New infrastructure technology related to the cryptocurrency industry can provide better cost savings and flexibility than that provided by cloud computing. As with other blockchain technologies, it also carries its own brand of risk.
The infrastructure technology is DePIN, short for Decentralized Physical Infrastructure Networks, which uses blockchain to create community-owned networks for sharing infrastructure services and technology. DePINS enables individual contributors to participate in a network environment where they can offer underutilized hardware, such as storage space, computing power, or sharable data assets in exchange for crypto-token rewards for other services.
On the cryptocurrency front, DePIN is described as an important part of the digital asset strategy by enhancing infrastructure resilience and encouraging innovation. DePINs provide benefits to achieving these goals, but they also bring associated challenges. These include scalability, security, regulatory uncertainty, and integration challenges.
DePIN is just one of a group of decentralization technologies – often referred to as DecentraTech – that are supporting a gradual but steady movement to adopt decentralized business and commerce models. This movement is often a response to the centralization of power and wealth by governments and big corporations.
What is debin?
DePINs are decentralized networks that leverage blockchain technology to coordinate the deployment, maintenance and use of real-world infrastructure, explains Tom Phipps, head of crypto strategy at Journey3 In London, England, Web3 marketing agency.
As we have seen in the broader cryptocurrency and blockchain markets, because the technology is in its infancy, it carries a greater risk of technical vulnerabilities or disruptions.
Instead of relying on a single entity to deploy and maintain a network or service, DePINs enable individuals and organizations to contribute tangible resources to the overall network. Phipps explains that the blockchain serves as a coordination layer that cryptographically verifies the provision of resources, and automatically distributes token incentives to contributors.
In DePIN ecosystems, blockchain technology serves as the backbone for transparency, automation, and collective decision-making. It records every recording of assets, performance metrics, and distribution of tokens (for incentives and rewards) in a publicly visible ledger, hopefully ensuring full traceability and trust.
Smart contracts then step in to automatically enforce SLAs, penalties, and reward schedules, eliminating the need for manual oversight. Meanwhile, decentralized identity and governance frameworks invite stakeholders from around the world to vote on protocol upgrades, approve new node types and supervisory treasury allocations. This eliminates dependence on any single central authority, as Merlin M. explains. Osterman, chief strategy officer at Arcrin Network, a public renewable energy asset company.
From an investment or financing point of view, DePIN’s crowdsourcing model means that the cost of building infrastructure is no longer a capital expenditure upfront, but operational costs that follow the usage model. Because service providers already have the infrastructure available to assign to the DePIN operator, the time to market is short, compared to creating it in advance.
Where and how DePIN is used
The most important applications of DePIN are those that require large infrastructure to deliver the service, and where it is possible to decentralize ownership of that infrastructure through crowdsourcing. The incentive model attracts owners to join and stay in the crowd, explains Pete Harris, the school’s principal lighthouse Partners, Inc. A global alternative asset management company.
The most immediate advantages of DePIN networks include low capital costs and rapid construction of infrastructure. This means lower prices for customers and increased profit margins for operators, Harris explains. Most DePIN numbers are geographically dispersed which improves the flexibility of DePIN services compared to centralized services. Through thoughtful design, DePIN infrastructure can be placed close to customers, reducing latency in service delivery.
One of DePIN’s most established use cases is wireless connectivity, Phipps says. This was the first one he invented HeliumStarting with IoT coverage before expanding to 5G networks. As one of DePIN’s earliest projects, Helium has been a proof of concept that has been promoted in a number of other industries exploring how community-deployed and hosted infrastructure can radically transform traditional infrastructure projects at a fraction of the cost. In this case, countless community-deployed hotspots will be put forward instead of larger traditional communications infrastructure.
The risks of DePIN and the need for regulation
With DePIN being a new industry that straddles a myriad of traditional markets, Phipps says its legal status and classification could pose a risk from a regulatory standpoint. These risks include enforcement risks, compliance costs, or risks related to updates to the legal transaction as legislatures and regulators rush to catch up.
As we have seen in the broader cryptocurrency and blockchain markets, because the technology is in its infancy, it carries a greater risk of technical vulnerabilities or disruptions. This can appear in smart contracts facilitating the DePIN application layer (application layer risk), or at a lower level in the network (protocol level risk). Every additional technical layer added to the stack becomes an additional layer of risk.
Despite the great enthusiasm for DePIN, the reality is that DePIN projects operate in an unregulated environment, creating uncertainty among users, developers, and investors. In response, governments and industry should prioritize cultivating a fertile innovation ecosystem, rolling out incentive programs — grants, tax credits, feed-in tariffs — that treat token-based sharing as a recognized path to network modernization, Osterman says.
Osterman explains that DePIN represents a paradigm shift in how physical infrastructure is financed, deployed and managed. By combining IoT, blockchain technology and token economics, we unlock new pools of capital, enhance local resilience and foster true alignment among stakeholders. The need is to evolve beyond purely financial instruments and incorporate cyber-physical economic risk frameworks.
