The Rise of DePIN: Transforming Physical Infrastructure

Decentralized Physical Infrastructure Networks, or DePIN, are rapidly emerging as a revolutionary force in the world of blockchain and cryptocurrency. In a recent episode of the Lightspeed podcast, Sean Carey, Partner at Borderless Capital, shed light on this exciting new sector and its potential to reshape industries. DePIN represents a paradigm shift in how we think about and build physical infrastructure, leveraging blockchain technology and tokenized incentives to create more efficient, scalable, and user-centric systems.

What is DePIN?

DePIN, or Decentralized Physical Infrastructure Networks, are blockchain-based systems that incentivize the creation and maintenance of real-world infrastructure through tokenized rewards. These networks aim to decentralize traditionally centralized services by allowing individuals to contribute resources and earn rewards in return. Sean Carey explains:

"DePIN is a tangible thing. It's technology that I understand. It's technology that I can look at and talk about. So a tangible thing for the consumer to understand. And that's why, for me, I think in DeFi, DePIN is the holy grail."

The Borderless Capital DePIN Fund

Borderless Capital recently launched a $100 million fund dedicated specifically to DePIN projects. This significant investment underscores the growing importance and potential of the DePIN sector within the broader cryptocurrency ecosystem. Sean Carey elaborated on the reasoning behind this focused approach:

"Why are we only investing in DePIN? And for me, it's technology that I understand. It's technology that I can look at and talk about. So a tangible thing for the consumer to understand. And that's why, for me, I think in DeFi, DePIN is the holy grail."

The fund's focus on DePIN reflects a broader trend in the crypto venture capital space, where investors are increasingly specializing in specific sectors rather than taking a generalist approach to crypto investments.

The Power of Tangibility in DePIN

One of the key strengths of DePIN projects is their tangibility and real-world applications. Unlike some more abstract or speculative crypto projects, DePIN initiatives often have clear use cases and value propositions that are easy for both investors and users to understand. Sean Carey emphasized this point:

"If you look at Helium, for instance, when I was part of Helium, when I co-founded Helium, one of the biggest questions that roamed around in our minds was, how were we going to get people to put these devices in their homes? How were we going to incentivize them?"

This tangibility not only makes DePIN projects more appealing to investors but also helps in gaining wider adoption among users who may be new to the crypto space.

Rapid Growth and Scalability of DePIN Networks

One of the most compelling aspects of DePIN projects is their ability to scale rapidly through decentralized incentives. Sean Carey highlighted this using the example of Helium:

"They were able to grow to a million devices. And if you think about that, in less than two years, something being able to deploy a million devices around the world is probably some type of Guinness record for that."

This rapid scalability is a key advantage of the DePIN model, allowing projects to quickly build out infrastructure without the massive upfront capital investments typically required in traditional models.

DePIN vs. Traditional Infrastructure Models

The DePIN model offers several advantages over traditional centralized infrastructure models. By leveraging blockchain technology and tokenized incentives, DePIN projects can achieve faster deployment, lower costs, and greater resilience. Sean Carey contrasted this with traditional approaches:

"If you think about another business trying to be able to do that without utilizing some type of crypto or incentivization program, I honestly don't even know what exists that could do that."

This efficiency and cost-effectiveness make DePIN an attractive option for a wide range of applications, from telecommunications to energy management and beyond.

Real-World Applications of DePIN

The podcast discussion highlighted several examples of DePIN projects addressing real-world needs. One such example is GeoNet, which is building a decentralized RTK precision GPS network. Sean Carey explained:

"There's projects like GeoNet, where GeoNet is, they're essentially one of the world's largest RTK precision GPS networks. And if you look at that, they have a real purpose and a real design behind the technology."

Another example mentioned was Wing Bits, which is creating a decentralized network for tracking aircraft:

"Wing Bits is a system that actually incentivizes users to have these ADSB systems and plug them in and operate them and they get rewarded for it."

These examples illustrate the diverse range of applications where DePIN can make a significant impact.

The Role of Tokens in DePIN

Tokens play a crucial role in the DePIN ecosystem, serving as both an incentive mechanism and a means of value transfer within the network. Sean Carey elaborated on why crypto tokens are essential for DePIN:

"The token is needed to be able to operate the network and incentivize those users who are running those nodes. The reason why it's needed is because Mulwary doesn't have $50 to $100 million to prove their concept just like Helium didn't."

This tokenized model allows DePIN projects to bootstrap their networks without relying solely on traditional venture capital funding.

Challenges and Considerations for DePIN Projects

While the potential of DePIN is significant, there are also challenges and considerations that projects in this space must navigate. One such challenge is balancing token economics to ensure long-term sustainability. Sean Carey touched on this issue:

"HNT like native Helium token, the price action for its entire lifetime has been kind of brutal. It had a big run up in 2021. It still hasn't come close to recapturing those highs."

Managing token supply and demand, as well as ensuring that the economic incentives remain aligned with the project's goals, are crucial factors for the success of DePIN initiatives.

The Importance of Conviction in DePIN Investments

Sean Carey emphasized the importance of conviction when investing in or participating in DePIN projects. He advised:

"Focus less on the ends and focus more on the community and what the community is trying to do, because I believe that helps empower the project."

This approach encourages investors and participants to look beyond short-term price movements and instead focus on the long-term potential and impact of the project.

DePIN and the Democratization of Infrastructure

One of the most exciting aspects of DePIN is its potential to democratize access to infrastructure and services that have traditionally been dominated by large corporations. Sean Carey reflected on this:

"Maybe there's a chance if we build this stuff as people, we're not susceptible to having to pay egregious amounts of money."

This democratization could lead to more competitive markets, lower costs for consumers, and increased innovation in various sectors.

The Role of Blockchain Platforms in DePIN

The choice of blockchain platform is a crucial consideration for DePIN projects. The podcast discussion touched on the strengths of various platforms, including Solana, Peak, and IoTeX. Sean Carey provided insights into the advantages of Solana for DePIN projects:

"Solana is excellent for being able to launch your token in the time that it takes to launch a token, create your oracles. In Build Your System, I think it's a no-brainer. Also, the cost to operate on Solana is a no-brainer."

He also highlighted the strengths of other platforms like Peak, which are specifically optimized for DePIN and IoT applications.

The Future of DePIN

As the DePIN sector continues to evolve, it's likely to have a significant impact on various industries and how we think about infrastructure development. Sean Carey expressed optimism about the future of DePIN:

"I think the more networks that are here to support DePIN projects, I think the more solidified DePIN becomes as a whole. And that's really the most important thing."

This multi-chain future could lead to increased interoperability and collaboration between different DePIN projects and ecosystems.

DePIN and the Evolution of Venture Capital

The rise of DePIN is also influencing how venture capital firms approach crypto investments. The Borderless Capital DePIN fund represents a trend towards more specialized and focused investment strategies in the crypto space. Sean Carey explained their approach:

"Really, what I try to convey personally is, well, one, is they're growing to get returns. The financial returns are always important. The other thing is, what is the product doing?"

This focus on both financial returns and real-world impact reflects a maturing approach to crypto investments.

The Importance of Community in DePIN Projects

Throughout the discussion, Sean Carey emphasized the critical role that community plays in the success of DePIN projects. He advised:

"Focus less on the ends and focus more on the community and what the community is trying to do, because I believe that helps empower the project."

Strong communities can help drive adoption, contribute to development, and provide valuable feedback to project teams.

DePIN and the Internet of Things (IoT)

The intersection of DePIN and the Internet of Things (IoT) presents exciting possibilities for the future of connected devices. Sean Carey touched on this connection:

"I think Helium is obviously going to own the mobile worlds. I think Helium is going to own the IoT world. I don't think that's going to change anytime soon."

As IoT devices become more prevalent, DePIN could play a crucial role in providing the infrastructure and incentives needed to support this growing ecosystem.

The Role of Data in DePIN Projects

Many DePIN projects involve the collection and utilization of data, which raises important questions about data ownership, privacy, and monetization. Sean Carey discussed an example of how DePIN could revolutionize data collection:

"Imagine if you had access to a million telephones, 700,000 telephones. You could say, check these four million products. I want you to check them from England. I want you to check them from California. I want you to check them from Sri Lanka."

This decentralized approach to data collection could provide more accurate and diverse datasets while also allowing individuals to be compensated for their contributions.

DePIN and Energy Management

The energy sector is another area where DePIN could have a significant impact. Sean Carey discussed the potential of projects like Sourceful:

"There are battery packs all around the world that are connected to solar panels. You've probably driven by them. You've seen them. People's roofs. There's fields in North Carolina that are full of panels. All of that power is off-grid."

DePIN projects in this space could help optimize energy distribution, reduce waste, and create more efficient power grids.

The Importance of Intellectual Property in DePIN

While much of the focus in DePIN is on decentralized networks and tokens, Sean Carey also highlighted the importance of intellectual property:

"You have to have a business that holds and protects that intellectual property. That's where having the equity and the token really comes into play and is a successful mechanism because they're both extremely valuable."

This dual approach of tokenized networks and protected IP could provide DePIN projects with a strong competitive advantage.

DePIN and the Changing Landscape of Telecommunications

The telecommunications industry is one of the sectors most ripe for disruption by DePIN projects. Sean Carey reflected on the potential impact:

"How can a small mobile company happen? When I was 16, I got my first cellular phone, it was Bluegrass Cellular. I remember all of those, maybe Bluegrass Cellular are still around. It's in Kentucky, but how many of those small companies are around anymore?"

DePIN could potentially revitalize competition in the telecom industry by lowering barriers to entry and allowing for more diverse and localized service providers.

The Importance of Education in DePIN Adoption

As with many emerging technologies, education plays a crucial role in the adoption and success of DePIN projects. Sean Carey emphasized the importance of helping people understand the value proposition of DePIN:

"Sometimes they don't fully understand a potential investment. When you take that time, and you explain that, and you help them understand your conviction behind a project, that opens a door for them to be more apt to invest in your fund as an LP."

This focus on education and clear communication will be essential as DePIN projects seek to attract both investors and users.

DePIN and the Future of Work

The rise of DePIN could also have implications for the future of work, creating new opportunities for individuals to earn income by contributing to decentralized networks. Sean Carey touched on this potential:

"Frankly, I can't imagine a world where 10 years from now, where human beings are going to be helping bootstrap businesses. DePIN is going to be one of the core foundations of it."

This shift could lead to more flexible and diverse income streams for individuals around the world.

The Importance of Sustainability in DePIN Projects

As the DePIN sector matures, sustainability will become an increasingly important consideration. Sean Carey addressed this issue:

"How many are going to be successful? I think there'll be a fairly high ratio. I think it would be dumb. I want to say dumb. It would be dumb of me to predict how many will be successful, but I think if they play their cards right, there will be a very good chance of a great success rate."

Ensuring that DePIN projects have sustainable token economics and business models will be crucial for their long-term viability and impact.

The Role of Regulation in DePIN

As DePIN projects continue to grow and impact various industries, regulatory considerations will become increasingly important. While not explicitly discussed in the podcast, it's clear that DePIN projects will need to navigate complex regulatory landscapes, particularly in areas like telecommunications, energy, and data privacy.

DePIN and Global Accessibility

One of the most promising aspects of DePIN is its potential to increase global accessibility to various services and infrastructure. By lowering barriers to entry and allowing for more distributed networks, DePIN could help bring essential services to underserved areas around the world.

The Intersection of DePIN and Artificial Intelligence

While not a major focus of the discussion, the potential intersection of DePIN and artificial intelligence presents exciting possibilities. As Sean Carey mentioned:

"It could be collecting data for AI, for instance. The whole idea is you need devices all around the world to understand information around the world."

This combination of decentralized infrastructure and AI could lead to more robust and diverse datasets, potentially improving AI models and applications.

The Importance of User Experience in DePIN

As DePIN projects seek wider adoption, user experience will be a critical factor. Making these systems easy to use and understand for non-technical users will be essential for achieving mass adoption. While not explicitly discussed in the podcast, this is an important consideration for the future success of DePIN initiatives.

Collaboration and Interoperability in the DePIN Ecosystem

The podcast touched on the potential for collaboration between different blockchain platforms and DePIN projects. Sean Carey noted:

"I think we're going to see that a lot in the future where you'll have connectivity between multiple L1s and L1s will be able to support each other in ways where one might be able to incentivize through the other."

This interoperability could lead to a more robust and diverse DePIN ecosystem, benefiting both users and developers.

The Role of DePIN in Smart Cities

While not directly addressed in the podcast, the potential applications of DePIN in smart city initiatives are significant. From traffic management to waste collection and energy distribution, DePIN could play a crucial role in creating more efficient and responsive urban environments.

DePIN and Environmental Sustainability

The potential of DePIN to optimize resource usage and reduce waste could have significant environmental benefits. Projects like Sourceful, which aim to better manage and distribute energy resources, could contribute to more sustainable energy practices.

The Importance of Long-Term Vision in DePIN

Throughout the discussion, Sean Carey emphasized the importance of having a long-term vision when approaching DePIN projects. Rather than focusing solely on short-term token price movements, he encouraged a more holistic view of the potential impact and value creation of these initiatives.

As the DePIN sector continues to evolve and mature, it's clear that it has the potential to revolutionize how we think about and build physical infrastructure. By leveraging blockchain technology, tokenized incentives, and decentralized networks, DePIN projects are creating new possibilities for more efficient, accessible, and user-centric systems across a wide range of industries. The Borderless Capital DePIN fund and the insights shared by Sean Carey highlight the growing importance and potential of this exciting sector within the broader cryptocurrency and blockchain ecosystem.

Facts + Figures

• Borderless Capital has raised a $100 million fund dedicated specifically to DePIN projects.
• Sean Carey is a Partner at Borderless Capital and was formerly a co-founder of Helium.
• Helium grew to a million devices in less than two years, which is considered a remarkable achievement in the industry.
• The Helium token (HNT) had a significant price run-up in 2021 but has struggled to recapture those highs since.
• Solana is highlighted as an excellent platform for launching DePIN tokens due to its speed and low cost of operation.
• GeoNet is mentioned as one of the world's largest RTK precision GPS networks.
• Wing Bits is creating a decentralized network for tracking aircraft using ADSB systems.
• Mulwary is developing an extended reality content delivery network using DePIN principles.
• Sourceful is working on managing and optimizing off-grid power systems, including solar panels and battery storage.
• DePIN projects are being built on various blockchain platforms, including Solana, Peak, and IoTeX.
• The podcast suggests that there are between 50 and 100 DePIN projects currently being actively followed by Borderless Capital.
• Borderless Capital has invested in approximately 10 DePIN projects in 2024 alone.
• The fund's focus on DePIN reflects a broader trend in crypto venture capital towards more specialized investment strategies.
• The podcast discusses the potential for DePIN to disrupt traditional industries such as telecommunications and energy management.
• Sean Carey emphasizes the importance of community and long-term vision in the success of DePIN projects.

Questions Answered

What is DePIN?

DePIN stands for Decentralized Physical Infrastructure Networks. These are blockchain-based systems that incentivize the creation and maintenance of real-world infrastructure through tokenized rewards. DePIN projects aim to decentralize traditionally centralized services by allowing individuals to contribute resources and earn rewards in return, creating more efficient and scalable infrastructure solutions.

Why is Borderless Capital focusing on DePIN investments?

Borderless Capital is focusing on DePIN investments because they see it as a tangible and understandable technology with real-world applications. Sean Carey explains that DePIN projects have clear use cases and value propositions that are easy for both investors and users to understand. Additionally, the rapid scalability and potential for disrupting traditional industries make DePIN an attractive investment opportunity.

How does DePIN differ from traditional infrastructure models?

DePIN differs from traditional infrastructure models by leveraging blockchain technology and tokenized incentives to achieve faster deployment, lower costs, and greater resilience. Unlike centralized models that require massive upfront capital investments, DePIN projects can rapidly scale by incentivizing individuals to contribute resources. This decentralized approach allows for more efficient and cost-effective infrastructure development.

What role do tokens play in DePIN projects?

Tokens play a crucial role in DePIN projects by serving as both an incentive mechanism and a means of value transfer within the network. They allow projects to bootstrap their networks without relying solely on traditional venture capital funding. Tokens incentivize users to contribute resources, operate nodes, or provide services within the network, creating a self-sustaining ecosystem.

How does Solana support DePIN projects?

Solana is highlighted as an excellent platform for DePIN projects due to its speed, low cost of operation, and ease of token launch. Sean Carey mentions that Solana's ecosystem is great, and the support from the Solana Foundation is valuable. The platform's ability to handle high transaction volumes and its mature infrastructure make it an attractive choice for DePIN projects.

What are some examples of successful DePIN projects?

The podcast mentions several examples of DePIN projects, including Helium (a decentralized wireless network), GeoNet (an RTK precision GPS network), Wing Bits (a decentralized aircraft tracking system), and Sourceful (an off-grid power management system). These projects demonstrate the diverse applications of DePIN across various industries.

How does DePIN impact the future of work?

DePIN has the potential to create new opportunities for individuals to earn income by contributing to decentralized networks. This could lead to more flexible and diverse income streams for people around the world. Sean Carey suggests that in the future, DePIN could be one of the core foundations for how businesses are bootstrapped and operated.

What challenges do DePIN projects face?

DePIN projects face several challenges, including balancing token economics to ensure long-term sustainability, navigating regulatory landscapes, and achieving mass adoption. Managing token supply and demand, ensuring economic incentives remain aligned with project goals, and creating user-friendly experiences are crucial factors for the success of DePIN initiatives.

How does DePIN relate to the Internet of Things (IoT)?

DePIN and IoT are closely related, with many DePIN projects focused on creating decentralized infrastructure for connected devices. For example, Helium's network supports IoT device connectivity. As IoT devices become more prevalent, DePIN could play a crucial role in providing the infrastructure and incentives needed to support this growing ecosystem.

What is the future outlook for DePIN?

The future outlook for DePIN is optimistic, with expectations of continued growth and impact across various industries. Sean Carey suggests that as more blockchain networks support DePIN projects, the sector will become more solidified. The potential for interoperability between different DePIN projects and ecosystems could lead to increased innovation and adoption in the coming years.