What is DePIN and why are we bullish?
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What is DePin?
Following our recent focus on the Real World Assets sector and related protocols, we wanted to take a look at a tangential sector: Decentralised Physical Infrastructure or DePin. DePin is a broad brush term for protocols which are combining the world of physical infrastructure with Crypto, often with the aim of bootstrapping decentralised versions of existing networks using Cryptoeconomic incentive systems.
We find it interesting that the sector has begun to perform well following initial momentum in the Real World Assets sector. Perhaps the market is signalling a desire for more tangible value to be created by Crypto, breaking out of the closed loop we have so often found ourselves in. Ultimately value needs to be created, the existence of technology is not inherently valuable without an application or usage.
While the sector consists of a large basket of projects, three prominent protocols have caught our eye in particular: Akash Network, Helium and Livepeer. We touch on each below to give a broad idea of what this sector is all about, what kind of opportunities lie within and provide context for future reports.
Akash Network
The price of $AKT is roughly 2x since we published our report back in late July, the story is mostly the same so we recommend reading our initial piece. At a high level Akash are building towards a decentralised marketplace for compute with their eyes set on the AI market. In practice we would see GPU compute on the supply side and computation hungry AI models on the demand side with Akash as a marketplace sitting in the middle and collecting a take rate.
Some key notes to add to our initial report:
There is a Nvidia H100 supply crunch across the market with 2 year wait times being common, Akash have access to plenty…
Overclock Labs remains well funded
Stable payments testing is complete which will allow payments to be settled in USDC
Akash has 180 contributors on GitHub and 100 validators
They take a generalised approach to computation meaning they can run 15,000+ models vs Render which is hyper-focused and can only run 1 stable diffusion model for rendering.
They are integrated with Hugging Face as one of the options alongside Google, Amazon and Microsoft - a strong sign that the team are focused on distribution.
The team have plans to use their marketplace to become the oracle for GPU compute, this would allow for the emergence of GPU computing futures (similar to how companies buy commodities forward, perhaps they will do the same with their computing needs…).
We believe Akash remains a promising and relatively under looked project which has immense upside if they execute successfully.
Helium
With their original product being focused on providing wireless coverage for IoT devices, Helium are building a decentralised 5G network whereby cellular node operators are rewarded with MOBILE tokens for running a dedicated 5G hotspot and providing service to users nearby. There are over 400,000 live nodes at the time of writing! They recently migrated to Solana from their own chain allowing them to operate their network at a significantly lower cost along with a raft of beneficial technical changes:
improved network efficiency, stability and reliability
smart contract functionality allowing for programmatic features and tools
DeFi composability
larger, engaged Crypto developer community
Helium Mobile, a hybrid wireless carrier from the Helium team, just launched a $5 unlimited plan in Miami - combining service from the Helium 5G network and T-Mobile’s network. When subscribers are not in range of a Helium node, T-Mobile is used as a backup.
Livepeer
Livepeer are building p2p infrastructure for video streaming, it is a protocol for developers who want to add live or on-demand video to what they are building through a series of simple API calls. Their value proposition is reducing the costs associated with video streaming while increasing the reliability. The product was initially implemented as a marketplace built on Ethereum and has since moved to Arbitrum.
The protocol brings together different participants such as “orchestrators” who generate revenue from using their compute to transcode and distribute videos and broadcasters/developers who are in need of said compute. The LPT token is used both as an incentive mechanism and a staking token to incentivise good behaviour on the network.
Current usage is low with less than $10k fees being paid on the platform in the last 7 days and a relatively low number of infrastructure providers or “orchestrators” at 100.
Summary
The DePin sector is an interesting one as these projects attempt to build Crypto-enabled networks in immensely large addressable markets. While their probability of success is low, the opportunity if successful is colossal which makes this sector one to watch in our view. Unlike other parts of the market which tend to be highly reflexive with price, we see DePin sitting alongside RWAs as a sector which has potential to break the proverbial loop.
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