How DePin reshapes the operator economy

Author: humanityprot Compiler: Block unicorn

Amid concerns about the Meme coin craze and the so-called moral crisis of cryptocurrency, the rise of the DePin network has once again strongly established the popularity of cryptocurrency in real-world practicality. Messari coined the term "DePin" in 2023, a new word, but the idea behind it is as old as cryptocurrency itself. DePin is an abbreviation for decentralized physical infrastructure, which refers to a community network driven by protocols and token incentives that coordinates hardware resources.

Bitcoin, as the original blockchain, is a typical DePin network. This is because it invites anyone in the world to contribute computing resources to ensure the security of its distributed ledger and reward them with "digital gold". This model is revolutionary not only because of its technology, but also because of its economic impact. However, as crypto has evolved, it has often veered into abstract speculation and has often lost touch with its proven ability to smoothly coordinate physical resources. Today’s DePin Network is more sophisticated, offering a path back to crypto’s origins and promising to quiet crypto’s critics by fostering more just economic relationships.

A Better Operator Economy

The DePin Network creates new economic models that improve upon those found in the existing operator economy. The operator economy — more commonly known as the “gig” or “sharing” economy — has emerged with companies like Uber and Airbnb, which leverage vast networks of independent operators to coordinate and deliver valuable services, such as rides and homes. Their reliance on networks of private companies to use crowdsourced labor and physical resources has proven to be wildly successful, validating a new service paradigm that can compete with, and even surpass, more traditional business-to-consumer models.

This Web2 operator economy has been highly profitable for unicorns and their shareholders. However, the picture is less positive for other stakeholders, such as workers who contribute their time and resources to the network and early adopters who see long-term value in the product. Like many large tech companies, the operator economy often embodies an extractive logic that favors monopolies, creates a precarious workforce, and relies on subsidized venture capital and unpredictable governance, leading to platform risk.

DePin improves the operator economy by making it more democratic, economically inclusive, and transparent. Like other blockchain applications that have found product-market fit, such as DeFi, the DePin protocol replaces the idle monopolists and rent takers at the core of Web2 operator networks with software and code. As a result, they are able to redistribute economic value to participants based on their contributions to the network. Take the ride-hailing protocol Teleport, for example. Teleport is very similar to Uber, except it dismantles the company behind the ride-hailing market. This means it can return more value to drivers and passengers through higher wages and lower prices.

Companies like Uber and Grubhub rely on a class of gig workers who are deprived of employee benefits and are precarious. In contrast, the DePin Network is specifically designed to reward network participants who invest their hardware and time into the network, giving them tokens through permissionless smart contracts. This means that every contributor to the DePin Network can become an economic stakeholder, rather than just an input in a corporate spreadsheet. More inclusive capitalism drives the Web3 operator economy forward, making it not only fairer to network contributors; it also ensures that risk returns are not only captured by a handful of venture capitalists, but also by participants who invest their time and money to grow the network. Allowing participants to become owners is also good for the business; as these initial owners will become network evangelists and help guide the growth of the next wave of users.

The more permissionless nature of DePin Networks also means that they lower barriers to entry, attract a wider range of participants, and expand geographic coverage, making them ideal for serving edge cases. On the supply side, they open the ecosystem to all qualified manufacturers, ensuring that a single hardware supplier does not become a monopoly and that the network provides better products at lower prices.

Finally, the protocol-driven nature of the DePin network provides more protection against platform risk and censorship. Unlike centralized ones, code is more difficult to block or censor. This means that hardware services based on DePin will be more difficult to disrupt for political or other illegal reasons. However, it may also mean that the DePin network will be better at maintaining services across legal boundaries, which will bring challenges to governance and regulation.

Depin's

Most Web3 operators are honing their technology in more and more specific areas, which marks the maturity of the Web3 operator economy.

Hardware operators are key to the DePin revolution, matching physical assets with user needs. Take io.net, for example, which connects companies that need AI processing power with a network of GPU providers. Helium operates in a similar way, connecting small cell hardware owners with users who need 5G connectivity. These examples highlight a key trend. In the expanding operator economy, hardware becomes a shared commodity, with each participant playing the dual role of consumer and provider.

Data operators transform raw data into valuable assets. They deploy hardware to collect and process data, creating datasets and APIs for commercial use. Examples such as DIMO and Hivemapper illustrate this trend, with operators collecting vehicle data for insurance companies or capturing street imagery for real-time street mapping. Beyond mere collection, these operators often enhance the data before packaging it into a sellable product. They also play a vital role in transporting real-world data across networks, leveraging IoT sensors to not only collect data but also provide services.

Storage operators form the backbone of data persistence in the Web3 operator economy. Projects such as Arweave and Filecoin are pioneers in this space, providing decentralized solutions for file storage. They ensure that data is not only preserved, but also available for future use. KwilDB is a decentralized database that operates on a similar principle. It provides secure and persistent storage for structured data. These platforms are critical because they protect information

Compute operators provide basic processing and communication services. Projects like Aethir demonstrate the potential of decentralized cloud rendering networks, enabling developers to build a range of decentralized consumer applications and enabling users to tap into collective computing power. Similarly, Akash provides a cloud services marketplace that challenges traditional providers like AWS and GCP with decentralized alternatives. These platforms embody the transformative spirit of DePin because they not only decentralize access to computing resources, but also democratize it.

Challenges

A Web3 economy powered by DePin faces many challenges. First, DePin projects must effectively navigate the complex regulatory environment of the real world. For example, data collection services like Hivemapper need to juggle a patchwork of governance, data management, and security regulations, each with its own set of strict compliance requirements. Similarly, 5G networks encounter a variety of spectrum licensing laws that vary widely across jurisdictions. These barriers create significant friction that slows progress and requires a delicate balance between innovation and compliance.

Second, DePin’s own market dynamics could introduce instability to the DePin project. While tokens can quickly attract more hardware operators, this does not ensure user adoption. Excess supply and little demand for the final product can lead to imbalances that destabilize the network. The design of the token economic mechanism is critical; too large an incentive to participate could trigger inflation, eroding the value of the token and the credibility of the network. If the incentive scheme is too small, then the network runs the risk of not being able to scale to meet market demand.

Third and finally, while decentralization is a cornerstone of the Web3 ethos, it also brings a host of challenges. Centralized services benefit from hierarchical coordination and management, which can lead to superior performance. In contrast, decentralized networks may struggle to match these governance efficiencies and technical efficiencies. For example, the distributed nature of computing shares can lead to delays in processing machine learning tasks compared to the centralized capabilities of data centers. If decentralized systems cannot deliver comparable performance, their cost-effectiveness alone may not be enough to convince users to abandon established centralized services.

Conclusion

DePin has the potential to unlock market efficiencies and create fairer operator economics. However, its ultimate success will require more effort and time, especially for projects launching two-sided marketplaces in highly regulated industries. Assuming DePin can address the challenges of a complex regulatory environment, challenging token economic models, and comparable performance, its success could be revolutionary. More importantly, it would prove even the most ardent critics wrong about the real-world practicality of web3.