Starting from scratch to sort out the investment logic of DePIN

DePIN, as an emerging investment direction, has received increasing attention in recent years. Although there are currently no landmark projects, this field still presents numerous opportunities in the next 1-3 years. This article will start from the basic concepts and analyze the investment value and logical framework of DePIN.

Why Focus on DePIN Investment

DePIN is not just a hype concept.

Decentralizing the infrastructure of the physical world is not a fantasy, but a feasible direction for practical implementation. In certain scenarios, decentralization can indeed achieve or optimize goals that are difficult to accomplish with traditional methods.

Taking the telecommunications sector as an example, traditional communication operators need to invest huge amounts of money in spectrum licensing and base station deployment. In contrast, through a community crowdsourcing model, individuals only need to purchase reasonably priced hotspot devices to access the network and become "micro-operators." This approach can significantly reduce network deployment costs.

In the field of AI data, traditional companies face high costs and numerous restrictions in acquiring training data. The distributed data collection model allows users to earn rewards by contributing idle bandwidth, which not only reduces the cost of data acquisition but also increases the diversity of the data.

Connect infrastructure with user needs

The DePIN project has both infrastructure and user-oriented dual attributes, which can effectively balance technical depth and user accessibility.

Infrastructure projects usually have high technical thresholds and are mostly B2B in nature, making it difficult to directly reach end users. On the other hand, purely consumer-oriented projects may easily gain attention but are also prone to market validation issues, resulting in short lifecycles.

DePIN is built on the foundation of real demand, with a solid market fit for products and the ability to directly reach users. For example, some projects offer cheaper unlimited data plans than traditional operators; others allow users to contribute idle bandwidth and earn rewards through simple browser plugins. This model is easy to understand and use, and can attract a large number of non-crypto native users.

DePIN Investment Framework

Direction Selection

When evaluating a DePIN project, the first thing to consider is the size of the market it is in and the strength of demand. For example, 5G and wireless networks belong to large markets and are essential needs, while in-vehicle data and weather data are relatively niche. Even a small share in a large market presents a considerable opportunity for DePIN projects.

product design

The DePIN model is particularly suitable for industries with high capital requirements, high entry barriers, apparent monopoly patterns, and underutilized resources. When evaluating products, two main points are considered:

1. Supply side: Has it achieved something that is difficult to accomplish through traditional methods, or does it have significant advantages in terms of cost, efficiency, etc.

2. Demand Side: Is there a real and strong market demand and willingness to pay.

Hardware Strategy

The hardware strategy involves multiple aspects such as manufacturing, sales, distribution, and maintenance. In the early stages of the project, the threshold for user adoption should be kept as low as possible, and as the project matures, some moderate friction can be gradually introduced to increase user stickiness.

Token Economy

The token mechanism design is the most challenging part of the DePIN project. Due to the need to incentivize various parties in the network early on, DePIN projects typically require an earlier launch of tokens. This topic is complex and deserves a separate in-depth discussion.

Team Composition

An ideal team configuration should include at least two types of core members: first, technical and product experts with extensive experience in relevant traditional industries; second, crypto-native talents who are familiar with crypto-economics and community building.

Other Considerations

It is also important to pay attention to regulatory risks and other factors, such as the sensitivity of data collection in certain regions.

Summary

Despite the long development cycle of DePIN, it has begun to show some positive signs. For example, certain projects have started collaborating with traditional telecom giants to seamlessly connect users to decentralized networks.

The unique advantages of DePIN include:

1. Compared to traditional monopolistic enterprises, it has a more flexible deployment method and incentive mechanism.

2. Can bring positive externalities and create value for real life and other industries.

Of course, DePIN also faces uncertainties such as hardware operating cycles and regulatory risks. Overall, DePIN is an investment direction worth focusing on in the coming years.