Decentralized Physical Infrastructure Network

The real-world value of encrypted networks

The network that connects digital space and physical space in a decentralized manner through encryption technology is known as DePIN (Decentralised Physical Infrastructure Networks). It must satisfy the following two points:

  1. Rely on decentralized networks and communities rather than centralized companies for transactions and business logic.

  2. Virtual assets can be used to purchase tangible assets in the real world, such as power, telecommunication services, network data transmission, and data access.

In summary, the creation of DePIN is to provide real value.

Why DePIN is Needed:

Compared to Traditional Centralized ICT Infrastructure, DePIN Solves:

  1. Monopoly pricing power.

  2. Inefficient infrastructure resource utilization.

  3. KYC real-name verification mechanisms.

Different Components of DePIN:

  1. Physical Resource Network (PRN):

    • Encourages participants to use location-based hardware to provide unique goods and services in the real world, such as wireless networks, energy networks, and sensor networks.

  2. Digital Resource Network (DRN):

    • Encourages participants to use hardware to provide interchangeable digital resources, such as cloud storage networks, bandwidth, or CPU/GPU computing power.

DePIN Token Economic Model:

The core logic of DePIN is to use token incentives to encourage users to contribute resources, including GPU computing power, deploying hotspots, storage space, etc., to contribute to the entire network.

In the early stages of DePIN projects, as tokens often have no actual value, users participating in the network's resource provision behavior are somewhat similar to risk investors. The supply side selects promising projects among many DePIN projects, invests resources to become "risk miners," and profits from the increase in the quantity and price appreciation of tokens.

Providers differ from traditional miners in that they may provide resources involving hardware, bandwidth, computing power, and their income in tokens is often related to network usage, market demand, and other factors. If network usage is low, leading to reduced rewards, or if the network is attacked or unstable, their resources may be wasted. Therefore, DePIN risk miners need to be willing to bear potential risks and play a critical role in the stability of the network and the development of the project.

This incentive mechanism forms a flywheel effect, creating a positive cycle during good development and potentially causing a withdrawal cycle during downturns.

Attracting Participants through Tokens:

  1. Attracting Builders and Network Consumers:

    • With the increase in resource providers, some developers join the ecosystem to construct products. Meanwhile, as DePIN provides lower prices than decentralized infrastructure and better cost-effectiveness, consumers begin to be attracted.

  2. Forming Positive Feedback:

    • With the increase in consumer users, the incentive for demand brings more income to the supply side, forming a positive feedback loop. Thus, attracting more participants on both the supply and demand sides.

In this cycle, the supply side receives more valuable token rewards, and the demand side receives cheaper and more cost-effective services. The project's token value and the growth of participants on both the supply and demand sides remain consistent. With the rise in token prices, more participants and speculators are attracted, creating value capture.

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