DePIN 2.0: What the Next Generation of DePINs Is Doing Differently

DePINs (decentralized physical infrastructure networks) are everywhere. Or, at least they are for those of us reading CoinDesk in July of 2024. As someone who’s been involved in the vertical since its inception back in 2019, I recognize that I might be more of an early adopter, more DePIN-fanatical than most. But as I sat down to write this piece and took a quick mental inventory of the DePINs I contribute to on a daily basis, even I was surprised at the number and variety of projects out there now.

This op-ed is part of CoinDesk’s new DePIN Vertical, covering the emerging industry of decentralized physical infrastructure. Connor Lovely is the DePIN Lead at IoTeX and Host of the Proof of Coverage Podcast. He was previously a consultant at BCG.

For starters, there’s a Cudis ring on my hand that gives me health data and pays me points towards a future airdrop. There are the Helium and XNET WiFi hotspots in my home that provide wireless connectivity for my devices (and others’) and pay me tokens when it is used. Helium Mobile (my sole cellular provider by the way) has an app on my phone that pays me crypto for opt-in sharing of location information that is used to better triangulate data usage and network demand. There’s the Grass browser extension running on my computer that allows AI labs and web scrapers to view the internet through my residential IP and earns me airdrop points. And, finally, there’s the DIMO device in my car that provides me with real-time data on my vehicle, makes this anonymized data available to third-party developers, and (again) pays me tokens.

If you think this list is exhaustive, you’re thinking too small. Today, the DePIN sector is 1300+ projects strong and its growth is accelerating through the bull market. While the proliferation of the DePIN model is exciting, what’s even more interesting to me is how exactly this next generation of DePINs is going about building their networks…and how that differs from their predecessors. Here’s what I’ve been seeing.

The DePINs of this generation are improving upon the last five years of learning and iteration in these ways:

Being demand-led in everything

The most common, yet fair critique of the first DePINs (like Helium’s IoT network) were that they had done a great job building out supply, but didn’t have enough demand. The DePINs of this generation are securing demand as early as possible, in many cases pre-TGE. They’re also building out supply in a more targeted, measured way, allowing demand to dictate where in the country or world they incentivize supply-side buildout.

For example, Spexi is a DePIN for aerial drone imagery. They’ve secured seven figures of demand contracts pre-TGE and have paid out six figures in cash to drone operators, who are salivating at the simple, gamified opportunity to earn money from their existing drone assets.

Lowering contributors’ barrier to entry

This cycle, we’ve seen the rise of DePINs that utilize generic, not custom-built hardware, that already exists for their supply-side. Another way to speed supply-side growth is to tap into everyday activities people are already doing. An example of both of these strategies is Natix, which uses smartphones in cars as dashcams for street-level imagery. The company is looking to capitalize on a behavior (driving) that is already occurring day to day, rather than trying to motivate net new behaviors with tokens (a much more “expensive” proposition from a token incentive standpoint). The example here for contrast would be a wireless DePIN like Helium looking to incentivize contributors to climb a roof and install a CBRS radio. That’s a net new behavior.