Welcome back to the DePIN Hub Newsletter, your backstage pass to the awesome world of crypto utility.
Before we landed on the term DePIN, we used to call this space TIPIN, short for token-incentivized physical infrastructure networks. 🪙
There are plenty of rabbit holes to dive down when it comes to tokenomics, so we’ll kick this topic off with an overview of some key aspects of DePIN token economies, and take a look at a few strategies that some notable projects have chosen to implement. Let's gooooo 🧮
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DePIN Hub Leaderboards 🏅
Growth statistics of some standout DePIN projects based on social metrics and token price
In The News 📰
🔔 Dabba announces the second round of their DePIN-powered WiFi devices. Dabba’s goal is to deploy 100,000 Solana-based routers by the end of 2024.
🔔 DIMO drops a new newsletter called Build on DIMO. The newsletter is targeted at developers as DIMO continues to build a decentralized marketplace for connected vehicles.
🔔 Helium launches international roaming. Starting from just $15, Helium Mobile app users can now call, text and use data in over 200 countries.
🔔 PowerPod announces the PowerPod Ambassador Program. Earn rewards for spreading the word about this exciting decentralized EV charging station initiative.
🔔 Streamr mainnet is live, signaling the completion of the 2017 roadmap. The launch comes with several key updates, such as fully deployed tokenomics and new network roles.
Feature
DePIN Tokenomics 📊
Whether you’re building, mining or investing in DePIN, you clearly care about the value of your tokens. When evaluating a project to participate in, as well as how to manage your current holdings, it’s critical to understand what drives the project’s token economics. Below we’ll walk you through some key concepts and practical examples using some familiar faces in DePIN.🕵️♂️
Token Utility 🪙
Tokens help ideas scale from proof-of-concepts into bigger more important things. It’s what helped Bitcoin become the world’s toughest network. It’s how Ethereum operates as an open and accessible virtual computer. Broadly speaking, tokens usually serve one or more of the following three functions: funding, utility, and governance. 🪙
Token allocations may be sold in advance to investors with the prospect of becoming valuable once a project kicks off and gains traction, or reaches product-market fit. 🏦
Once funding is acquired, and building commences, projects utilize tokens to attract network contributors and reward them for their time, their energy and their resources. Without this incentivisation layer, the scale of these projects would be limited to the active participation of hobbyists, volunteers and donors. This accounts for the supply side. 📦
On the demand side, projects may wish to use the tokens to sell their services into their relevant markets. This keeps the token within the system, creating a so-called circular economy. ↻
Finally, tokens play a pivotal role in governance and decentralized decision making. However, considering the physical and hands-on approach involved in DePIN projects, this is a hard nut to crack, one that many crypto projects have struggled to perfect over the years.😓
Token Supply and Burns 🔥
DePIN projects, like any other crypto vertical, need to think hard about the supply of their tokens. Too much supply, too quickly, can dilute the holdings of the token holders (read: bad 👎). In order to combat this, many projects opt for some form of burn mechanism to keep things in balance. The key difference is how projects implement the burn. Are the burns hardcoded into the protocol 📟 or is it up to a foundation to execute these transactions manually? ✍️
The latter is simpler to do in the beginning phase of a project, although it involves a certain level of trust, countering the true decentralization of a project. That said, contributors and token holders can always verify the burn activity on-chain and see if the foundation or team are staying true to their word. GEODNET serves as an example of this method, with the foundation using 80% of project revenue to buy back tokens and burn them. (read: good 👍)
Burn and Mint 📉📈
DePINs face a challenge in that they bridge volatile cryptocurrencies with use cases tailored to everyday people. Miners receive project tokens, similar to how investors might receive shares from a company. Meanwhile, consumers are used to paying in stable units of account, typically in USD or other fiat currencies. If DePIN is to unlock hundreds of millions of new users, then services, especially subscription-based services, can greatly benefit from having predictable price structures. (Did you know crypto is volatile? 😆)
The burn and mint equilibrium (BME) model provides a balance between the expectations of both parties. In order to access services, end users burn a consumer facing token. On the opposite end of the transaction, a protocol token is minted to reward the contributor.
Helium introduced such a BME method in their HIP-20 upgrade. Services on the Helium network are paid for using Data Credits; which are pegged at $0.00001.
DePIN Rewards 💰
The method in which rewards go out to contributors are a key aspect to a DePIN’s longevity. ATOR’s reward system serves as a good example of a well-thought out time-based unlock. ⏳ The protocol has set aside a perpetual pool of rewards. The daily rewards consist of 0.1% of the pool, yet this amount is decreased every new epoch (15 days). Such a modification allows for a slow, perpetual distribution over time, with a halflife of 693 days (46 epochs).
Speaking of ATOR, unlike many other projects that sell hardware for USD, ATOR tokens were required to purchase their first 1,000 relay units. This was accompanied with the prerequisite of owning an Atornaut NFT. 🧑🚀 The NFTs were sold for ETH, giving the project a more stable fundraise. The NFTs also provided additional community hype and royalty payments from secondary market trading. 🫰
This was an awesome use case for NFTs as part of a project’s funding and something we hope to see more of!
Dynamic Rewards ➕
Something that is somewhat unique to DePIN is the multiplier effects that projects can attribute to specific geographical regions, where network expansion into targeted areas can be incentivized with higher than average rewards. 🗺️
Hivemapper uses a demand-driven incentive model called Burst, where contributors can actively meet the demand of businesses and developers focused on a particular area.
GEODNET does this with their Superhex multipliers, which can extend rewards by up to 14x the base reward! 🤩
Locking Supply 🔒
DePIN projects take vastly different approaches to how tokens get released into the market. Messari’s State of DePIN 2023 report highlights this clearly.
The projects in the top segment of the graph have more control over the distribution. This gives space for initiatives such as the Superhex and Burst use cases above.
Market Correlation 💹
DePIN is only just beginning to kick off now, with many new projects heading into their first big crypto bull run. There have been a few older projects that have stuck around, and it’s fair to say these got treated like most other altcoins.
Despite its $4B+ market cap and ranking within crypto’s top 30 range, Filecoin’s FIL token is still down over 95% from its 2021 all time high.
Helium’s HNT chart looks similar, currently sitting at $1B market cap, and 88% off its 2021 all time high.
However, more recent projects like ATOR ($230M market cap), DIMO ($100M) and GEODNET ($25M) have witnessed up-only levels of price action. 📈
It’s too early to draw meaningful conclusions from these trends as we’re entering into a bull run and speculation is rife. There will undoubtedly be dips in valuations once the market cools off. This is when the tokenomics of high-quality, revenue-generating DePINs will be put to the test. ⚖️
Revenue-Derived Value 🤑
There’s a lot of burning going on in DePIN these days. Just as long as it’s not the token holders and consumers getting burnt, then it’s all good. 🔥🔥🔥
Jokes aside, there is a key takeaway from this dive into DePIN tokenomics. Although tokens are seemingly created out of thin air, that can’t be said of value. Value has to come from something tangible and in the case of DePIN, that value is derived from revenue. As the DePIN space matures, projects will continue to innovate with tokenomic models as they aim to maximize revenue while minimizing supply dilution.
And one innovation that we didn’t cover today, is the idea of points. Keep your eyes peeled for our next issue as we explore how projects like Grass, UpRock and Silencio are leveraging this tactic, often in combination with launchpads, to grow their user bases pre launch. 🚀
Coming Soon 👀
Launchpads have become a key tool for successful Web3 projects. However, the needs of DePIN projects are very different to those of a traditional crypto project. Web3 launchpads aren’t suited for dealing with hardware and logistics. 🙅♂️ They aren’t catered to the needs of hardware builders and equipment deployers who are aligned with a project’s long-term vision.
DePIN Hub is looking to fill this gap in a BIG way. Word is - it will be launching soon 🤫
If you want early entry to the Launchpad, as well as access to discounted miners, airdrops, and plenty more, all you have to do is share this newsletter with others. If they subscribe through your referral link (found at the bottom of this newsletter) you’ll accrue points that will unlock rewards in the DePIN Hub Launchpad! 🚀
Sponsor
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DePIN Hub Podcast🎙️
Brought to you by Peaq Network, harnessing the home of DePIN projects! 🚀
Aethir is your chance to cash in on the world's insatiable demand for enterprise-grade GPUs 🕹️
And there's no better time than now as Aethir just announced its first-ever node sale! Learn how to run a network validator (known as a Checker Node) as well as Aethir's ambitious plans for the future in this episode with CEO Mark Rydon.
dTelecom's goal is a world where you can run real-time streaming applications like teleconferencing without centralized servers and their poor latency and high costs 🔓📶
Check out the interview with dTelecom's founder Vaidm Filimonov to learn more about their DePIN-powered P2P network for real-time communication! 🚀
DePIN Hub Telegram Group 💬
🔔 Join our new DePIN Hub Telegram group for the latest updates and vibrant community discussions! Join now at https://t.me/depinhub! 🚀🤝
Parting Words 👋
Gotta love those bull market gas prices 😂.
Yours in Decentralization,
The Hotspotty Team
