DePIN. Just another acronym, or here to stay?

A new buzzword is sparking curiosity in cryptocurrency communities and for a valid reason. Decentralized Physical Infrastructure Networks (DePINs) are currently a trending topic. This multifaceted blockchain subsector offers versatile utility with untethered potential. In this article, we will delve into why this innovative sector is worth monitoring closely.

Are DePINs a Recent Development?

In a way, yes. The term DePIN is relatively new and has only gained popularity in the past year. Decentralized Physical Infrastructure Networks however have existed since the inception of cryptocurrency itself. Recent advancements in product innovation, utilising distributed ledger technology (blockchains) and creating real-world applications, along with the emergence of tokenised circular economies, have contributed to the recent growth of this sector. This has attracted a community of investors and speculators who are supporting innovative DePIN projects in the hope of getting into the sector early and is helping to push the sector into the spotlight.

Vitalik Buterin Gives Spotlight to DePIN

The co-founder of Ethereum, Vitalik Buterin, recently brought attention to the DePIN sector, questioning its justification for the current level of interest and the factors that could propel the sector’s growth. Buterin cited an example in a tweet, highlighting its lack of substantial progress since its inception. However, a  limitation of Buterin's tweet lies in its focus on a single use case without considering the broader market expansion within the DePIN sector.  Advancements in Ethereum and the infrastructure built on EVM ecosystems have provided innovative builders with tools to create new and unique service models for Web3 applications,  such as Infrastructure-as-a-service and Software-as-a-service. This advancement positions new products with an advantage over legacy projects. 

Just Another Acronym or Is There Substance Behind the Hype?

Acronyms are very popular  in the cryptocurrency market. Socially engineered or organic, they can be powerful tools in  building hype and have been responsible for building billions of dollars of value for some of the current blockchains today. For example, DeFi (Decentralized Finance) and NFTs (Non-Fungible Tokens)  have helped Ethereum bootstrap its community and underlying token utility in recent years.  

As successful use cases of DePIN’s grow and other existing markets adopt blockchain, the scope for DePIN applications grows. The acronym will help provide a bridge in communication and understanding to the non native Web3 user base.  The total addressable market for DePIN application is multi trillion, whilst not all publicly tokenised, the market niche will certainly continue to grow.  

Conceptualising a Decentralized Physical Infrastructure Network… 

In essence, Bitcoin was the first DePIN, which is often overlooked. Bitcoin has also been the most successful DePIN in history in terms of network adoption, uptime and value growth. As the wider population of the world is just about getting their head around bitcoin, I thought it would be good to use it as an example. Bitcoin only exists in the digital realm, however, its network has a physical presence globally. Its token economy and network architecture has attracted attention globally. 

The Three Pillars of a DePIN

To establish a decentralized network successfully, it is crucial to have a robust economy that supports both the infrastructure and the network. Without a genuine use case and revenue model, a decentralized network is at risk of failing and eventually becoming centralised to a select few key stakeholders. Take for instance, Bitcoin – its economy thrives on its network and tokenomics. By incentivising users to engage and contribute to the network through its token economy, Bitcoin ensures the network's sustainability.

A DePIN network requires a clear use case to thrive. For instance, Bitcoin's use case as a peer-to-peer currency has solidified its economic viability, earning it the nickname "digital gold”. Bitcoin has carved its own use case with its network and economy architecture. In a modern DePIN example, the use cases must be able to provide economical viability, and bring in revenues to ensure the continuous decentralization of the projects.  

The challenge in Web3 lies in the uneven distribution of knowledge across the broader investment community, akin to an iceberg effect. As sectors like DeFi and DePINs gain prominence, the dissemination of knowledge is gradually improving. However, a project's viability hinges on achieving the right market fit, strategic product positioning and timing. DePINs rely on a real world application, unlike other cryptocurrencies, meaning the timing and market fit has to be right. Without market fit, a DePIN will have no use case, creating a fallout effect from network contributors making the network more centralised and potentially killing the network before it gains traction.

Kyoto’s DePIN application 

At Kyoto, we have been diligently developing our blockchain technology and products without prior knowledge of the DePIN term. Our application however, seamlessly aligns with the DePIN framework. Kyoto comprises three key elements: the Kyoto blockchain, its climate technology company, and the Kyoto ecosystem.

The Kyoto Blockchain serves as the foundation for Kyoto's climate technology company infrastructure, offering a service that digitises the entire carbon asset’s life-cycle, optimising the off-/on-ramp to carbon credits via Web3 payment rails. This innovative technology creates digital carbon credits that individuals and businesses can use to offset carbon emissions. The revenue generated from the creation and retirement of these carbon credits supports the growth of the Kyoto blockchain ecosystem. This, in turn, creates a circular economy around the governance token of the Kyoto blockchain, $KYOTO. 

Similar to Bitcoin, Kyoto has its own token economy that revolves around its technology and use case; incentivising individuals to participate in the network, which helps to decentralize the Kyoto blockchain ledger. As Kyoto aims to support and store the world’s carbon market data on its blockchain  whilst supporting a whole ReFi sub-sector, the importance of network decentralization for stability is key. Kyoto is already at pre-launch making strides towards progressive decentralization with the introduction to the Kyoto DAO. 

As for market fit and timing for Kyoto; the economical viability and use case of Kyoto has been briefly described above, but what is most interesting for Kyoto in the run-up to its mainnet launch is the number of possible markets a product like Kyoto fits into and the timing of it. The supporting narrative that goes alongside DePINs is RWAs, Real World Assets. Kyoto is tapping into the $50b Voluntary Carbon Credit market, which is expected to grow to $250b by 2030. By bringing a real world asset class to the Kyoto blockchain, and more importantly a Web3 friendly carbon credit brings a huge utility to the blockchain for builders and projects. The market has shown interest and demand for a Web3 friendly carbon asset and Kyoto plans on bringing that to market. In addition to the carbon asset aspect of the business, Kyoto’s infrastructure-as-a-service model also allows companies to accelerate climate initiatives by reducing the amount of costs and intermediaries in the supply chain. To give an example, a popular tree planting organisation like One Tree Planted, plants a tree for 1$. With Kyoto and its technology, companies can plant 10x the amount of trees for the same price. 

The timing for this offering could not be better; with crushing inflation, businesses are looking for ways to meet sustainability pledges more cost effectively and Kyoto offers the solution. In addition to the market fit and timing. Kyoto’s DePIN application provides a genuine use case to a market that is looking to adopt blockchain, and a customer base that is looking to scale environmental impact. This is expected to create a natural economy around the Kyoto token and blockchain, ultimately establishing Kyoto as a project that showcases DePIN as a use case and method for building a vibrant blockchain ecosystem.

In summary, DePINs are here to stay.