What innovations will the combination of AI and DePIN bring?

Original title: "AI+DePIN: A strong alliance or a positive plus a negative?"

Original author: Fishery, Biteye core contributor

DePIN, the full name of which is Decentralized Physical Infrastructure Networks, refers to a network system that connects and manages physical hardware devices in a decentralized manner.

Although the concept was officially established by Messari through a Twitter vote in November 2022, the concept and practice behind it have existed for many years.

In the two years since the unified name DePIN was established, despite the industry's strong publicity, we have to admit that we have not seen too many eye-catching emerging projects.

On the contrary, many projects were short-lived and even became short-term capital. However, this performance cannot negate the value and potential of the entire track. In fact, the concept represented by DePIN has a long history of development.

Before the name "DePIN" was widely accepted, this track had been referred to by many different names. For example:

1. TIPIN (Token Incentivized Physical Infrastructure Networks): Token-incentivized physical infrastructure network

2. PoPW (Proof of Physical Work): Proof of physical work

3. EdgeFi: Edge finance, emphasizing the deployment of hardware resources at the edge of the network

4. MachineFi: Machine finance, first proposed by the IoTeX project in November 2021

Although these names have different focuses, they essentially point to the same concept: using blockchain technology and cryptoeconomics to build and manage infrastructure networks in the physical world.

In this field, some projects have achieved remarkable success, the most classic of which are Filecoin and Helium.

Filecoin is committed to building a decentralized storage network, while Helium focuses on decentralized wireless networks. Both projects appeared in the previous rounds of bull markets, but they are still doing well today.

The success stories of Filecoin and Helium prove that combining blockchain technology with real-world physical infrastructure can create disruptive solutions.

These projects not only innovated in technology, but also successfully applied cryptoeconomics to solving practical problems, demonstrating the feasibility and potential of the DePIN model.

Through this historical perspective, we can not only understand the concept and value of DePIN more comprehensively, but also provide important reference and inspiration for future project development.

This article will explore the development history of the decentralized physical infrastructure network (DePIN) in depth, review the successful DePIN projects in history, summarize their successful experiences, and use this as a basis to sort out the development opportunities of DePIN in the future. At the same time, we will pay special attention to the new development direction and potential brought about by the combination of AI and DePIN under the wave of AI.

01 DePIN value logic

Looking back, successful DePIN projects usually have several common points:

First, there is support from the open source community at the software level, and third-party manufacturers are open to manufacture products that can mine in terms of hardware;

Second, the products have actual landing scenarios and meet actual needs;

Third, the blockchain algorithm is designed in a targeted manner according to the business scenarios of DePIN to ensure that the incentives are fair and not controlled by the project party, rather than simply issuing a token on the public chain.

Let's talk about these three points one by one.

Open Source Community and Hardware

Successful DePIN projects cannot do without the support of the open source community at the software level, and are open to third-party manufacturers in terms of hardware, rather than monopolizing the production of mining hardware.

Open source community support can attract global developers to participate, accelerate technological innovation, and improve software security and stability. The spirit of open source is also highly consistent with the concept of decentralization, which helps to build community trust and expand the ecosystem.

At the same time, if the open source community behind a project is prosperous, it also means that the project technology is solid and reliable. You must know that pseudo-concept projects cannot attract open source developers to "generate electricity with love."

Opening hardware production to third-party manufacturers can reduce costs, promote hardware innovation, and prevent centralized risks. This approach enhances the network's degree of decentralization and risk resistance, while also expanding the base of participants.

This open software and hardware strategy creates a virtuous cycle, attracting more participants, driving continuous innovation, and ultimately forming a strong and diverse ecosystem to ensure the long-term sustainability of the project.

Take Helium and Filecoin as examples. Both projects rely on strong open source communities to drive their technological advancement and network expansion.

Helium uses the open source LoRaWAN protocol, a low-power wide area network protocol that provides a low-cost, low-power solution for long-distance communication of IoT devices. By being open source, LoRaWAN has attracted a large number of developers and companies to participate, proving its actual demand in IoT communications.

Similarly, Filecoin relies on the open source distributed storage protocol IPFS to store and share data in a peer-to-peer manner, solving many problems of traditional centralized storage, such as single points of failure and data censorship.

The open source nature of IPFS has attracted extensive participation from developers and enterprises around the world. IPFS was widely used by program developers long before Filecoin went online, and the total network storage capacity reached 1 EiB in 2020.

Blockchain consensus

Any successful DePIN project must be closely integrated with blockchain technology and design algorithms for specific application scenarios, rather than separating the DePIN business from Web3 and simply issuing a token on the public chain.

When it comes to the core technology of blockchain, proof of work and consensus are unavoidable, and are also one of the most difficult problems at the DePIN technical level.

The core of the problem is, how to count the workload of user-end devices? Who will distribute the relevant benefits to users?

What is involved is the design of a targeted proof of work algorithm.

Helium cleverly combines the IoT hotspot business by introducing the "Proof-of-Coverage" (PoC) consensus mechanism. Its challenge-response mode simulates actual IoT data transmission and verifies the communication capabilities of the hotspot.

Multi-hop verification reflects the wide coverage requirements of the IoT network and ensures the stability of network connectivity.

The space-time proof is consistent with the location service of the IoT, providing a reliable foundation for location-based applications.

Filecoin also has a targeted design in terms of consensus. Through its innovative PFT (Power Fault Tolerance) consensus mechanism, the storage used by miners in the network and the space-time proof generated are converted into voting weights to elect leader nodes to create new blocks.

This mechanism not only improves network efficiency, but also greatly reduces energy consumption. Through token incentives, Filecoin effectively promotes the expansion of the network and strengthens the position of the IPFS protocol in practical applications.

In this way, the biggest benefit of the consensus algorithm designed by the DePIN project is to ensure fairness and ensure the security of the economic system. This design not only ensures that users can obtain accurate and reasonable incentives that are consistent with their actual contributions, but also effectively prevents potential abuse by the project party.

The contribution statistics and reward distribution are directly bound to the tamper-proof blockchain through consensus, ensuring the transparency and immutability of the incentive distribution.

This means that the project party cannot maliciously deduct the rewards that users deserve, nor can it secretly increase its quota.

Looking back at the VC-based DePIN that was launched recently, the effect is not ideal at present, and this may be the reason.

Most of these projects choose to issue tokens on the Solana or Ethereum public chains, with high token emissions, a large number of chips concentrated, and incentives that are out of the constraints of consensus.

Real needs

Not emphasizing another key factor for the success of the DePIN project: the combination of long-term development and actual needs.

This is fully reflected in the development history of Filecoin and Helium. Filecoin is built on the open source protocol IPFS (Interplanetary File System), which itself was born to solve many problems of the current centralized storage system. The existence and widespread application of IPFS proves the actual demand for decentralized storage.

Filecoin further expands the scope of application and participation of IPFS by introducing a token incentive mechanism, forming a virtuous circle.

Similarly, Helium is built on the open source IoT communication protocol LoRaWAN. The widespread use of LoRaWAN has proven the huge market demand for IoT connectivity, and Helium's incentive mechanism has greatly accelerated the deployment and expansion of LoRaWAN networks.

The combination of this open source protocol and the DePIN project not only proves the existence of market demand, but also shows how DePIN can promote the further development and application of open source technology through economic incentives.

In summary, the successful DePIN project has significant advantages in open source community support, hardware openness, long-term development, and market demand satisfaction, and has further consolidated its position in the industry through close integration and innovation with blockchain technology.

Helium and Filecoin, as successful examples, demonstrate how the DePIN project can achieve long-term sustainable development through the effective combination of technology and market demand.

02 AI + DePIN Value or Speculation?

Value Window

The combination of AI and Web3 is still in the exploratory stage, and the industry has not yet formed a mature route. However, from the perspective of asset attributes, the AI field involves both hardware and algorithms, which is highly consistent with the characteristics of the DePIN track.

DePIN projects usually involve decentralized networks of physical hardware and incentive mechanisms driven by smart contracts, which happens to provide an ideal landing scenario for AI.

When exploring the prospects for the integration of AI and DePIN, we have to face up to a key challenge we are currently facing: the mismatch between decentralized AI training needs and technological development.

At present, the open source AI kits used by the mainstream in academia and industry are still mainly designed for centralized servers, which reflects that the demand for decentralized AI training has not yet formed a scale.

In fact, it is often a long process to form a real decentralized demand.

Looking back at the successful DePIN cases in the past, we can find a relatively healthy development path: first, the emergence of decentralized demand, then promoting the community to develop the corresponding open source decentralized framework, and finally injecting incentive mechanisms into the ecosystem.

However, the current development trend in the field of AI+DePIN seems to be somewhat reversed. Many projects are eager to launch incentive mechanisms, but due to the lack of real decentralized demand support, these incentives are often obtained by "fleecing players" rather than flowing to real demanders and contributors.

This incentive-first model not only fails to effectively stimulate the generation of real demand, but may also cause the direction of technology development to be out of touch with actual market demand.

In the absence of clear demand guidance, projects may focus too much on short-term benefits and ignore the technical accumulation and ecological construction required for long-term sustainable development.

Therefore, for AI+DePIN projects, the top priority is to patiently cultivate the real demand for decentralized AI and at the same time promote the open source community to develop a decentralized AI open source framework.

Only on the basis of community demand can the introduction of a reasonable incentive mechanism really play a role and promote the healthy development of the entire ecosystem.

This requires project parties, developers and investors to remain patient and focus on long-term value creation rather than short-term interests.

Only in this way can we expect to see truly successful AI+DePIN projects emerge and open up new possibilities for the future of decentralized infrastructure.

Actively participate in the new AI narrative

After the above analysis, the path of value investment may not work in a short period of time, but this does not mean that the market for AI + DePIN is bleak. Looking at the overall environment, AI is still the track with the most hot money.

The current mainstream route of AI + DePIN is to provide a distributed computing resource network for AI, aiming to reduce the cost of AI training and reasoning, and to make full use of idle computing power worldwide, especially GPU resources.

In the early stage of this bull market, you can participate in such projects using existing hardware, and the returns are still good. But as the timeline lengthens, more and more similar projects emerge, and the leading ones gradually weaken after listing.

This means that we should actively participate in the new AI narrative, and each subdivided narrative under each AI can be appropriately participated (long-term holding is not a safe decision). Note that it must be a new narrative!

For example, Xai pioneered the sale of nodes. As a pioneer, the income is quite considerable, and the investment can be recovered in less than half a month.

03 Written at the end

At this time, the market is not very good, and the mood is generally depressed.

We must be patient and confident in the development of the AI+DePIN track. The development of this emerging field may take time, but its potential cannot be ignored.

When there is no market, review existing projects more and look for those with real decentralization needs, strong open source community support, open hardware production, and targeted consensus algorithm design.

Finally, pay close attention to the trends in the open source community, screen out new narratives that are worth participating in and truly technical, and contribute to the healthy development of the AI+DePIN ecosystem.

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