DePIN and Crypto: The Promise of Decentralized Infrastructure That Attracts Billions

In recent years, a new trend has emerged in the cryptocurrency universe capable of moving billions of dollars in investments: decentralized physical infrastructure networks, known as DePIN. While most of the crypto sector operates in the “ether” — data circulating on blockchains and price charts fluctuating — DePIN projects promise a tangible connection to the real world: building decentralized physical infrastructure, from wireless networks to data storage systems, maintained by communities of contributors incentivized by tokens.

Why DePIN Attracts Billions of Dollars in Investment

The enthusiasm of venture capitalists and institutional funds for DePIN is not unfounded. As of February 2024, the total market capitalization of all DePIN tokens exceeded $25 billion, with leading projects raising over $1 billion combined. Funds like Borderless Capital, specialized in this segment, have invested in more than 30 DePIN projects and are raising their third $100 million fund dedicated specifically to this ecosystem.

Pranav Kanade, portfolio manager of VanEck’s digital assets fund, expresses confidence in its transformative potential: “We believe DePIN is a category with the potential to host a killer app with a billion users. These users would be using public blockchains without necessarily realizing they are interacting with a crypto product.”

The core promise is revolutionary: replacing traditional centralized infrastructures — controlled entirely by giants like AT&T, Deutsche Telekom, or China Mobile — with decentralized networks where ordinary participants can set up and maintain infrastructure, earning native rewards in return.

The Uncomfortable Gap Between Valuation and Financial Reality

Despite the impressive market value of tens of billions of dollars in DePIN tokens, there is a concerning gap when it comes to actual revenue. Rob Hadick, general partner at Dragonfly, one of the largest crypto venture funds, revealed alarming figures: the entire sector generates approximately $15 million annually in combined revenue.

This disparity raises critical questions about the financial health of these projects. “Most protocols are not limited by supply but by lack of demand,” Hadick stated in an interview. This diagnosis points to crypto’s oldest challenge: effective user adoption. While investors celebrate speculative price metrics, DePIN projects face a humble reality: few real customers using their services.

Solana Emerges as the Ideal Blockchain for DePIN Projects

A significant discovery in the DePIN ecosystem has been the strategic role of Solana. About 20 leading DePIN projects, including Render, io.net, and Nosana — which run decentralized computing networks — have been built on the Solana blockchain. Even the pioneer Helium, which originally operated its own blockchain, migrated to Solana in 2023.

Sean Farrell, chief digital assets strategist at FundStrat, identifies the fundamental technical reason: “Many of these DePIN projects would have been forced to build on a high-performance chain without adoption or create their own. Now that Solana has entered the group as a legitimate place to build, that solved the infrastructure problem.”

Solana’s competitive advantage over layer 1 blockchains like Ethereum is clear: it has the bandwidth to process high volumes of transactions at relatively low costs, without needing to move to more complex layer 2 blockchains. Ethereum, notoriously expensive and slow, has spawned an entire ecosystem of Layer 2 solutions specifically to address this bottleneck.

Ariel Seidman, co-founder of Hivemapper — a decentralized mapping network that rewards contributors with HONEY tokens and is built on Solana — summarized the three decisive factors: “Low transaction fees, ease of use, and ecosystem quality. DePIN tokens become immediately usable in DeFi applications on Solana.”

Success Stories Demonstrate Potential

The Helium Mobile project exemplifies how to build both sides of a functional DePIN network. According to Farrell: “I think Helium Mobile effectively demonstrated how to build both supply and demand — that was what was missing in the layer 1 blockchain they built.” This successful transition offers a model that other protocols aim to replicate.

Other notable projects include:

• Render: Offers a decentralized graphics processing network
• Akash Network: Provides decentralized cloud computing
• Filecoin: Offers decentralized data storage
• Ritual: Leads initiatives at the intersection of DePIN and artificial intelligence

These cases show that when the demand for the underlying service is clearly identifiable — meaning real customers already exist — the model tends to be more viable.

The Reality of Challenges

Analysts identify significant obstacles to mass adoption of DePIN. Strahinja Savic, head of data and analytics at FRNT, warns: “DePIN presents a higher risk for investors compared to more established investments like exchanges, mining, or staking infrastructure. Incentivizing the development of physical infrastructure is another level of commitment to a project.”

A particular risk involves token dynamics. Many DePIN projects use tokens as the sole reward mechanism to incentivize participants to build and maintain costly physical infrastructure. Christopher Newhouse, decentralized finance analyst at Cumberland Labs, notes: “DePIN so far is a playground for large institutions and VCs, not retail investors.”

Price volatility presents another critical challenge. Since most rewards are paid in the protocol’s native token, price fluctuations directly affect contributors’ earnings. “High volatility can discourage ongoing involvement if rewards are seen as an unreliable income source,” industry analyses suggest.

The Economic Model That Works (or Doesn’t)

Most DePIN projects follow the “burn and mint equilibrium” model — a two-token system where contributors earn tokens and users burn tokens when paying for services. This model requires a perfect balance between supply and demand.

Pranav Kanade from VanEck categorizes DePIN projects based on their likelihood of success:

First category: Projects that follow the “build it and they will come” approach. These scale the supply side aggressively with token incentives, creating large-scale token inflation. Only then do they attempt to address demand. “These projects tend to be highly speculative, and in many cases, demand doesn’t exist, making it hard to find users,” Pranav explains. He is skeptical about the long-term success of this group, as demand (token burning) remains unclear.

Second category: Projects where demand for the underlying service is clearly identifiable, meaning customers already exist. “We believe these projects have a higher chance of success because they can balance token supply and demand much earlier in the token’s lifecycle,” Pranav states.

Brian Rudick, strategist at GSR, agrees but introduces another critical factor: “In theory, DePIN projects can pass their lower infrastructure costs onto customers to stimulate demand. However, in practice, the DePIN products or services offered may be of inferior quality compared to traditional solutions that have been optimized over decades, nullifying this cost advantage.”

Current Trends and Market Outlook

While the overall crypto sector faced significant selling pressure — with Bitcoin dropping from near $69,000 — the DePIN segment continues to attract qualified institutional attention, unlike the retail frenzy that typically drives meme coins and volatile altcoins.

Anand Iyer, founder of Canonical Crypto, a early-stage venture capital firm, notes an important shift: “We are seeing the real utility of decentralized hardware come to life as AI computing needs grow. Companies and protocols like Akash Network and Ritual are leading the way, and we expect more participants to leverage decentralized networks for non-crypto use cases.”

This suggests that DePIN’s future success may not be in replacing all traditional centralized infrastructure but in filling specific niches where decentralization offers tangible advantages — particularly in AI computing and other demanding technical applications.

Conclusion: Hype or Reality?

Massive venture capital investment in DePIN reflects genuine conviction in its transformative potential. The category shows real opportunities when two criteria are met: clear demand for underlying services and simultaneous building of supply and demand.

However, the sector remains in very early stages. The gap between market capitalization in the tens of billions and actual annual revenue of $15 million serves as a critical reminder that not all investor enthusiasm translates into sustainable adoption. The most promising DePIN projects will be those that solve real, tangible problems for real users — not those that mainly rely on token inflation to fuel speculation.

The future of DePIN in the crypto ecosystem will be determined not by promises of decentralized infrastructure but by execution: how many users will actually use these services, how long they stay engaged, and whether economic and technical advantages can surpass decades of optimization of incumbent centralized solutions.