AI+DePIN: Strong alliance or straight loss?

Original author: Biteye Core contributor Fishery

Original compilation: Biteye core contributor Crush

DePIN, short for Decentralized Physical Infrastructure Networks, refers to a network system that connects and manages physical hardware devices in a decentralized manner.

Although this concept was officially named through a Twitter vote by Messari in November 2022, the idea and practice behind it have existed for many years.

In the two years since the unified name of DEP was established in DePIN, although the industry has vigorously promoted it, it must be admitted that we have not seen any particularly noteworthy emerging projects.

On the contrary, many projects are short-lived, even falling into short-term capital pools. However, this performance does not negate the value and potential of the entire track. In fact, the concept represented by DEP has a fairly long history of development.

Before the name “DePIN” was widely accepted, this track was referred to by various other names. For example:

1. TIPIN (Token Incentivized Physical Infrastructure Networks): Token incentivized physical infrastructure network

2. PoPW (Proof of Physical Work): Proof of physical work

3. EdgeFi: Edge finance, emphasizing the deployment of hardware resources at the network edge

4. MachineFi: Machine finance, first proposed by the IoTeX project in November 2021

Although these names have different focuses, they essentially refer to the same concept: using blockchain technology and cryptoeconomics to build and manage the infrastructure network of the physical world.

In this field, there have been some projects that have achieved significant success, among the most classic of which are FIL and Helium.

FIL is committed to building a Decentralization storage network, while Helium focuses on Decentralization wireless network. Both projects emerged in the early Bull Market rounds, but remain impressive to this day.

The successful cases of FIL and Helium prove that combining blockchain technology with the physical infrastructure of the real world can create disruptive solutions.

These projects have not only innovated in technology, but also successfully applied cryptoeconomics to solve practical problems, demonstrating the feasibility and potential of the DEP mode.

Through this historical perspective, we can not only have a more comprehensive understanding of the concept and value of DEP, but also provide important reference and inspiration for the future project development.

This article will delve into the development history of the Decentralization Physical Infrastructure Network (DePIN), summarize its successful experience by reviewing successful DePIN projects in history, and based on this, sort out the development opportunities of future DePIN. At the same time, we will pay special attention to the new development direction and potential brought by the combination of AI and DePIN, and follow it closely in the AI wave.

01 DePIN Value Logic

Successful DePIN projects typically have several common features:

Firstly, there is support from the Open Source community at the software level, and on the hardware side, third-party manufacturers are open to producing Mining products.

Second, the product has actual landing scenarios, meeting real needs;

Thirdly, DePIN’s business scenarios are specifically designed for targeted design of Block chain algorithms to ensure fair incentive measures that are not controlled by the project party, rather than simply launching a Token on the public chain.

Let’s discuss these three points one by one.

Open Source Community and Hardware

The successful DEP project, at the software level, cannot do without the support of the Open Source community, and is open to third-party manufacturers for production in hardware, rather than monopolizing the production of Mining hardware.

The Open Source community support can attract global developers to participate, accelerate technological innovation, improve software security and stability. The spirit of Open Source is also highly compatible with the concept of Decentralization, which helps to build community trust and expand the ecosystem.

At the same time, if the prosperity of the Open Source community behind a project is also an indication of the solid and reliable guarantee of project technology, it should be noted that projects with false concepts cannot attract Open Source developers to “generate electricity with love”.

And open hardware production can drop costs for third-party manufacturers, promote hardware innovation, and prevent centralization risks. This practice enhances the degree of Decentralization and risk resistance of the network, while also expanding the participant base.

This open software and hardware strategy creates a virtuous cycle, attracting more long participants, promoting continuous innovation, and ultimately forming a powerful, long diversified ecosystem to ensure the long-term sustainable development of the project.

Taking Helium and FIL as examples, both projects rely on a strong Open Source community to drive their technological advancement and network expansion.

Helium uses the Open Source LoRaWAN protocol, which provides a low-cost, low-power solution for long-range communication of internet of things devices. Through Open Source, LoRaWAN has attracted a large number of developers and businesses, demonstrating its practicality in internet of things communication.

Similarly, FIL relies on the Open Source distributed storage protocol IPFS to store and share data in a peer-to-peer manner, solving many problems of traditional centralized storage, such as single point of failure and data censorship.

The Open Source feature of FIL has attracted extensive participation from global developers and enterprises. Even before FIL was launched, it was widely used by programmers, and the total storage capacity reached 1 EiB in 2020.

Blockchain Consensus

Any successful DEP project must be closely integrated with Blockchain technology, designing Algorithms for specific application scenarios, instead of separating the DEP business from Web3 play people for suckers, and merely issuing a Token on the public chain.

When it comes to the core technology of blockchain, Proof of Work and Consensus are indispensable, and they are also one of the most difficult issues at the DePIN technical level.

The crux of the problem is how to calculate the workload of user-side devices? And who is responsible for distributing the related income to the users?

What is involved is designing a targeted Proof of Work Algorithm.

Helium introduces the “Proof-of-Coverage” (PoC) Consensus Mechanism, cleverly combined with the hot business of internet of things, its challenge-response mode simulates the actual data transmission of internet of things, verifying the communication capability of the hotspots.

The long jump verification reflects the extensive coverage requirements of the internet of things network, ensuring the stability of network connectivity.

Proof-of-Spacetime is in line with the geolocation service of internet of things, providing a reliable foundation for location-based applications.

FIL also has targeted design in terms of Consensus, through its innovative PFT (Power Fault Tolerance) Consensus Mechanism, converting the storage used by Miners in the network and the generated Proof-of-Spacetime into voting weights to elect leading Nodes to create new Blocks.

This mechanism not only improves network efficiency, but also greatly reduces energy consumption. Through Token incentives, FIL effectively promotes the expansion of the network, while also strengthening the position of the FIL protocol in practical applications.

As a result, the biggest advantage of the Consensus Algorithm designed by the DePIN project is to ensure fairness and guarantee the security of the economic system. This design not only ensures that users can receive accurate and reasonable incentives that match their actual contributions, but also effectively prevents potential abuse by the project party.

The contribution and reward distribution are directly tied to the immutable Block on-chain through Consensus, ensuring transparency and immutability of incentive distribution.

This means that the project party cannot maliciously withhold the rewards that users deserve, and they also cannot secretly increase their own quotas.

Looking back at the recently launched VC series DePIN, the current effect is not ideal, and the reason may lie here.

Most of these projects choose to issue tokens on Solana or Ethereum public chains, with high token emissions and a large concentration of chips, and the incentives are detached from the constraints of consensus.

Real Needs

Another key factor for the success of the DEP project is the combination of long-term development and actual demand.

This point is fully reflected in the development process of FIL and Helium. FIL is built on the Open Source protocol FIL (Inter Planetary File System), and FIL itself was born to solve many problems of the current centralized storage system. The existence and widespread application of FIL prove the practical need for Decentralization storage.

By introducing a Token incentive mechanism, FIL has further expanded the scope and participation of FIL, forming a virtuous cycle.

Similarly, Helium is built on the basis of Open Source internet of things communication protocol LoRaWAN. The widespread application of LoRaWAN has proven the huge market demand for internet of things connectivity, and Helium’s incentive mechanism greatly accelerates the deployment and expansion of LoRaWAN networks.

The combination of this Open Source protocol with the DePIN project not only demonstrates the existence of market demand, but also shows how DePIN promotes the further development and application of Open Source technology through economic incentives.

In conclusion, the successful DEP project has significant advantages in Open Source community support, hardware openness, long-term development, and meeting market demand, and further consolidates its position in the industry through close integration and innovation with blockchain technology.

Helium and FIL, as successful examples, demonstrate how the DePIN project achieves long-term sustainable development through the effective combination of technology and market demand.

02 AI + DEP value or speculation?

Value Window

The combination of AI and Web3 is still in the exploration stage, and the industry has not yet formed a mature trap route. However, from the perspective of asset attributes, the AI field involves both hardware and Algorithm, which is highly consistent with the characteristics of the DePIN track.

DePIN projects typically involve Decentralization networks with physical hardware and Smart Contract-driven incentive mechanisms, which provides an ideal scenario for AI implementation.

When discussing the prospect of integrating AI with DePIN, we have to face a key challenge: the mismatch between the demand for decentralized AI training and technological development.

Currently, the mainstream Open Source AI suite used in academia and industry is still mainly designed for centralized server, which reflects the fact that the demand for Decentralization AI training has not yet formed a scale.

In fact, the formation of true Decentralization demand is often a long process.

Looking back at the successful DEP cases in the past, we can find a relatively healthy development path: first, the emergence of the Decentralization demand, then promoting the community to develop the corresponding Open Source Decentralization framework, and finally injecting incentive mechanisms for the ecosystem.

However, the current development trend in the field of AI+DePIN seems to be somewhat upside down. Many projects are eager to launch incentive mechanisms, but due to the lack of real Decentralization support, these incentives are often obtained by “freeloaders” rather than flowing to the real demand side and contributors.

This incentive-driven approach not only fails to effectively stimulate the generation of real demand, but may also lead to a disconnect between technological development and actual market needs.

In the absence of clear demand guidance, projects may excessively follow short-term interests and overlook the technological accumulation and ecological construction required for long-term sustainable development.

Therefore, for the AI+DEP project, the first thing to do is to patiently cultivate the real demand for Decentralization AI, and promote the development of the Decentralization AI Open Source framework in the Open Source community.

Only when there is a community demand, can the introduction of a reasonable incentive mechanism truly play a role and promote the healthy development of the entire ecosystem.

It requires patience from the project, developers, and investors to follow long-term value creation rather than short-term gains.

Only in this way can we expect to see truly successful AI+DEP 01928374656574839201 projects emerge, opening up new possibilities for the future of Decentralization infrastructure.

Actively participating in the new AI narrative

After the analysis in the previous section, the path of value investment may not be feasible in the short term, but this does not mean that the market for AI + DEP is gloomy. Considering the overall situation, AI is still the hottest sector for investment.

The current mainstream route of AI + DEP is to provide a distributed computing resource network for AI, aiming to drop the cost of AI training and inference, and fully utilize idle Computing Power globally, especially GPU resources.

In the early stages of this Bull Market, it is profitable to participate in such projects using existing hardware. However, as the timeline lengthens, more and more similar projects emerge, and the leader gradually weakens.

This implies that we need to actively participate in the new AI narrative, and each sub-narrative under each AI can be appropriately involved (long-term holding is not a safe decision), note that it must be a new narrative!

For example, Xai pioneered the sale of Nodes. As an early adopter, the returns are quite considerable, and the investment can be recouped in about half a month.

03 Final Words

At this time, the market is not very good, and the sentiment is generally depressed.

We need to have patience and confidence in the development of the AI+DePIN track. The development of this emerging field may take time, but its potential cannot be ignored.

When there is no market situation, review existing projects more and find those with real Decentralization needs, strong Open Source community support, open hardware production, and targeted design of Consensus Algorithm.

Finally, closely follow the trends of the Open Source community, select worthwhile and truly technical narratives, and contribute to the healthy development of the AI+DEP ecosystem.

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