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Hubspot’s report mentioned above brings many interesting pieces of information, including this quote:

It’s undeniable how popular AI is becoming by the day. With tools that allow any person to create images, videos, and texts with only a few clicks, the amount of data being processed is also growing exponentially.

But not only this. The growing need for processing power won’t stop anytime soon (if ever), so it’s important to understand what’s going on on this topic and, most importantly, explore a topic that may help solve this scenario.

That’s what we’ll dive into today.

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Business data, gaming, people’s data, and a LONG list that keeps going. The need for data storage and processing power has been growing exponentially over the last few years, and witnessed a boom with the rise of artificial intelligence (AI).

The emergence of generative AI and the metaverse is driving an explosion in demand for digital infrastructure. To put this in perspective, AI was accounting for less than 1 percent of data produced in 2021 but is expected to consume 10 percent of capacity by 2025.

In practical terms, this scenario translates into growing costs for many industries, as the infrastructure needed to run things becomes more expensive and, in many cases, not completely reliable.

Speaking of costs:

“Yeah, but how much more computing capacity will be needed in the future? 2, 3… 50x?”

Intel has estimated that a 1,000x increase in current computing capacity will be required if the metaverse is to realize its full potential.

Let’s say they are very wrong and we “only” need 20% of this prediction. We are still talking about a 200x increase in computing capacity 🤯.

So, where does this leave us?

AI, metaverse, and many other “new things” are certainly here to stay. But realizing their full potential hinges on our ability to scale up our digital backbones - the data centers, networks, and all the tech-tech that will power these virtual worlds, platforms, products, and solutions.

And as much as there are a lot of question marks around the whole metaverse thing, research by KPMG showed that many strategy decision-makers at companies with US$250M+ in annual revenue see the potential in it:

In short, here’s an overview on the tech infrastructure scenario:

➡️ Rapid demand growth: The evolution of AI and the metaverse (and not only these two) is skyrocketing the need for enhanced data storage and processing capabilities;

➡️ Hyperscalers at the forefront: Companies like AWS, Microsoft Azure, and Google Cloud are leading the charge, expanding data center infrastructure at an unprecedented pace.

➡️ Investment imperative: Keeping pace with technological advancements necessitates challenging financial strategies to fund the infrastructure expansion.

➡️ Infrastructure as the keystone: For new tech to reach their full potential, a robust, scalable digital infrastructure is crucial. This isn’t just about building for today but engineering the backbone for tomorrow’s digital era.

Now that we have a better understanding of what’s going on, it’s time to jump into the subject mentioned in the title of this edition.

DePIN:
Decentralized Physical Infrastructure Networks

If you want a quick answer, here is one popular definition: Decentralized Physical Infrastructure Networks (DePIN) are decentralized applications that use tokens to incentivize people to crowdsource and build connected real-world physical infrastructure networks.

All this aims for the democratization of processing power, storage, computer, communication, and more.

See you next week.

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😆 

Ok, let’s go deeper.

DePIN marks an evolution in how we conceive and implement infrastructure projects. This approach harnesses decentralized applications and digital tokens, incentivizing collective action to build and expand essential real-world networks.

One of its biggest “selling points” lies in the fact that DePIN is turning the conventional infrastructure model upside down. It's a concept where community effort reduces the need for hefty upfront investments, allowing for organic growth and scalability.

For many people (myself included), this method aligns perfectly with the ethos of Web3, fostering a community-centered approach to building and managing infrastructure that's both resilient and adaptive.

I know that often an image can help us understand complex topics, so here’s a good one:

Another way to put it is using CoinGecko’s definition:

“A DePIN is a network of crowd-sourced providers offering certain real-world services to users and leveraging a public ledger (blockchain) to keep a record of the services rendered and also receive remitted rewards for these services via cryptocurrencies that run on the same or a different blockchain network”.

“Ok, but I’m not sold yet!”

Hold that thought! Time to go a bit further into the transformative aspects of DePIN.

Empowering community ownership: Imagine a scenario where infrastructure projects aren’t monopolized by big corporations but are driven and owned by the community itself.

For instance, a car-sharing initiative where revenue is shared among all participants - from those offering their vehicles to the service to the end users. This model not only democratizes profit distribution but also fosters a sense of ownership and participation among community members.

Decentralizing governance: Think about a decentralized electric vehicle charging network where each station owner has a say in operational decisions.

This shift towards open, democratic governance ensures that infrastructure serves the community's needs first, aligning with the collective interests rather than those of a singular governing body.

Accelerating scalability: The DePIN approach to building infrastructure allows for lightning-fast scaling, reminiscent of the rapid growth seen in digital platforms but applied to physical projects.

An illustrative example here would be a global mapping initiative that employs crowdsourcing to achieve its goals more efficiently and cost-effectively than traditional methods.

In fact, this is already happening: Within 11 months of mapping, the Natix Network was able to map 3x more than Google Maps, 8.6x more than Mapillary, and 6.6x more than Hivemapper 🤯.

Eradicating gatekeeping: With DePIN’s openness and accessibility, we are removing (at least some of the) barriers that traditionally hindered participation in infrastructure projects.

Envision a model where data collection networks are free from central gatekeeping, allowing open access to valuable data for all interested parties. This inclusivity enhances research, development, and community services, marking a significant departure from restrictive conventional models.

Unlocking new investment avenues: The tokenization aspect introduces a novel asset class, bridging the gap between digital finance and real-world infrastructure.

By enabling fractional ownership and investment in projects - such as renewable energy storage or community-driven telecom networks - DEPIN not only democratizes investment opportunities but also aligns them with the growing ethos of sustainable and community-focused growth.

By the way, we talked a lot about tokenization in our edition #21.

Looking ahead, it's tough to predict exactly where DePIN will land in five or 10 years.

But, considering all the ground-breaking stuff we’ve talked about (and all the MANY other things not mentioned here), ignoring its potential seems like a missed opportunity.

The way DePIN is shaping up is something you'd want to keep on your radar - as some of the people you’ll “meet” below are doing.

Not long ago I shared on my LinkedIn my takeaways from a great report on DePIN crafted by Outlier Ventures.

In this same report, there’s a quote from Jasper de Maere that’s worth sharing here (not the first time I’m quoting him 😅). It’s a great summary on the importance of moving to a decentralized environment:

And I appreciate each one that took the time to interact with this post and share their views on DePIN. Below, some of these comments:

Potential + Early adoption

As Dirk mentioned, besides the “shinny” super-tech-modern-decentralized-infrastructure, another great thing about DePIN is how it allows old tech a second chance - which has a direct impact in cost reduction while helps diminish the environmental impact, since hardware may be used for longer periods.

Many, MANY uses

As shared by Chris Moeller, there are many different ways to leverage DePIN. We have explored some options in this edition of The Wild West of Web3, but there are certainly even more ways to benefit from Decentralized Physical Infrastructure Networks.

Still early

I know that this is something I say in pretty much every edition… Well, it is what it is 😀.

Despite all the great things being built around DePIN, it is still a very “niched” conversation, which means there are a LOT of opportunities for builders.

Shout-out:
Anthony Day & Porter Stowell

Earlier this month, my good friend Anthony Day had a great conversation about DePIN with Porter Stowell.

There are many great insights you get from this Masterclass, and you can watch it by clicking here.

Here to stay 🤝 

I guess it is safe to say that we won’t see any decrease in the “quest” for more data storage and computational in the near future.

Therefore, DePIN is one of those things that will keep being mentioned more and more often. So expect more content on this, as there are many more opportunities, challenges, and use cases to be discussed.

Stay tuned!

See you next week.

#LFGrow
Diego Borgo