DePIN: The new industrial revolution

Author: Erik Lowe, Pantera Content Director; Cosmo Jiang, Pantera Portfolio Manager; Eric Wallach, Pantera Investment Analyst; Translation: Jinse Finance xiaozou

The Industrial Revolution was a transformative era that reshaped the economy by increasing productivity through breakthrough large-scale machine manufacturing. During the Industrial Revolution, there was a shift from a primarily local agricultural economy to urbanized industrial centers, and social centralization was an inevitable product.

However, while centralized production has improved efficiency, it has also brought challenges. Factories are vulnerable to catastrophic events such as fire or other single points of failure (such as mechanical failure).

While we have experienced a series of "industrial revolution" stages over the past few centuries, driven by new technological advances, modern companies still face many core issues related to the concentration of resources and human capital. In addition, as management becomes larger and regulatory processes become more onerous, the cost and friction of building large-scale businesses are currently higher.

However, now we believe that a new stage is taking shape: reimagining how businesses, services, and networks are composed and managed. Decentralized Physical Infrastructure Networks (DePIN) promise to usher in a new era of productivity, driven not by centralized forces but by decentralized ones.

1 What is DePIN?

" Decentralized Physical Infrastructure Networks (DePIN) use token rewards to incentivize the deployment of hardware-based networks and the completion of real-world tasks." - Messari Classification System

At the heart of DePIN are decentralized marketplaces that connect resource suppliers with buyers. Unlike the typical traditional model (where one company is responsible for resource production), the supplier side is a network of many independent operators. Through economic rewards such as tokens or fees, these operators are incentivized to contribute their resources (usually in the form of physical hardware), aligning their interests with the success and growth of the DePIN ecosystem.

DePIN is highly regarded for its potential to revolutionize physical infrastructure networks in a range of industries such as cloud computing, wireless networking, and cloud storage. For example, the Helium Network is a decentralized wireless infrastructure network for IoT (Internet of Things) devices that allows operators to deploy wireless hardware to earn Helium tokens, which are rewards for expanding network coverage.

A key difference between DePIN and its centralized counterparts is who the stakeholders are. Instead of the value of DePIN flowing to rent-seeking intermediaries or companies, it is distributed to the operators who jointly own and operate the network.

Many DePIN projects are innovative and interesting, but the question arises: "If my existing services are working well, what additional value will DePIN provide me?"

2 What are the advantages of DePIN?

The benefits of DePIN can be summarized into the following key advantages:

• Reliable, resilient and secure - A sufficient number of node operators are decentralized, ensuring more consistent network uptime and resistance to single points of failure inherent in centralized physical systems. Security or fraud risks associated with closed systems can be mitigated by transparent, immutable and auditable blockchain networks.

• Affordability for users - Since the DePIN project is operated by a network of operators, the operating expenses of centralized operators such as physical maintenance and legal fees have less impact on prices, so the savings can be passed on to users.

• Community-driven decisions - Decisions made by a small number of company executives may not always be in the best interests of users and/or operators, and in some cases, their decisions are mainly based on self-interest. In DePIN, decisions are made by the community of token holders, which may promote the development of a healthier ecosystem and benefit network participants in a more equitable way.

• Growth of the gig economy - The nature of work has changed in the past few years, and more people want the freedom to work independently or find passive income sources. DePIN networks often take advantage of potential labor supply and the ability for someone to do more without affecting their established daily work - such as someone making a few takeaway orders on the way home from get off work.

• Better Products and Services - A strong DePIN flywheel has the potential to create better products than centralized counterparts. As user demand increases, growth is captured by tokens with a strong value accumulation mechanism. These tokens, in turn, incentivize more operators to contribute, further improving the product and attracting more users. This is the DePIN flywheel.

We believe DePIN has a bright future, but we also know it is not without challenges. Issues such as regulatory hurdles, potential security issues, and dependence on widespread adoption are all potential obstacles. However, its potential benefits make it a concept worth exploring.

3、DePIN Project Case Studies

Below we will share two case studies of projects at the forefront of the DePIN revolution.

(1) GEODNET

GEODNET is building the world's largest decentralized Real Time Kinematics (RTK) network, powered by a community of satellite miners to enable large-scale IoT. It is disrupting incumbents by establishing an affordable, global, decentralized real-time data market.

Here is our overall investment thesis:

• Product differentiation: GEODNET's RTK network provides better GPS data (1 cm accuracy vs. 2 meters for standard GPS) and is more affordable (more than 10 times cheaper), and its global community network allows for faster expansion.

• Huge Market: Global Navigation Satellite Systems (GNSS) is a $200 billion+ market. Public companies like Trimble ($15 billion market cap) and Hexagon ($30 billion market cap) have $10 billion in revenue and $3 billion in EBITDA.

• Growth Flywheel: Miners can earn GEOD tokens by contributing to the network through the purchase and installation of GNSS base stations. These incentives have already led to 5,500 devices being added to the GEODNET network, more than any of its large public competitors.

• Momentum: In less than three years, GEODNET has reached ~$1 million in recurring revenue and over 7,600 network miners, matching or exceeding the network size of public companies.

• Value Accumulation: 80% of GEODNET revenue is used to purchase and burn GEOD tokens.

（2）Hivemapper

Hivemapper is a decentralized map network that uses cryptocurrency incentives to crowdsource high-quality, up-to-date global map data. Hivemapper aims to leverage community contributions to disrupt the digital map market dominated by centralized technology giants by providing newer, more comprehensive, and more affordable map data.

Here is our overall investment thesis:

• Long-term trends: The digital map market is growing rapidly and is expected to reach $37 billion by 2026, driven by growing demand in the enterprise, logistics and emerging advanced driver assistance systems (ADAS) or autonomous driving sectors.

• Competitive advantages: Hivemapper's crowdsourcing model enables map data to be updated 20-100 times faster, providing a significant cost advantage over competitors' traditional mapping methods (e.g., each contributor costs about $300-550, while each Google Maps tool costs $500,000).

• Basic results: With nearly 150,000 contributors, Hivemapper has mapped more than 14.38 million kilometers of non-overlapping roads, accounting for 24% of the world's non-overlapping roads, and is 5-6 times faster than Google Maps. The network has also acquired multiple enterprise customers, which is also reflected in the on-chain revenue.

• Catalysts: Hivemapper Bee dashcam launched this year significantly improves data quality and user experience. Growth in ADAS adoption, increasing number of autonomous vehicles, and new EU regulations requiring vehicles to be equipped with intelligent speed assistance systems are long-term drivers of demand for newer, more detailed map data.

• Key Risks: Competition from large incumbents, regulatory challenges of cross-jurisdictional data collection, high upfront costs for emerging market contributors, and execution risks of managing a complex token reward system.