Decentralised Physical Infrastructure Networks (DePIN) is an innovative trend in infrastructure as a service (IaaS) that might disrupt the current major providers, including AWS, Azure, GCP, Oracle and IBM.

Decentralisation

The key differentiator is decentralisation. The service is crowd-sourced rather than supplied by a corporation. In 2024, it may seem unlikely for any business to build its information technology (IT) infrastructure on something other than tier-1 trusted suppliers, such as IBM, Amazon and Google. Still, there were many corporations a few years back, when Cloud services were taking off, who would not trust their IT infrastructure to “somebody else’s data centre” (the enduring snipe against cloud services).

IaaS is so much more convenient and accessible than running one’s own physical infrastructure. It became the mainstay for startups who benefit from quick setup and an easy and reliable scaling solution when the startup takes off.

Now many large corporations move their farm, mid-range and mainframe to ‘The Cloud’ and benefit from not having to manage their own physical data centre, with its attendant costs and risks.

Inevitable Corporate Exploitation

Cloud service providers naturally wish to extract the maximum dollar from their clients, so the relationship becomes increasingly exploitative. This is nothing new. It is a natural progression. In the heyday of the mainframe, the bureau services industry grew at a pace, providing access to mainframes to those who could not afford or did not want to own (or rent) a mainframe of their own. This also progressed to more and more exploitation. Many view the rise of Cloud Services as simply the return of Bureau Services, albeit in internet-enabled microprocessor farms instead of mainframes.

A Natural Disruptor

A natural disruptor of a dominant market actor is co-operatives – where a number of generally small-sized consumers cooperate together to form a new organisation that is a competitor to the dominant actor, undercutting their prices. The cooperative is inherently democratic and more focused on the needs of its customers. Some remember such an organisation in north England in the 1960s, appropriately named ‘The Co-op‘. Follow that link for a revealing Wikipedia write-up of the group commencing in 1844. We believe the modern alternative to co-operatives is cloud sourcing supported by blockchains and smart contracts. This is at the heart of DePIN, where decentralised organisations (rules-not-rulers) thrive. These protocols are showing themselves to be robust and efficient and are only getting better.

DePIN Roadmaps

Starting a new business usually requires up-front investment to get the business established before any revenue can be generated. This is a barrier to entry for new businesses. It is why the venture capital (VC) industry has flourished in the IT innovation space. Even successful businesses can often benefit from external funding to accelerate their progress which helps prevent copy-cat competitors from gaining ground and market share.

Establishing DePIN is no different. An incentive must be provided to the early providers and adopters to build the service so the business scale can sustain itself without additional financing. This is in addition to the early-stage funding required to build the service technologies before any providers or adopters can be on board.

The target business architecture for DePINs is characterised by one where the service is stable, reliable and efficient, and the payment made by consumers is relayed on-chain to service providers via the blockchain’s smart contracts with only a small deduction going to a capital fund for future developments and maintenance. This is in sharp contrast to a typical central actor monopoly siphoning off the majority of all revenue; instead, an efficient equilibrium is established to benefit both service suppliers and consumers

Building DePIN: A Killer App

Cryptocurrency and the public blockchain technology stack is the killer app for anyone planning to establish a decentralised services platform.

Public Blockchains affirm decentralisation: They measure their degree of decentralisation as the nakamodo coefficient. A robust service will also have effective governance as well. COSMOS-based chains have on-chain governance and COSMOS engineers have established the DAO DAO to facilitate good governance. On-chain governance means those with a stake in the service can vote online using their crypto wallet, and their votes are registered on-chain. This increases the transparency and reduces the cost of voting.

With the progress made in open-source blockchain technology, decentralised applications are flourishing. It is only natural that one area of innovation has been DePIN.

DePIN Landscape

We already have a number of DePIN providers of IT infrastructure

General Purpose Compute, including GPUs that can be used for AI
Special Purpose Compute
Content Distribution Networks (CDN)
Virtual Private Networks (VPNs)
Storage Networks
Databases
Wireless Networks, which are particularly well provided for
IoT Sensor Networks and
Energy Networks

I expect this landscape to diversify in the same way as AWS Cloud services diversified from simple IaaS compute to EDS, RDS, S3, Lambda, Cognito, Glacier, AIM, Dynamo DB, SQS, Kinesis, web application firewall, cloud formation, and many, many more.

Survey Of DePIN Providers

The above “DePIN Sector Map” will kick-start your investigation. In a later article, ePatterns will present a detailed survey of some of these services before presenting case studies of using DePIN to build decentralised applications.

DePIN On-ramp

The central problem of Cloud Provider vendor lock-in and the attendant out-of-control escalating costs is often addressed by only partially adopting cloud infrastructure (aka a hybrid cloud = cloud + on-prem solution) or adopting multiple cloud providers for a blended solution (aka multi-cloud). Here orchestration becomes important, and Kubernetes Eastic Cloud, amongst others, helps enormously.

These solutions are the first steps to DePIN. Once organisations adopt them, they are on course to consider crowd-sourced DePIN, and as DePIN services mature and gain more and more adoption, they become even more attractive.

ePatterns see DePIN services first being adopted by web3 innovators, but as these become established, we expect large corporations to be attracted to DePIN’s reduced costs and increasing profile.

Zero-Knowledge Service Considerations

As with any hosted service, the risk of information loss needs to be considered with DePIN. Zero-knowledge services architecture should be adopted to ensure your organisation’s data cannot be disclosed to third parties. If this is not built into the DePIN protocol, consider deploying strong encryption to data before storing it using products similar to BoxCryptor.

Your DePIN Architecture Partner

ePatterns Consulting is ready to partner with you to deploy your DePIN solution. Contact us today at marketing@epatterns.com.au

Decentralised Physical Infrastructure (DePIN)