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Wars.” The company writes:“In a tech ecosystem driven by outrageous hype cycles, the economics behind DePIN networks are easier to understand (“Airbnb for digital storage”), and their tokens are easier to underwrite. If decentralized networks eventually take 10% of the cloud market, the results in this sector will be eye-popping.”The bullish tone makes it clear: Messari and social media think DePIN storage solutions could really provide a solution to growing storage demand fueled by AI and Big Data companies. Or at least the narrative around it could develop. Could web3 physical infrastructure become one of the big crypto narratives in 2023?Messari seems to think so. Why else would they anoint the space with the new title "decentralized physical infrastructure?"Vox populi decided in a highly representative 136-vote Twitter poll:Call it DePIN, Proof of Physical Work (PoPw), Token Incentivized Physical Networks (TIPIN), EdgeFi, or whatever you want, this umbrella term describes "real-world stuff" that makes crypto run. CoinMarketCap Alexandria went into the DePIN trenches and explains:What is DePIN and how does it work?The main sectors and main players in web3 infrastructureTwo case studies of decentralized infrastructure projectsWeb3 infrastructure lacked a good buzzword. How can the sector pump without a snappy term that opens the wallets of VCs and retail alike?Good thing Messari is memeing the decentralized physical infrastructure term into existence.DePIN refers to infrastructure projects using tokenization to coordinate and incentivize their bootstrapping phase. Individuals build up the supply of the infrastructure in a decentralized manner and get rewarded with token incentives.The key idea is to flip the traditional model on its head. The traditional way is for corporations in telecommunications or energy to invest a lot of time and money into building and maintaining infrastructure. Web3 companies try to outsource this build-up and maintenance process to a token-incentivized army of volunteers and monetize later once the coverage rate is high enough.This is the same liquidity incentive principle used in other web3 sectors, such as DeFi (yield farming), play-to-earn, or move-to-earn.Source: MessariWhat Belongs to Decentralized Physical Infrastructure (DePIN)?The four categories in DePIN are:Cloud/storage networks: File storage, relational database, CDN and VPN networks.Wireless networks: 5G, LoRaWAN (Internet of Things).Sensor networks: Interconnected devices embedded with sensors that collect real-time data from the physical world, such as maps.Energy networks: Aggregate distributed energy sources to create a more resilient and efficient energy grid.What Are the Benefits of Decentralized Physical Infrastructure (DePIN)?DePIN's declared goal is to create

Such as loss, theft, or damage. A 2024 survey by Messari found that 15% of hardware wallet users lost access to funds due to wallet misplacement or lack of a secure backup strategy.Avoiding Common MistakesWhile a seed phrase is a powerful tool for securing your cryptocurrency wallet, it is also a potential point of vulnerability. Improper storage or careless handling can expose your wallet to theft, loss, or irrecoverable damage. To safeguard your assets, it’s crucial to understand the risks associated with seed phrases and how to mitigate them.1. Phishing AttacksPhishing attacks are one of the most common ways hackers compromise seed phrases. Attackers create fake websites, wallet apps, or email communications that mimic legitimate platforms, tricking users into entering their seed phrases.Example: A phishing website may look identical to a popular wallet provider, prompting users to “restore” their wallets by entering their seed phrases. Once submitted, the attacker gains full access to the wallet.Prevention Tip: Never enter your seed phrase online unless you are restoring your wallet in the official application. Double-check website URLs and avoid clicking on unsolicited links.2. Digital Storage VulnerabilitiesStoring a seed phrase on a digital device, such as a smartphone, computer, or cloud storage, can lead to theft if the device is compromised. Hackers use malware, keyloggers, or spyware to extract sensitive information.Statistic: According to a 2023 report by Kaspersky, over 20% of crypto-related cyberattacks involved malware targeting seed phrases stored on devices.Prevention Tip: Always store your seed phrase offline, such as on paper or a metal backup device, to minimize exposure to digital threats.3. Loss of Physical BackupWhile storing seed phrases offline is more secure than digital storage, physical backups are still vulnerable to loss, theft, or damage. Paper backups can be misplaced, destroyed by fire or water, or stolen if not securely stored.Prevention Tip: Use fireproof and waterproof storage solutions, such as metal plates designed for crypto backups. Consider storing duplicates in separate secure locations.4. Sharing or Revealing the Seed PhraseSharing your seed phrase with others, even unintentionally, poses a significant risk. Scammers often pose as customer support representatives or wallet providers, requesting

A more equitable and efficient process to bootstrap infrastructure networks compared to legacy companies' top-down, capital-intensive approach.If you ask web3 VCs like Multicoin Capital, they will extol the following benefits of the decentralized approach:You can build infrastructure 10-100x faster.It is better synced to hyper-local market needs.It can be far more cost-effective.It can be scaled across jurisdictions in a permissionless way.The network is credibly neutral and collectively owned.Blockchains support frictionless micropayments and integration with DeFi.That is, of course, the best-case scenario. We will look at the limitations of DePIN in the case studies below.What Are the Trends and Challenges of Decentralized Physical Infrastructure (DePIN)?The combined market cap of the global top 10 cloud companies is $5 trillion. Not bad. If web3 companies could take a tiny share of that market, they would be in fantastic shape. Messari sees several trends and challenges in this sector:Source: MessariTrendsMost people access the internet from a mobile device these days. Crypto is the one big exception, simply because much of it hasn't developed a good mobile interface. But to succeed, crypto will have to go mobile eventually. Technological trends like AI tools and more capable smartphones point towards more mobile traffic, not less.Moreover, with the possibility to produce and consume content in a decentralized way increasing (again, AI), the demand thereof will also increase. And with it the demand to access and store it, which concerns wireless and storage providers.ChallengesDePIN faces several challenges, explaining why the sector hasn't taken off yet. For instance, as we will still explore further, the incentive models are highly dilutive and often sound better than they are in reality. The time horizon to build applications and demand is significantly longer than for mere consumer apps. The market is big, but companies compete against web2 giants like Amazon, Microsoft and Google.In other words, disrupting legacy competition will take a lot more effort and professionalism than in purely retail-facing sectors of web3 like gaming.What Is the Flywheel of Decentralized Physical Infrastructure (DePIN)?Web3 enthusiasts point out that tokenization allows globally distributed individuals to collectively bootstrap a network in a permissionless and trustless manner. Ideally, the costs of building the network are borne by and distributed among the supply-side participants, usually retail, who get paid token incentives to bootstrap the network.Once the network has built an infrastructure base, it attracts users. These users pay to use the network and boost further supply-side growth. In