The crypto community is excited by a new cryptic acronym. The DePIN banner has been high for this cycle. This one is actually quite wholesome compared to previous crazes. It’s not just that – it’s exciting and has tons of potential. And it combines Web3 with the real world in an actual way that makes sense.

Why? Let’s first focus on “what” before we move onto the “why.”

DePIN: A Guide to Understanding It

DePIN is still a relatively new term, and many people — including crypto-natives — are not familiar with it. DePIN is short for Decentralized Physical Infrastructure Networks or, in simpler terms, real-world apps. DePINs use tokens to encourage people to install hardware to render and provide real-world services. Imagine car-sharing, peer to peer solar power trading, WiFi or 5G connectivity, street maps, electric vehicle charging and other exciting uses.

The following op-ed was published as part of CoinDesk’s “DePIN Vertical”, a new section dedicated to exploring the future decentralized infrastructure.

As an example, Silencio allows people to record sound pollution levels on their smartphones, and receive token rewards. wingbits is another DePIN that uses tokens as an incentive to encourage people to install private antennas for tracking planes’ broadcast location data. The basic model of DePINs, which was created by Messari late in 2022, has been around for a long time.

The name was met with some smirks at first — there’s nothing wrong with it, after all, memes are Web3’s way — but its debut sparked a powerful, empowering movement that promised change. This change is both aimed at the management and earning from devices as well as making Web3 natives reconsider their view of Web3.

Bring crypto to the real world, even if it is a unique opportunity, is an interesting idea. This is what people have been waiting to see: real, tangible use-cases of blockchain that they actually need and can use every day. This unique opportunity is more difficult to launch than a dog-themed memecoin and also has its own particulars.

Why DePINs don’t work with regular dApps

What makes DePINs so special? Imagine a hypothetical DePIN which allows you to earn tokens by measuring local temperatures through a smart thermostat. We’ve already hit one of the elephants in the living room: hardware.

What is the best way to handle thermometers? Do we allow users to connect third-party devices that can record and send data? While we’re there, let’s also applaud the open-source spirit of our own company. Let’s not overlook writing the code to support the most diverse smart sensors, and feature an easy user interface which will make adding them simple. It’s not an easy task.

This is what the “masses'” have been waiting to see: real, tangible use-cases of blockchain that people need and use every day

We could also manufacture our own hardware, but that would put us on yet another animal reservation. We’re not just building a dApp anymore, but also a custom hardware piece, which means we have to deal with manufacturing, storage and shipping. We can buy a white label solution, hire contractors and do many other things. But, the next beast is token economics.

The token economy has to take into account the cost of all that. We must consider the investment made by the community when deciding on rewards and incentives, regardless of whether we expect them to buy a thermometer. After all, people will expect to see a return on the hardware they invest in, and this is perfectly reasonable. We are now writing economics not for the people as in regular dApps, but for machines and machines that generate value. Machines that are becoming more intelligent and are turning from tools to economic agents.

How important is this difference? So far, we’ve only covered the supply side.

It’s not easy to be real

Let’s now consider the other side of the equation. A crypto token is able to survive on the hype, memes and unhinged speculation that we are used to from Web3. A DePIN cannot. It’s important that we have weather companies, researchers and anyone willing to purchase the data collected. Other times, DePINs are able to connect devices via its IoT network or find charging stations for drivers. The bottom line is that DePINs require real-world demand in order to provide their service. They need to go beyond the Web3 echo chamber and compete, in many cases, with Web2 competitors.

They are ready to take on the challenge. DePINs, when armed with an innovative idea and a well-executed plan, have several unfair advantages against their Web2 competitors. They can, for example, bootstrap themselves to scale quickly and undercut any centralized competitors. Uber, the most undercutting of undercutters, could have found its match. Unfortunately, crypto hasn’t adapted as well to this model as they think. Solid enterprise ties will help any DePIN ecosystem secure this demand and solve other problems, like hardware manufacturing.

Don’t forget to win hearts and minds too. DePINs must reach out to new audiences that are often overlooked by crypto projects. You can think of IoT, tech geeks and anyone who runs hardware. This includes drivers (who love‘s world-mapping dePINs), small businesses and even people in the business sector. Marketing-wise, it’s not an easy task. DePINs are a Web3 industry that is unique.

All of this is not fatal as long as the sector continues to grow, but it does require a new language, architecture, and mindset.

Mindset: More aware of the real-world challenges DePINs are capable of tackling and more savvy in calculating the obstacles in their path. This includes things like product marketing and the user experience in order to compete with Web2 competitors.

Architecture: integrating smart contracts and edge computing with peer-to-peer devices interactions, while taking into consideration the real-world issues involved.

Language: easier to understand for those not familiar with Web3, or who haven’t spent their last few years in crypto-bags, and more suited to business cases.

DePIN gives us a chance to evaluate crypto on the basis of its actual usefulness. DePINs provide us with more accurate metrics by analyzing real-world demand and supply. How many people are using the DePIN services? Are its services and pricing better than Web2’s rivals? This is not about speculating anymore. It’s about having a positive effect on the world. DePINs are unique in the Web3 sector. If we want to see real blockchain adoption in this space, then the layer-1 community should be just as concerned as everyone else.

Benjamin Schiller is the editor.