are not only useful for DePIN enthusiasts but also crucial for anyone considering investing or participating in this exciting space.

Lesson #1: Avoid the Static Rewards Trap

Tokens are a powerful tool for incentivizing participation in DePIN projects. They gamify the process, encouraging contributors to collectively build a product that’s greater than the sum of its parts. But, for a DePIN project to be sustainable, it needs both a robust supply strategy and genuine demand for its product.

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🔄 Supply is relatively easy to generate by distributing tokens for work. However, the challenge lies in determining the right amount to give. Give too many, and there won’t be enough tokens for later stages of growth. Give too few, and contributors won’t have much incentive to get involved. New projects must also overcome the “cold start” problem, reaching a threshold-scale before attracting significant demand.

🌱 Genuine demand, on the other hand, is much harder to achieve. It requires finding product-market fit quickly. To increase your chances, focus on solving a real pain point through a decentralized approach. But beware of the Static Rewards Trap! It’s tempting to offer rewards to contributors solely based on engagement, rather than the value they add. This shortcut may attract initial contributors, but it compromises the network’s underlying incentive structure.

📌 For example, Helium rewards all 5G hotspots equally, regardless of their location. But imagine if a hotspot in Manhattan earned the same rewards as one in Death Valley. There would be no incentive to improve coverage where it’s needed most, hindering the mission of democratizing communication access. Similarly, Hivemapper rewards dashcam contributors based on the uniqueness and productivity of their data. This approach avoids rewarding duplicative or low-quality work.

💡 So, if you’re building or evaluating a DePIN project, remember that productivity should be your protocol’s mantra. Establish a baseline reward for less useful contributions and prioritize quality to reward the most valuable work. Don’t fall into the Static Rewards Trap and sacrifice long-term growth for short-lived success.

Lesson #2: Embrace Dynamic Rewards

Designing dynamic rewards is crucial for the success of DePIN projects. There are four main dimensions to consider: geography, contributor productivity, contributor quality, and network progress.

🌍 Geography: In the Hivemapper Network, customer demand in a region translates into better rewards for contributors. Tokens burned from map usage are re-minted, benefiting contributors who provided the data. We’ve also implemented rewards multipliers for regions producing more useful map data, even before customer usage ramps up. This “land and expand” approach ensures the network prioritizes regions with the highest demand and potential impact.

💪 Contributor Productivity: Rewarding contributors based on their productivity is essential. At Hivemapper, we focus on recruiting gig drivers, truckers, and commercial fleets who passively collect map data during their daily jobs. They drive more, explore new roads, and contribute higher-quality data. Contributors who drive less or mainly commute generate fewer rewards, reflecting their lower productivity.

🌟 Contributor Quality: Building an accurate map requires high-quality data. Hivemapper has implemented reputation scores to reward contributors who consistently provide precise and valuable information. This incentivizes contributors to mount their dashcams correctly and capture data that improves the overall network quality. Aligning incentives with quality ensures both individual and network success.

📈 Network Progress: The size of the rewards pool in the Hivemapper Network depends on the network’s progress. Map Progress, a dynamic metric, measures the amount of mapping done across the network. By linking rewards to network utilization, we avoid front-loading rewards for early adopters. Fixed-minting schedules can lead to falling rewards as more contributors join, just when the network becomes more useful. It’s important to maintain a healthy relationship between early adopters and later contributors.

🗝️ By embracing dynamic rewards, DePIN projects can ensure fairness, maximize productivity, and promote healthy growth within their networks.

The Future of DePIN

DePIN holds enormous potential for transforming critical infrastructure ownership and operation. With the right incentive design and careful execution, we can build a world where more of humanity’s infrastructure is community-owned and operated. 🌐

📈 Considering the current trajectory, the future looks promising for DePIN. As more projects experiment, learn from past mistakes, and implement successful models, the sector will mature and gain wider recognition. The rapid growth of communities like Hivemapper demonstrates how DePIN can achieve more with fewer resources. 💪

👥 So, whether you’re an enthusiast, investor, or participant in DePIN projects, keep an eye on the trends and developments in the field. The potential for disruptive and revolutionary infrastructure solutions is vast. Embrace the power of decentralized networks and help shape a future where ownership and control are in the hands of the people.

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😄 We’d love to hear your thoughts! Have you participated in any DePIN projects? Do you have any questions or concerns? Let us know in the comments below! And don’t forget to share this article with your friends and on social media! 🚀

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📚 References:

1. Helium Mobile’s $20-a-month unlimited cell plan
2. Render Network’s permissionless ML cloud
3. Hivemapper’s mapping of 10% of the world’s roads
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Original article by Ariel Seidman, co-founder and CEO of Hivemapper. Edited and enhanced by [YOUR NAME].

We will continue to update Blocking; if you have any questions or suggestions, please contact us!