Infra Brief: Exploring Chain Options for DePINs

Exploring Chain Options for DePINs

Decentralized physical infrastructure networks (DePINs) use token rewards to incentivize the deployment of hardware-based networks and the completion of real-world tasks. These can include deploying a wireless hotspot, fitting a dashcam to a vehicle, or contributing GPUs to a distributed compute network.

Despite being a relatively small niche within the broader crypto ecosystem, DePINs have been attracting increasing attention from both traditional and Web3 investors seeking crypto projects that deliver tangible real-world value and cater to existing demand. Moreover, developers are beginning to explore beyond the confines of the Web3 circular economy, building projects that include advanced positioning networks using Global Navigation Satellite Systems (GNSS), networks for street and aerial imagery, and solar and battery energy networks.

As the advantages and disruptive capabilities of DePINs become more evident, the race among smart contract platforms to draw these projects into their ecosystem is intensifying. DePINs usually necessitate processing a large number of transactions, which can generate substantial, consistent revenues for the underlying chains on which the networks are constructed. Given that the currently estimated total addressable market for DePINs exceeds $2.2 trillion, there is a rush among L1 and L2 chains to seize a share of this burgeoning market.

Platform Options

In the past, developers faced limited options when building DePINs, having to choose between creating a new L1 or relying on Ethereum, both of which had drawbacks. For instance, Helium network, launched in 2019, chose to construct its own L1. However, as the network expanded, scalability became a significant issue, with core developers spending more time maintaining the L1 blockchain than building wireless networks. Consequently, Helium migrated to Solana in April 2023.

Livepeer, another example, was initially built on Ethereum but later migrated to Arbitrum due to rising transaction fees negatively impacting supply-side participant's revenue and end-user costs.