Today, a small number of companies control the internet, benefiting from their size and regulatory advantages. These companies dominate critical internet infrastructure, providing services like telecommunications and digital commodities such as compute power. However, their dominance has led to reduced competition, resulting in higher prices and fewer choices for users.
A new solution called decentralized physical infrastructure Networks (DePIN) aims to give control of the internet’s infrastructure back to the users it is meant to serve. These networks, built on public blockchains, go beyond the disruptive innovation of companies like Airbnb by empowering citizens to own, monetize, and improve their surrounding infrastructure.
In simple terms, DePIN allows individuals to contribute their own resources, such as electricity and internet connection, in exchange for micropayments. This enables protocols to create extensive infrastructure without bearing the entire cost.
DePIN makes it easier to start businesses in sectors that traditionally have high barriers to entry. Instead of hiring employees and purchasing infrastructure, companies can build capital-intensive businesses by crowdsourcing resources. This model, pioneered by companies like Uber, reduces upfront fixed costs and allows for faster scaling without significant capital investment.
Unlike Uber, DePIN companies use tokens to reward contributors with ownership in addition to cash. By mobilizing internet-connected communities, DePIN introduces a new model for building networks that leverages a variable cost structure to deliver value to customers. This model is becoming increasingly relevant due to various changing factors in the world.
Currently, over 1000 companies are using DePIN to challenge established incumbents. One notable example is Filecoin, which powers verification, storage, and retrieval for third parties offering cloud services. Filecoin’s disruptive model creates a competitive storage marketplace financed through fees earned by storage providers, enabling businesses with excess storage capacity to compete with centralized giants like Amazon.
Other DePIN networks have emerged to provide digital commodities such as compute power and bandwidth. Akash Network allows individuals with GPUs to lease resources to developers in need of compute power. Helium, on the other hand, aims to build a crowdsourced telecommunications network by incentivizing people to deploy routers and provide internet services.
The DePIN business model disrupts the traditional approach of incumbents in creating digital commodities. Incumbents often force customers into long-term contracts under the software-as-a-service (SaaS) model to recoup upfront costs. However, customers increasingly prefer pay-as-you-go solutions. DePIN projects, free from upfront costs, are well-suited for infrastructure-as-a-service (IAAS) models.
DePINs strategically incentivize capacity, challenging the fixed upfront costs of traditional cloud services. While DePIN is still in its early stages and none of the mentioned projects have achieved mainstream adoption, they have the potential to compete with major incumbents on cost. For example, Filecoin already offers storage services at a fraction of the cost of Amazon’s cloud services.
By driving down the price of digital commodities, DePIN encourages broader adoption of internet services with fewer barriers to entry, leading to increased societal welfare. It has the potential to transform industries and create significant economic value by returning the means of production to workers.
Disclaimer: This article is for informational purposes only and does not constitute legal or investment advice. The views and opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.