(Kitco News) – Decentralized physical infrastructure network (DePIN) projects have emerged as a sector of choice among investors in the current cryptocurrency bull cycle as the unique group of projects presents a compelling narrative of innovation and decentralization in the infrastructure sector, according to asset manager Franklin Templeton.
“DePIN projects have become a popular sector in crypto as they have the potential to disrupt traditional infrastructure companies and business models,” the firm wrote in a report entitled DePIN: Traction in Supply & Early Signs of Increasing Demand. “DePIN projects crowd-source the hardware, data, and computational resources, i.e., the physical infrastructure, to build large networks that incentivize contributors through tokens.”
Having such a design enables these projects “to minimize overhead as operating expenses are outsourced to third-party network participants who are subsidized with the project's token,” the report said. “This is typically referred to as token incentives. DePIN projects can be found in various infrastructure sectors such as compute, energy, mapping, and telecommunications.”
Franklin Templeton highlighted several up-and-coming projects that “have started to gain success in crowd-sourcing the infrastructure supply needed for their network.” These include Hivemapper, “the world's first blockchain-based decentralized mapping network,” and Helium, “the largest decentralized wireless network in the world which operates via hotspots and wireless coverage”
“Hivemapper collects mapping data by having contributors install a Hivemapper dashcam in their cars,” the report said. “As they drive, they map the roads, earning the HONEY token while driving. Token rewards can be adjusted based off the demand for mapping specific roads. Impressively, Hivemapper has mapped 21% of the world's roads in 31 months.”
“Hivemapper has had great success growing the number of contributors providing mapping data to the network, at over 60k,” Franklin Templeton noted. “However, the project has not seen the same relative growth in demand as on the supply side.”
Helium has a longer track record since the project was founded in 2013 and launched its flagship Helium Hotspot in 2019. In 2022, the project launched its own 5G network and expanded to support a wireless network.
“With nearly 93,000 signups for their unlimited phone plan, Helium has shown early signs of product market fit and potential to disrupt the telecommunication industry,” they said. “Unlike traditional wireless carriers whose plans start anywhere between $40 - $65 a month, Helium charges $20 a month for unlimited data, talk, and text. The wireless coverage is provided by T-Mobile in areas where Helium is not yet present.”
Franklin Templeton said that while these projects show promise and offer a glimpse into how decentralized networks can operate, they have largely been limited by the overall adoption of crypto as an asset class as the reward for participation comes in the form of on-chain tokens.
“Despite the success by these projects to incentivize the crowd-sourcing of infrastructure supply, the demand for these DePIN projects has remained limited relative to the token incentives emitted,” they said. “Hivemapper and Helium are rewarding suppliers of the network via token rewards as shown in the graphs below. For example, Hivemapper's resources are in the form of new roads mapped and for Helium the resources are in the form of hotspots.
“As these network resources increase, the DePIN projects may become more valuable to potential customers, which would result in a higher burn,” they said. “However, at this time, these networks are still in high growth mode to accelerate their respective network effects.”
And it's not just Hivemapper and Helium that are in high growth mode, as the DePIN sector as a whole has seen significant growth over the past couple of years. According to the latest data from the DePIN Ninja dashboard, the ecosystem now boasts 1,220 active projects with a total market capitalization of $39 billion at the time of writing.
According to a report from Syndica, the Solana (SOL) network is rapidly becoming the preferred network for many of the top DePIN projects and currently hosts both Helium and Hivemapper.
Other popular sub-sectors of DePIN include the compute, data storage, and AI, where projects like io.net (IO), Render (RNDR), and Nosana (NOS) stand out with their decentralized GPU marketplaces and ability to help facilitate the growing field of artificial intelligence and image rendering.
