Through a model that encourages users to seek out the most energy-efficient resources to uncover new assets, bitcoin mining has paved the way for a novel computing system. Decentralized Physical Infrastructure Networks (DePINs) interconnect various computing systems, reducing both processing costs and risks. These complex networks are also discovering innovative applications in fields like artificial intelligence and tokenization.
How DePIN Reduces Risks
The fundamental principle behind DePIN is to distribute computing processes across multiple locations rather than concentrating them in a single facility. This approach mirrors how many multinational companies often centralize their data servers in specific regions, such as Silicon Valley or other parts of California.
Even giants like Facebook have centralized data servers in one or two major hubs,” notes Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research and author of the report on DePIN. This localization leaves them vulnerable to disruptions, such as natural disasters, which could potentially impact their operations significantly.”
By adopting a decentralized architecture, DePIN minimizes service disruptions by dispersing computational resources globally. Should individual nodes fail, the network can continue operating with minimal interruption. Moreover, leveraging blockchain technology ensures data security through cryptographically secure access and storage mechanisms.
Economic Benefits of Decentralized Systems
DePIN offers several economic advantages over traditional computing methods. For instance, decentralized systems generally have lower operational costs due to efficient infrastructure management within market economy principles. Users don’t need to make large, long-term investments in building their own infrastructure; instead, they can leverage existing networks.
The cost savings are substantial: centralized data centers typically incur monthly expenses around $1 million, whereas decentralized systems operate at a fraction of that cost. Additionally, participants in the network contribute to maintaining equipment costs, further reducing overall operating expenses for users.
A Model Emerged from Mining
Bitcoin mining initially began on simple computers and eventually evolved into a decentralized model through incentives for additional computational resources. Over time, this model has become more sophisticated, leading to the development of specialized mining equipment that enhances energy efficiency.
Centralized systems often require substantial power consumption, around 100 megawatt-hours per day or higher. Conversely, decentralized systems are significantly more efficient and consume less than half of that daily, making them a greener option in many cases.
Applications Beyond Mining
The concept of collective ownership is increasingly common in various business sectors. Participants provide physical resources, earning incentives like token rewards or discounts on network services. Some AI models are starting to adopt decentralized computing for its benefits, such as reduced overhead costs and increased efficiency.
While cloud systems also have decentralized components, they usually rely on a centralized infrastructure within large data centers. DePIN differs by offering a more distributed approach that enhances resilience against local disruptions.
Navigating the Future
Hugentobler advises financial institutions and technology providers to consider decentralized computing networks for tasks such as AI model training, high-volume data processing, and real-time financial computations. As with bitcoin mining, decentralized computing is likely to see performance improvements and cost efficiencies over time.
While decentralized computing has matured enough to warrant consideration, companies should conduct hands-on experiments to optimize their systems. They need to consider which blockchains to use, manage incentives, and address other critical issues when launching pilots. Although it’s a lengthy process, the potential benefits for computation-heavy organizations are significant.