Decentralizing Infrastructure: The DePIN Revolution

The cryptocurrency industry is expanding beyond digital realms into real-world infrastructure through projects like Helium and Filecoin, forming what’s known as DePIN (decentralized physical infrastructure networks). Despite significant investment and potential, DePIN faces challenges, notably the lack of customers. However, it’s gaining traction as an emerging trend, with billions invested and attention from venture capitalists.

DePIN projects operate physical hardware infrastructure via blockchain, utilizing token rewards to incentivize participation. Unlike traditional centralized infrastructure, DePIN networks are decentralized, offering opportunities for public involvement. Solana has become a preferred platform for DePIN projects due to its efficiency and low transaction fees.

While DePIN projects attract institutional and VC interest, they struggle with generating revenue and acquiring users. The market remains speculative, with tokens often tied to the success of the underlying service. Projects like Helium Mobile demonstrate the potential for community-driven networks, but scalability and adoption remain key challenges.

Despite the risk, DePIN projects offer innovative solutions for real-world problems, especially in AI, mapping, and wireless networks. However, their success hinges on identifying and serving existing demand rather than speculative token inflation. Projects with clear utility and user bases have a higher likelihood of success, potentially disrupting centralized infrastructure and creating long-term value.

Borderless Capital, for instance, has been investing in projects since 2021 and was an early backer of the Helium network. It runs a dedicated DePIN fund that has done more than 30 investments in the space and has raised money from the likes of Jump, Telefónica, and OKX. Borderless Capital noted in their DePIN investment thesis that adoption and usage of these networks (including Helium) are still at very early stages. Borderless told CoinDesk that it is in the process of creating the $100 million DePIN Fund III to support the growing DePIN ecosystems in Solana.

Dragonfly’s Rob Hadick thinks that while DePIN interest amongst VCs is here to stay, there is an issue to be tackled with the lack of users on said protocols. “Investors spend a lot of their time imagining how crypto and blockchains will bring about a new financial or social paradigm,” Hadick said. “But the hot DePIN projects look and feel more tangible, making it easier to drum up excitement.”

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