Blockchain DePINs Explained
by Hans Rempel | October 21, 2024 | Category: Diode
Blockchain DePINs are an exciting new way to create better services for end users by unlocking the value in assets operated, and often owned, by node hosts.
Read below for more information and emerging use cases.
What are blockchain DePINS?
DePINs (Decentralized Physical Infrastructure Networks) work by deploying useful devices that are associated with blockchain wallets. These useful devices provide some sort of service and are automatically rewarded by a blockchain token. They can be thought of as blockchain “Layer 2” real-world utility services.
The devices are almost always deployed and maintained by an ecosystem of third parties - the “node hosts”. Helium is an early example of one of the first successful DePINs (LoRA, WiFi, and cellular nodes-as-a-service). Helium has an Internet-connected wireless node that is operated by a node host - the node provides wireless connectivity to others, and the nodes are rewarded by receiving the Helium token.
What is the Diode DePIN?
Diode is also a DePIN - instead of wireless service like Helium, Diode provides end-to-end encrypted routing services. The Diode Network is a new type of secure infrastructure that can be used to connect any type of device and any type of application using end to end encryption. All a device needs to securely communicate is its blockchain wallet - unlike Web2 security, no other third parties are involved with the communication.
Diode nodes are emerging in every region of the world, providing better security (all in-region connections, blockchain perimeter anchoring can’t be tampered) and faster performance (shorter hops) than anything else in existence today.
The nodes of the Diode Network make up an open, permissionless Zero Trust communication network. It is kind of as if the popular chat app, Signal, figured out how to make their E2EE infrastructure expandable by a community, and then also made it available for everyone to build on top of.
For the blockchain back-end, Diode leverages both its own L1, and also Moonbeam - an EVM compatible, low gas chain with DePIN friendly features. Nodes are rewarded for the bandwidth they transfer by the $DIODE token which today has a one-way bridge from the Diode L1 to the Moonbeam ERC-20.
DePIN use cases
A use case may be a fit for DePIN if regional distribution of nodes is key to the success of the project. If regional distribution doesn’t matter, a DePIN approach could still make sense, but it is usually more about financing - which could be a differentiated strategy depending on a few factors (see “Other use cases” below).
Today’s practical DePIN use cases are three:
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IoT sensor services - crowd-sourced IoT devices that gather data about their environment provide that data back to an aggregated view of the information. An example of this is the QuakeCore Network - their service senses seismic activity in a region, but the sensing devices need to be placed and maintained by someone. The geographic distribution of sensing nodes is critical, as is the rewards for sensing activities to keep the node hosts interested in ensuring their nodes are up and running at all times.
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Compute services - Unused compute (graphics cards, servers) are a powerful use case because compute systems are often both expensive and underutilized. Although geographic location can be a key value proposition (e.g. Internet egress location, regional cost of power, ISP co-location for speed), the core focus for this use case is paying those owning the computing systems an incentive to make them available to others. A notable example of this is Akash - they have a compute DePIN that is essentially a distributed data center that anyone can leverage.
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Network services - The ability to deploy network nodes geographically solves a core challenge in network engineering - that of coverage. The more coverage your network has, the better service the network can provide to end-users. A clear example of this for wireless networks is Helium, and a great example for IP-based secure communication networks is Diode. Other organizations, such as Althea’s Liquid Infrastructure, are providing tooling that can also leverage the underlying DePIN incentive token as a Real World Asset (RWA).
Other use cases
There are other potential “Uber”-like use cases that are close the to “Compute systems” use case - basically ones that make expensive but underutilized assets available to others as a service, and pay the asset owner for the service (asset-as-a-service). However, these use cases can be awkward if the the metering of the asset can’t easily be automated. For example, a service that allows people to rent recreational equipment from homeowners whose kayak (choose your equipment) is usually sitting around unused - probably not a great DePIN candidate. Other use cases’ metering can be automated - such as electrical scooter fleets that can be unlocked by a mobile app. However, even for these use cases, the availability of the asset type must be sufficiently dense (if providing physical access), or sufficiently virtual (if providing remote access), to provide a high quality, dependable service.
In Summary
DePINs are being used to provide better services thanks to their ability to leverage geographic node distribution and to automate payment to node hosts. Today, they are most effective for collecting sensor data, making computing resources available, and providing network services. As the building blocks for DePINs are made more widely available, because of their efficiency, it is likely we will increasingly see DePIN models used in place of traditional infrastructure networks.
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