News Release
HTX Research：DePIN: Current State and Prospects
HTX Ventures
Introduction: DePIN - Current State and Prospects Singapore / April 30, 2024 – Decentralized Physical Infrastructure Networks (DePIN) are reshaping the blockchain landscape with their innovative use of existing infrastructure and data-centric business models. Moving beyond traditional IoT frameworks, DePIN stands out for its decentralized efficiency and cost-effectiveness. This report explores the burgeoning DePIN sector, particularly within the Solana network, noted for its robust infrastructure and innovative applications. DePIN projects prioritize tangible profitability over speculative financials and are pivotal in integrating technologies like privacy enhancements, zero-knowledge proofs, and artificial intelligence. The strategic composability with other ecosystems positions DePIN to transform economic systems through data integrity and scalable solutions. As the leading platform for DePIN, Solana exemplifies the integration of high-performance blockchain technology with physical networks, promising significant economic returns and pioneering new ways to merge technology with practical applications. HTX Ventures, the global investment arm of HTX, leverages an integrated approach that combines investment, incubation, and research to identify the most exceptional and promising teams around the world. To date, HTX Ventures has supported over 200 projects spanning multiple blockchain tracks, with some high-quality projects already listed on HTX for trading. Key Takeaways · While DePIN projects are decentralized physical infrastructure networks, their core business models focus on effectively utilizing data, whether for storage, transmission, sharing, or use. · There is no need to compare DePINs to traditional IOT projects or categorize them as Web2 or Web3. What matters most is their ability to utilize data efficiently and distribute economic resources effectively. · DePIN's development will combine blockchain technology to enhance data credibility and establish extensive protocols along with the Internet of Things, creating an infinite network connecting people to people, people to machines, and machines to machines. · When assessing DePIN projects, it's crucial to disregard speculative or financial aspects, which are more applicable to sectors like DeFi, meme, and BRC20. Instead, the focus should be on a project's profit potential. · In the near term, attention should be paid to the composability of DePIN with other ecosystems, such as DePIN x Privacy, DePIN x Gaming, DePIN x ZK, and DePIN x AI. In the long term, DePIN's future involves gig economy, sharing economy, and data credibility. · The Solana network has emerged as the preferred blockchain for deploying DePIN projects. Solana DePIN projects boast an FDV exceeding $10 billion and a market capitalization of over $4 billion. · Advantages of Solana for DePIN include: o Superior performance and technological advancements o Robust token standards and a thriving ecosystem o Low cost o Concentrated liquidity, composable ecosystem, and unified community o An active developer community driving innovative projects and new concepts What Is DePIN? DePIN, short for Decentralized Physical Infrastructure Networks, was first introduced in early 2023 in Messari's research report titled "The DePIN Sector Map." It was defined as leveraging cryptographic economic protocols for the deployment of real-world physical infrastructure and hardware networks. Essentially, DePIN employs a blockchain-driven, token-incentivized approach to encourage collective efforts in building physical infrastructure networks. While the term "DePIN" is new, projects deploying real-world physical infrastructure and hardware networks via cryptographic economic protocols have been in existence for some time. Notable examples include Helium, a decentralized network created in 2013, and Storj, a decentralized storage solution launched in 2014. These projects explored decentralized ways to build physical infrastructure networks in fields such as communications and storage. Subsequently, sectors like the internet, AI, energy, and data collection followed suit. Despite their differences, these projects share a common underlying mechanism, contributing to the flourishing landscape of DePIN today. Current State of DePIN Overview As of 2023, data from Messari and DePIN.Ninjia revealed that the DePIN ecosystem comprised 650 projects with a total market capitalization of $35 billion. These projects span various sectors, with 250 in computing, 200 in AI, 100 in wireless, 50 in sensors, 50 in energy, and 25 in services. The DePIN landscape's potential market size is estimated at approximately $2.2 trillion, projected to reach $3.5 trillion by 2028, according to Messari. According to CoinMarketCap (CMC) data, 60 DePIN projects have issued tokens, collectively amounting to a market cap of $1.33 billion. Among the top 100 projects by market cap are FIL, RNDR, HNT, THETA, BTT, AKT, and AR. Other notable examples include IOTX and ANKR, along with AI-related projects like TAO. The majority of the top 10 projects focus on AI, storage, and computing. However, DePIN currently occupies a small share of the crypto market, falling behind sectors like Meme, DeFi, and NFTs. Compared to the traditional IoT sector, DePIN has only 21 projects with a market cap exceeding $100 million and only 4 surpassing $1 billion. Based on these figures, the potential profitability of the DePIN sector is expected to be 243 times in the near-to-medium term and over 400 times in the mid-to-long term. Breakdown of DePINs Similar to IoTeX, DePINs can be categorized into software and hardware projects. Hardware encompasses sensors and wireless networks, while software includes computing, storage, network distribution, and AI. Although DePIN projects are decentralized physical infrastructure networks, their core business models focus on extracting value from data. · Sensors are responsible for data collection. · Wireless networks and network distribution are responsible for data transmission. · Computing is responsible for data processing. · Storage is responsible for data storage. · AI is responsible for data application. While hardware serves as the foundation, the evolution of DePIN projects lies in their ability to effectively utilize data. This echoes the growth model seen in traditional internet economies. Therefore, evaluating a DePIN project's potential requires a data-focused approach. Projects that utilize and control data well are more likely to succeed. It's essential to remove the speculative elements of crypto and focus on tangible value. DePIN Investors As mentioned earlier, investment institutions and entrepreneurs have shown significant interest in the DePIN sector. The limited number of new DePINs in early 2023 was primarily due to unfavorable market conditions and the sector's nascent stage. By the end of 2023, improving market conditions and accumulated experience led to the emergence of tangible prototypes, prompting their introduction to the market. These developments garnered attention, establishing DePINs as a noteworthy presence in a landscape hungry for technological innovation. Venture capital firms like Multicoin, Borderless, A16Z, and HTX Ventures have made substantial investments in the DePIN sector, focusing on projects with robust utility and minimal speculative elements. That said, DePINs still represent a small portion of their portfolios. The following image shows the capital raised by top DePIN projects.Top DePINs by Capital Raised. Solana DePIN Projects Solana: The Preferred Choice for DePIN Project Deployment · Solana DePIN projects boast a Fully Diluted Valuation (FDV) exceeding $10 billion and a market capitalization of over $4 billion. According to CMC data, the top 500 Solana DePIN projects by market capitalization feature Render Network (RNDR), Helium Network (HNT), and Helium Mobile (MOBILE). Other notable DePINs include Helium IOT (IOT) and Hivemapper (HONEY). Recent trending projects include MOBILE and IOT, as well as getgrass, a bandwidth network market project set to issue tokens. · DePIN and Solana: A Synergistic Partnership Solana's recovery is attributed in part to the irreplaceability of Mass Adaption, especially DePIN and Web2 applications. Solana successfully met the needs of STEPN, a project that made Web3 stand out. Solana's cNFTs provide DePIN/PoPW nodes with more cost-effective authorization certificates, which is a common practice. The migration of RNDR and Helium to Solana has empowered these projects with enhanced capabilities. For instance, Render's transition enabled new features such as real-time streaming, dynamic NFTs, and state compression. This has significantly improved the network's performance and scalability while unlocking its range of use cases. Unlike high-value DeFi applications, DePIN projects are closely aligned with traditional edge computing and IoT concepts. They prioritize stability and affordability, while Solana excels in synchronization. Helium, with over 300,000 IoT devices and 3,000-some 5G devices, underscores the huge demand for hardware coordination, which can only be satisfied by Solana. · DePIN Brings High Value to Solana Projects like Helium have remarkably increased the number of active wallets within the Solana ecosystem. Helium alone reports over 60,000 active wallets monthly, engaged in activities like reward collection, staking, delegation, or token burning. Additionally, over 30,000 wallets are using other SPL programs, highlighting Helium's impact on the Solana ecosystem. From the perspectives of regulators and policymakers, DePIN showcases Solana's practical application, enhancing its legitimacy and brand recognition. Solana's Advantages · Superior Performance and Technological Advancements Solana boasts remarkable throughput capability, handling over 65,000 transactions per second (TPS) at peak times and between 2,500 to 3,000 TPS during regular periods. Notable performance features include rapid transaction confirmations, scalability, and block size. After the Firedancer upgrade, theoretical TPS could surpass 1 million, with routine TPS potentially exceeding 100,000. This is a primary reason why both Visa and DePIN have selected Solana. · Robust Token Standards and a Thriving Ecosystem Solana is a dynamic ecosystem with well-tested DEXs and established standards such as compressed NFTs (cNFTs), programmable NFTs (pNFTs), and Token Extensions. These provide fundamental components for DePIN projects to develop and launch their on-chain products. · Low Cost Even after the Cancun upgrade, Solana remains a low gas fee L1 solution. Some leading L2s, including ZK Rollup-based ZkSync and Starknet, as well as Optimistic Rollup-based Optimism and Base, have switched their DA layers to Ethereum mainnet Blob. This has reduced gas fees significantly, but not to the lowest level, as they didn't switch to Celestia. · Concentrated Liquidity, Composable Ecosystem, and Unified Community Significant ideological differences between Ethereum and other L2s have led to liquidity competition. This has been particularly pronounced in the current bull market, where minimal differentiation in technologies and ecosystems has resulted in limited wealth opportunities. General L2s pose no threat to competitive chains like Solana. Driven by the recent momentum of meme coins, Solana's DeFi ecosystem has experienced rapid growth, with TVL reaching $3.3 billion. This suggests the launch of more attractive yield products and speculative products on Solana. Coupled with RWA, AI, and DePIN projects, DeFi products are poised for greater composability. · An Active Developer Community Driving Innovative Projects and New Concepts Solana has nurtured an active developer community through hackathons and various incentives, driving the expansion of its ecosystem. Prominent projects like Magic Eden, Stepn, and jito have emerged. Solana maintains its developer ecosystem and community activities even during bear markets. Through consistent incentive measures and hackathons, Solana has improved its infrastructure and stimulated greater development of innovative applications, further fueling its ecosystem's growth. · Wealth Creation as the Best Marketing Tool Saga's massive airdrops lead the way for crypto phone strategies, fostering the unity within Solana's communities. Projects like Solend, Helius, Chads, and Solcial have announced airdrops, benefits, and giveaways for Saga 2 owners. In the recent bull market, meme coin $BOME achieved the feat of being listed on Binance within just three days. Ecosystem Developments Below is a summary of DePIN projects on Solana Summary of the Solana DePIN Ecosystem: Leading Projects: RNDR and Helium RNDR is a decentralized rendering platform. Helium Network is a wireless network project. Since its inception in 2014, Helium has raised over $350 million from renowned investors such as a16z, Deutsche Telekom, Google, and Tiger Global. It migrated to the Solana blockchain in April 2024. Its current ranking on CMC is 64. Second-tier Projects: Helium series (MOBILE and IOT), io.net, and Nosana MOBILE and IOT are projects within the Helium ecosystem. · IOT: The protocol token for the Helium IoT network, mined by LoRaWAN Hotspots through data transmission revenue and coverage proof. · MOBILE: The protocol token for the Helium 5G network, awarded to those who provide 5G wireless coverage and Helium network validation. MOBILE is currently ranked 166th on CMC. io.net is a "GPU Aggregator" that integrates GPU networks from data centers, crypto miners, and projects like Render, utilizing computing power for machine learning applications. Yet to issue tokens, it has 426,000 followers on Twitter. Its Serie A financing totaled $30 million, led by Hack VC, with participation from Multicoin Capital, 6th Man Ventures, M13, Delphi Digital, Solana Labs, and Aptos Labs. Its GUP miners have exceeded 50,000. Nosana is a consumer marketplace connecting user-provided GPU networks and aiming to develop AI products. Potential Projects: ALEPH, HONEY, and Shadow ALEPH is a storage solution and interchain database. Hivemapper (HONEY), launched in November 2022, is a decentralized global mapping network, rewarding contributors who collect 4K street images using dash cams through the Drive-to-Earn model. In April 2022, the project completed $18 million in financing, led by Multicoin Capital, with participation from industry professionals such as Solana's founder, former Apple Maps executives, and Helium's CEO. Hivemapper is currently ranked 513th on CMC. Shadow, a rival to Filecoin, employs Shdw Drive to reduce the cost of corporate data center storage by utilizing efficient traditional and action computing – a technology called DAGGER. Prospects of DePINs · As DePIN projects demand infrastructure with high throughput, they are likely to be established on high-performance L1 networks, or even on L2 or L3 solutions. · DePIN projects may explore various possibilities, including clean energy infrastructure and virtual power plants, exemplified by projects like Daylight and Etheos. · The transition of DePIN projects to larger platforms, as observed with Helium and Render, enables smaller projects to harness their capabilities for further development. · Dedicated DePIN chains have emerged, such as Peaq and IoTeX, two EVM/substrate chains specifically designed for DePINs. Additionally, some blue-chip DePIN projects, like Dimo, are using Polygon CDK to build their chains, indicating the demand for application chains. · The composability of DePIN with other ecosystems is particularly evident on Solana, exemplified by the wealth opportunities resulting from Bonk's airdrops to Saga holders. In the future, we can anticipate further integration between DePIN and DeFi for enhanced returns and speculative activities, as well as the fusion of DePIN with RWA, providing financing solutions for projects or data for the real world. Let's look at some examples. · DePIN x ZK As technology continues to advance, solutions like ZK TLS can prove the authenticity of Web2 or Web3 data, bridging the gap between the two. Combining DePIN with ZK technology will give rise to a flurry of Web3 projects capable of "vampire attacking" their Web2 counterparts, a development worth noting. Take Space and Time as an example. Space and Time is a verifiable compute layer that extends zero-knowledge proofs on decentralized data warehouses, providing trustless data processing for smart contracts, LLM, and enterprises. It connects indexed blockchain data with off-chain datasets and adopts Proof of SQL to prevent computations from being tampered and to validate the integrity of query results. Proof of SQL, a new ZK-proof develped by Space and Time, allows the data warehouse to generate a SNARK cryptographic proof of SQL query execution, proving that query computation was done accurately and that both the query and the data are verifiably tamperpoof. Through the project, developers can connect indexed on-chain and off-chain data, and perform low-latency cached queries and large-scale analytical tasks using SQL transformations. Additionally, they can customize data into business-specific patterns, deploy queries to APIs, and build dashboards. Meanwhile, zero-knowledge technology ensures that tamperproof query results are sent to smart contracts in a trustless manner or directly published on-chain. Currently, Space and Time has indexed Ethereum, Polygon, Sui, Sei, and Avalanche. It is supporting more chains while integrating with Chainlink. · DePIN x AI The development of decentralized physical infrastructure networks could revolutionize data utilization, including decentralized machine learning, exemplified by projects like Bittensor. Bittensor is an open-source protocol that powers a decentralized, blockchain-based machine-learning network. Machine learning models engage in collaboration training in TAO and receive rewards based on the value of information they contribute. TAO also facilitates external access, empowering users to extract information from the network and customize network activities to suit their requirements. · DePIN x Privacy As mentioned earlier, while DePINs are decentralized physical networks, their business models focus on data utilization. Protecting data privacy is paramount for large decentralized networks. Consequently, integrating privacy protection measures is imperative for the growth of DePIN. Therefore, it's crucial to keep an eye on the sector's integration with privacy-enhancing technologies. · DePIN x Gaming The integration of DePIN and gaming can be analyzed from multiple angles: 1. Large decentralized hardware networks may enhance gaming experiences to some extent. 2. The combined concept of real-world wearable devices, gaming, and metaverse could become popular again. 3. DePIN hardware infrastructure may reshape incentive mechanism and gaming experiences. References 1. https://www.panewslab.com/zh_hk/articledetails/8vy12wz3Ft.html 2. https://mp.weixin.qq.com/s/DE28WI5hE7OE5s2D-TFLxw 3. https://foresightnews.pro/article/detail/53218 4. https://DePIN.ninja/leader-board 5. https://DePINhub.io/rankings/investors About Us This article is a product of diligent work by the HTX Research Team that is currently under HTX Ventures. HTX Ventures, the global investment division of HTX, integrates investment, incubation, and research to identify the best and brightest teams worldwide. With a decade-long history as an industry pioneer, HTX Ventures excels at identifying cutting-edge technologies and emerging business models within the sector. To foster growth within the blockchain ecosystem, we provide comprehensive support to projects, including financing, resources, and strategic advice. HTX Ventures presently backs over 200 projects spanning multiple blockchain sectors, with select high-quality initiatives already trading on the HTX exchange. Furthermore, as one of the most vigorous Fund of Funds (FOF) investors, HTX Ventures collaboratively forges the blockchain ecosystem alongside premier global blockchain funds, including IVC, Shima, and Animoca. Contact Details Michael Wang glo-media@htx-inc.com Company Website https://www.htx.com/en-us/ventures Disclaimer 1. The author of this report and his organization do not have any relationship that affects the objectivity, independence, and fairness of the report with other third parties involved in this report. 2. The information and data cited in this report are from compliance channels. The sources of the information and data are considered reliable by the author, and necessary verifications have been made for their authenticity, accuracy and completeness, but the author makes no guarantee for their authenticity, accuracy or completeness. 3. The content of the report is for reference only, and the facts and opinions in the report do not constitute business, investment and other related recommendations. The author does not assume any responsibility for the losses caused by the use of the contents of this report, unless clearly stipulated by laws and regulations. Readers should not only make business and investment decisions based on this report, nor should they lose their ability to make independent judgments based on this report. 4. The information, opinions and inferences contained in this report only reflect the judgments of the researchers on the date of finalizing this report. In the future, based on industry changes and data and information updates, there is the possibility of updates of opinions and judgments. 5. The copyright of this report is only owned by HTX Ventures. If you need to quote the content of this report, please indicate the source. If you need a large amount of references, please inform in advance (see “About HTX Ventures” for contact information) and use it within the allowed scope. Under no circumstances shall this report be quoted, deleted or modified contrary to the original intent. About HTX Ventures HTX Ventures, the global investment division of HTX, integrates investment, incubation, and research to identify the best and brightest teams worldwide. With a decade-long history as an industry pioneer, HTX Ventures excels at identifying cutting-edge technologies and emerging business models within the sector. To foster growth within the blockchain ecosystem, we provide comprehensive support to projects, including financing, resources, and strategic advice. HTX Ventures presently backs over 200 projects spanning multiple blockchain sectors, with select high-quality initiatives already trading on the HTX exchange. Furthermore, as one of the most vigorous Fund of Funds (FOF) investors, HTX Ventures collaboratively forges the blockchain ecosystem alongside premier global blockchain funds, including IVC, Shima, and Animoca. Contact Details Michael Wang glo-media@htx-inc.com Company Website https://www.htx.com/en-us/ventures
May 03, 2024 10:17 AM Eastern Daylight Time
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