Benzinga - Decentralized Infrastructure Physical Networks — DePINs — have the potential to transform how we access and use real-world services.
Potential use cases are only restricted by your imagination. What if…
- Internet hotspots could be established in rural areas where there is little coverage?
- Homeowners could be rewarded by selling excess solar energy back to the grid?
- Consumers could share unused storage space on their devices with others?
- Entrepreneurs could unlock peer-to-peer microloans to build local projects?
Underpinned by blockchain technology, DePINs make all of this possible — at a time when the infrastructure powering the global economy is experiencing seismic change. Figures from Statista suggest 33.8% of the world's population don't use the internet, with people in low-income countries most likely to be shut out of the modern information society. The International Energy Agency estimates that 100 million households will depend on rooftop solar panels by 2030, and enhancing economic incentives will be a crucial catalyst for adoption. And let's not forget that the rise of artificial intelligence means the need for storage and computation is booming, with McKinsey projecting demand for data centers will rise 10% a year between now and the end of the decade. DePINs have the power to cultivate a cloud storage network that's much cheaper than traditional players including Google (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN).
DePINs mount a competitive challenge to the centralized providers who dominate the business landscape. Right now, most of the infrastructure we use every day is controlled by huge companies or governments. This creates a real risk of monopolies where a lack of choice pushes up prices for consumers and businesses — with the pursuit of profits stymying innovation and shutting out customers based on geography and income.
Blockchains are at the beating heart of these decentralized networks. That's because individuals and businesses who contribute physical infrastructure can be rewarded in crypto tokens that are automatically paid out through smart contracts. Consumers can also use digital assets to unlock services on demand.
This approach isn't about modernizing access to infrastructure, but changing how it is managed, accessed and owned. Unlike centralized providers, the crypto tokens issued through DePINs incentivize all participants to get involved. Decentralized autonomous organizations (known as DAOs for short) play a vital role in establishing the framework for how these projects are managed. Digital assets can be used to vote on proposals ranging from planned network upgrades to where resources should be allocated. Whereas big businesses are motivated by profit, community-driven projects can focus on meeting the needs of underserved areas. The issuance of tokens can also provide the funding required to build infrastructure — and acquire the land, equipment and technical expertise needed to get an idea off the ground.
Web3 has been driven by a belief that internet users should have full control over their data, and tech giants should be stopped from monetizing personal information while giving nothing in return. DePINs align well with these values, all while reducing barriers to entry and ensuring there's healthy competition. Multiple marketplaces for internet access, data storage and energy will result in much fairer prices for end users — and encourage rivals to innovate so they have compelling points of difference. It also means an entrepreneur with a deep understanding of what their community needs can start a business without large capital requirements. Open access and interoperability are the future.
Certain challenges must be overcome for DePINs to have a lasting global impact. There's no denying that multibillion-dollar corporations currently benefit from economies of scale, vast user bases, and deep pockets. That's why it's incumbent on decentralized innovations to show why their approach is better. Reaching out to untapped markets that aren't being served by business behemoths is a good first step. Another obstacle standing in the way of adoption concerns regulatory uncertainty, which can prevent investors and participants from getting involved. Careful thought also needs to be paid to the ramifications that DePINs can have on data privacy. Unless safeguards are imposed, someone who accesses an internet hotspot through blockchain technology could inadvertently disclose their particular location.
Ecosystems have been created that allow DePINs to be established while ensuring that user privacy is preserved at all times — championing data ownership and self-sovereignty. As well as reducing the risks surrounding identity theft, they have been built with the evolving nature of global regulation in mind — with measures such as GDPR in the EU forcing companies to rethink how much data they hold on their customers.
Zooming in on Europe as a use case, and how these regulatory headwinds will affect more than 400 million citizens on the continent, gives an invaluable insight into how DePINs — and the infrastructure they're built on — can have an impact in the years to come.
For one, the current internet landscape means that we need to create a new digital identity every time we want to join a website or app — manually handing over personal information by filling out lengthy forms to open accounts. Users are then confronted by lengthy terms and conditions or privacy notices that often go unread, leaving people in the dark about how their data is going to be used in the future. That's why the EU has proposed singular digital identities that could be used for multiple services — from "paying taxes to renting bicycles" — and change the dynamic about how confidential information is shared. This approach would mean that consumers are in the driving seat, and decide which counterparties have the right to learn more about who they are.
The European Union's approach is ambitious and requires infrastructure that is fast, inexpensive and interoperable — allowing digital signatures, identity checks and credentials to be stored and executed securely across the trading bloc. Another element that must be thrown into the mix is central bank digital currencies, with the European Central Bank spearheading efforts to create an electronic form of the euro that is free to use and privacy preserving — all while enabling instant cross-border transactions with businesses, other consumers and governments.
High-performing and low-cost infrastructure will be essential if decentralized assets are going to be used by consumers across the continent — not to mention regulatory compliance. Privacy-focused wallets need to support multiple blockchains — as well as decentralized identities, verifiable credentials and data storage. A simple, user-friendly mobile application will be instrumental in guaranteeing that DePINs gain momentum.
The future is bright, and we're yet to scratch the surface when it comes to the advantages decentralization can bring for all of us. But usability and efficiency are two key pillars that must be prioritized if this new wave of innovation is to match the unparalleled impact of the internet.
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