Author: Ian, Xinwei, Severin, MT Capital
TL;DR
1. Overview of DePIN: The Decentralized Physical Infrastructure Network (DePIN) combines the physical world with Web3 to reduce costs and improve efficiency through decentralized technology. It has wide applications in computing, storage, wireless networks, and more, from traditional fixed devices to new-generation portable and wearable devices, with a broad market outlook.
2. Investment Trends and Projects: DePIN projects have shown significant growth in both bull and bear market cycles, covering various sectors such as wireless networks, maps, connected cars, agriculture, drones, weather, and energy. Investment institutions have expanded from Europe and the United States to Asia, with increasing participation and interest in the DePIN field.
3. Market Demand and Potential: The emerging DePIN market encompasses various categories, including health data, weather, energy, bandwidth, AI, and mobile, with tremendous market space and high growth rates. The energy and mobile markets, in particular, have enormous potential, and the year-on-year growth rates of the health data and AI markets are also significant.
4. Project Ecosystem and Blockchain Choices: Ethereum and Solana are the main blockchain choices for existing and emerging DePIN projects, respectively. Solana, with its high performance, low cost, and strong community support, has attracted numerous new projects and become the preferred platform for DePIN projects. Representative projects such as Render, Helium, and Hivemapper showcase the diverse applications of DePIN. Core players such as Solana and IoTeX provide strong technical support and ecosystem environment for DePIN projects, driving rapid development.
5. Modular Blockchain Trend: Modular design significantly enhances the scalability and adaptability of DePIN. Through standardized interfaces and interchangeable components, DePIN can flexibly adapt to different application scenarios and technological requirements, promoting rapid deployment and maintenance of networks.
6. Evolution of Token Economics: From early fixed incentive models to dynamic incentive mechanisms, DePIN projects such as Helium ensure the continuous growth and healthy development of networks through measures such as adjusting incentives for new and old devices, regional incentives, and time-based incentives.
Definition of DePIN
DePIN, short for Decentralized Physical Infrastructure Network, is literally defined as a “decentralized physical infrastructure network.” “De” represents decentralization, “P” represents physical, “I” represents infrastructure, and “N” represents network.
The core definition of DePIN is to bring real-world users into Web3 and achieve cost reduction and socialization through decentralized networks. In the current world, especially in the physical business field, DePIN aims to achieve cost reduction and efficiency improvement through decentralized technology.
In previous research and reports, DePIN has often focused more on the infrastructure aspect, while this report (please download the complete PDF version on the official website) focuses more on the decentralized part, aiming to showcase the diverse DePIN markets and investment opportunities in the future.
Types of DePIN Projects
Classic DePIN Devices:
Characteristics: These devices are typically immobile and fixed in a specific location.
Main businesses: Computing, bandwidth, and storage.
Market characteristics: The market for classic DePIN projects tends to be technology-oriented, especially in areas such as AI computing power, which attracts significant funding and traffic. This market has a large scale but is highly competitive, resembling a red ocean.
Representative projects: Filecoin, RNDR, etc.
Next-Generation DePIN Devices:
Characteristics: These devices are small, flexible, portable, and even wearable.
Main businesses: Services related to daily life, such as health monitoring, weather forecasts, and mobile functions.
Market characteristics: The market for next-generation DePIN projects is more life-oriented and cost-effective, suitable for daily applications. This market has various categories and a wide range of applications, which are yet to be fully explored, resembling a blue ocean with enormous potential.
By comparing these two generations of DePIN projects, we can see that DePIN technology is continuously evolving, and the application scenarios are expanding. From traditional fixed devices to more flexible and portable devices, the market prospects for DePIN are becoming broader, covering various needs from high-tech fields to daily life. The traditional DePIN market has a large scale but is highly competitive, resembling a red ocean, while the innovative DePIN market has various categories and a wide range of applications, which are yet to be fully explored, resembling a blue ocean with tremendous potential.
New Landscape of DePIN Investment
During this bull market cycle, the number and types of DePIN projects have significantly increased, with the emergence of lightweight next-generation DePIN projects. These include wearable devices for collecting health data, such as AI-powered smart bands, smartwatches, and a large number of portable lightweight physical device DePIN projects.
2022.1.1 – 2023.1.1
A total of 19 DePIN projects were funded, with an average funding amount of 18 million, excluding the large-scale funding of 200 million in Helium’s Series D round, the average funding amount was 5.9 million.
The projects cover wireless networks, maps, connected car data, agriculture, drone imagery, weather, electricity markets, DePIN infrastructure, with wireless network projects being the most numerous, totaling 7.
2023.1.1 – 2024.1.1
A total of 9 DePIN projects were funded, with an average funding amount of 7.2 million, significantly lower in quantity compared to 2022 (bear market), but an increase of 22% in funding amount.
The projects include wireless networks, decentralized computing power, maps/geospatial data, weather, and DePIN infrastructure, with a significant decrease in the number of funded projects and categories in the bear market (requiring more reasonable business scenarios and models).
2024.1.1 – 2024.5.20
A total of 26 DePIN projects were funded, with an average funding amount of 6.5 million. The number of funded projects has significantly increased, while the funding amount has slightly decreased.
The projects include decentralized computing power, connected cars, Internet of Things (IoT), wireless networks, FHE, maps, weather & environment, bandwidth, DePIN infrastructure, mobile, energy, storage, and mixed reality.
New undisclosed funding categories include AI, VPN, wearable devices such as smart bands/watches, and portable device projects (health data).
DePIN Project and Institution Count
In the previous cycle, DePIN participation was dominated by Europe and the United States, while this cycle has seen an increasing number of Asian institutions, showcasing their strong interest in DePIN. The number of DePIN projects has also significantly increased, with over 135 secondary DePIN projects and over 130 primary DePIN projects.
Projects:
– Secondary market projects: 137
– >$1B FDV: 20
– $500M – $1B: 19
– $100M – $500M: 48
– $50M – $100M: 16
– $30M – $50M: 14
– $10M – $30M: 12
– <$10M: 6
- Primary market projects: 133
- Since the current bull market cycle began (from October 2023 to date), a total of 8 projects have raised over $2 million in funding, and 6 projects have raised over $10 million in funding.
Institutions:
Previous cycle:
- Andreessen Horowitz (A16z)
- Multicoin Capital
- HashKey Capital
- IOSG Ventures
- Spartan Group
- Borderless Capital
- Lattice Ventures
- Variant Fund
- Delphi Digital
- Big Brain Holdings
- Cogitent Ventures
Current cycle:
- OKX
- Animoca Brands
- JDI
- IoTeX
- FMG
- Waterdrip Capital
- MH
Market Demand for DePIN
In the previous cycle, emerging projects in sub-sectors such as computing power, storage, wireless networks, and maps continued to emerge. This cycle has seen the addition of emerging sub-sectors such as health data-focused wearable devices, weather, energy, bandwidth, AI, and mobile.
From the market demand perspective, the energy and mobile markets have significant market space. The health data and AI markets not only have large market space but also have high year-on-year growth rates, indicating substantial market potential.
Market: (Number of primary market projects + number of secondary market projects)
Health (5+), Weather (9+1), Energy (15+10), Computing Power (17+29), Storage (7+19), Wireless Networks (9+11), Bandwidth (6+4), Maps (3+2), AI (8+13), Mobile (5+)
Number of Market Projects in the Previous Cycle
- Computing Power: 17+29
- Storage: 7+19
- Wireless Networks: 9+11
- Maps: 3+2
Number of Emerging Market Projects
- Health Data (Wearable Devices): 5+ /
- Weather: 9+1
- Energy: 15+10
- Bandwidth: 6+4
- Mobile: 5+
- AI: 8+13
Market Size and Growth Rate
- Health Market: $243 billion, CAGR 17%
- Weather Market: $7 billion, CAGR 7%
- Energy Market: $880 billion, CAGR 8.4%
- Computing Power Market: $95.7 billion, CAGR 6.8%
- Storage Market: $108 billion, CAGR 22%
- Wireless Networks Market: $500 billion, CAGR 12%
- Bandwidth Market: $8.6 billion, CAGR 13.75%
- Maps Market: $19 billion, CAGR 12.5%
- AI Market: $150 billion, CAGR 36.8%
- Mobile Market: $484 billion, CAGR 7.3%
Public Blockchain Choices and Device Types
Currently, in the secondary market of DePIN projects, the highest number of projects are built on the Ethereum blockchain, with a total of 70 DePIN projects choosing to build on Ethereum, accounting for 81% of the total.
Among the collected primary projects, the Solana ecosystem has 28 projects, accounting for 62% of the total. Solana is gradually becoming the leading public blockchain for the new cycle of DePIN projects.
From the perspective of device types, there are more projects in the energy and sensor device categories. Moreover, there is an increasing number of primary market projects utilizing wearable, portable, and home devices as physical hardware.
Full DePIN Industry Chain
Upstream Supply Chain
1. Hardware Manufacturing and Supply
Hardware suppliers: They produce various devices and sensors used in DePIN networks, such as GPUs, servers, IoT devices, wireless devices, etc. Examples include the LoRaWAN hotspots for the Helium network and the dashcams for Hivemapper.
Specialized hardware manufacturers: Some specialized hardware manufacturers provide custom hardware for specific DePIN projects, such as storage miners for Filecoin and GPUs for the Render network.
2. Chips and Semiconductors
Chip manufacturers: Companies like NVIDIA and AMD provide high-performance GPUs for computing networks, such as Render and Akash, which are the core of processing AI workloads and complex computational tasks.
3. Internet of Things (IoT) Devices
Sensor manufacturers: They provide sensors required for environmental monitoring, traffic data collection, etc. For example, Bluetooth sensors for the Nodle network and noise pollution detectors for Silencio.
Smart devices: Such as smartphones and other mobile devices that can be part of a sensor network for data collection and transmission.
4. Power and Energy Devices
Energy equipment suppliers: They provide devices such as solar panels, wind turbines, and energy storage batteries for decentralized energy networks. Examples include solar panels and battery systems for the Daylight Energy network.
Midstream Industry Chain
1. Network Operation and Maintenance
Network operators: Companies like Helium and Hivemapper manage and maintain the normal operation of decentralized networks, including node management, data transmission, and storage.
Service providers: They provide infrastructure services for networks, such as cloud computing services, storage services, etc.
2. Software and Platform Development
Blockchain platforms: Platforms like Solana and IoTeX provide fundamental blockchain technology support for DePIN projects, including smart contract execution, data storage, and verification.
Software developers: They develop software platforms and tools for managing and operating DePIN networks, such as Filebase's distributed storage management platform and Livepeer Studio's video streaming management tool.
3. Data Processing and Analysis
Data analysis companies: They process and analyze data collected from sensor networks, providing valuable insights and services to users.
AI and machine learning services: Companies like Beam provide cloud-based AI computing services, distributing model training and inference workloads to decentralized GPU networks.
Downstream Industry Chain
1. Applications and Services
Enterprise customers: They utilize DePIN network services to enhance their business efficiency, such as logistics companies using Hivemapper's map data or agricultural companies using Geodnet's high-precision positioning data.
Consumer applications: Such as Teleport's ride-sharing app, DIMO's vehicle data platform, providing convenient services to consumers and rewarding them with user-contributed data.
Smart cities and public infrastructure: They utilize decentralized network data and services to optimize city management and public services, such as energy management and traffic management.
Modular/Data Layer/Middleware
Modular blockchains optimize the scalability, security, and flexibility of blockchains by dividing core functions (such as execution, consensus, data availability, and settlement) into different layers. For example, Ethereum improves data availability and processing capacity through sharding architecture and rollups, while Cosmos enables interoperability between different blockchains.
The DePIN industry chain involves various players and components, from upstream hardware manufacturing and supply to midstream network operation and maintenance, software and platform development, data processing and analysis, and downstream applications and services. The emergence of modular blockchains further enhances the scalability and adaptability of DePIN networks.
