DEP IN: The New Industrial Revolution

Authors: Erik Lowe, Pantera Content Director; Cosmo Jiang, Pantera Portfolio Manager; Eric Wallach, Pantera Investment Analyst; Translation: Golden Finance Xiaozou

The industrial revolution is a transformative era that improves productivity and reshapes the economy through breakthrough large-scale machine manufacturing. During the industrial revolution, there was a transition from a primarily localized agricultural economy to urban industrial centers, and social centralization was an inevitable outcome.

However, centralized production, while improving efficiency, also brings challenges. Factories are vulnerable to catastrophic events such as fires or other single point failures (such as mechanical breakdowns).

Although in the past few centuries, driven by advances in new technologies, we have experienced a series of ‘industrial revolution’ stages, modern companies still face many core issues related to resource and human capital concentration. In addition, as management becomes increasingly large, regulatory processes become more cumbersome, and the cost and friction of establishing large-scale businesses are also higher now.

However, we now believe that a new phase is forming, that is: reimagining the composition and management of business, services, and networks. The decentralized physical infrastructure network (DePIN) is expected to usher in a new era of productivity, but what drives the development of this era is not centralized forces, but decentralized forces.

1 What is DePIN?

*“The decentralized physical infrastructure network (DePIN) uses token rewards to incentivize hardware-based network deployments and completion of real-world tasks.”- *Messari classification system

DePIN’s core is a decentralized marketplace that connects resource suppliers with buyers. Unlike typical traditional models (where a company is responsible for resource production), the suppliers are a network composed of many independent operators. These operators are incentivized through tokens or fees, willing to contribute their resources (usually in the form of physical hardware), aligning their interests with the success and development of the DePIN ecosystem.

DePIN is highly respected for its potential to completely transform the physical infrastructure network in a range of industries such as cloud computing, wireless networks, and cloud storage. For example, the Helium Network is a decentralized wireless infrastructure network for IoT devices, allowing operators to deploy wireless hardware to earn Helium tokens, which serve as a reward for expanding network coverage.

A key difference between DePIN and its centralized counterparts is who the stakeholders are. The value of DePIN is not flowing to rent-seeking intermediary institutions or companies, but is allocated to the operators who collectively own and operate the network.

Many DePIN projects are not lacking in innovative practices, which are very interesting, but problems have also arisen: “What additional value will DePIN provide for me if my existing services are running well?”

2、What are the advantages of DePIN?

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

• Reliable, resilient, and secure - a sufficient number of node operators are decentralized to ensure 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.
• User’s affordability - Since the DePIN project is operated by the operator network, the impact of centralized operating expenses such as physical maintenance and legal fees on prices is relatively small, so the saved costs can be passed on to users.
• Community-driven decision-making—decisions by a few corporate executives may not always serve the best interests of users and/or operators. In some cases, their decisions are primarily driven by self-interest. In DePIN, decisions are made by the token holder community, which may promote a healthier ecosystem, benefiting network participants in a more equitable manner.
• Gig economy growth - In the past few years, the nature of work has changed, with more and more people wanting the freedom of independent work or seeking passive income sources. The DePIN network often leverages potential labor supply and the ability for someone to do more without affecting their established daily work - such as someone being able to deliver a few takeout orders on their way home from work.
• Better products and services - a powerful DePIN flywheel may create better products than centralized competitors. With increasing user demand, growth is captured by tokens with a strong value accumulation mechanism. These tokens in turn incentivize more operators to contribute, further improving products and attracting more users. This is the DePIN flywheel.

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

3、DePIN project case study

Below we will share two case studies of the DePIN revolutionary frontier project.

(1) GEODNET

GEODNET is building the world’s largest decentralized Real Time Kinematics (RTK) network, supported by a community of satellite miners, to enable large-scale Internet of Things. It is disrupting existing enterprises by establishing an affordable global decentralized real-time data marketplace.

Here is our overall investment theory:

• Product differentiation: GEODNET’s RTK network can provide better GPS data (accuracy is 1 centimeter, while standard GPS accuracy is 2 meters), and at a cheaper price (more than 10 times cheaper), its global community network can enable faster expansion.
• Huge market: The global satellite navigation system (GNSS) is a market of over $200 billion. The revenue of listed companies such as Trimble (market value of $15 billion) and Hexagon (market value of $30 billion) is $10 billion, with earnings before interest, taxes, depreciation, and amortization (EBITDA) of $3 billion.
• Growth Flywheel: Miners can earn GEOD tokens by purchasing and installing GNSS base stations to contribute to the network. These incentives have led to the addition of 5500 devices to the GEODNET network, more than any of its large publicly listed competitors.
• Development momentum: In less than three years, GEODNET’s recurring revenue has reached approximately $1 million, with a network of over 7600 miners, matching or surpassing the scale of listed companies’ networks.
• 80% of GEODNET’s 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 disrupt the digital mapping market dominated by centralized tech giants by leveraging community contributions to provide updated, more comprehensive, and more economical map data.

Here is our overall investment theory:

• Long-term trend: Due to the increasing demand in the fields of enterprise, logistics, and emerging advanced driver assistance systems (ADAS) or autonomous driving, the digital map market is growing rapidly and is expected to reach $37 billion by 2026.
• Competitive Advantage: Hivemapper’s crowdsourcing model speeds up map data updates by 20-100 times, with significant cost advantages compared to traditional surveying methods used by competitors (e.g., cost per contributor is around $300-550, while each Google Maps tool costs $500,000).
• Basic achievements: Hivemapper has nearly 150,000 contributors and has mapped over 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 gained multiple enterprise customers, and this is also reflected in on-chain revenue.
• Catalyst: This year’s launch of the Hivemapper Bee dashcam has significantly improved data quality and user experience. With the increasing adoption of ADAS and the growing number of autonomous vehicles, coupled with new EU regulations requiring vehicles to be equipped with intelligent speed assistance systems, these are long-term driving factors for the demand for updated and more detailed map data.
• Main risks: competition from large established enterprises, regulatory challenges of cross-jurisdictional data collection, high upfront costs from emerging market contributors, and execution risks of managing complex token reward systems.