What is DePIN? Cloudless Data Storage for Collaborative Consumption

What is DePIN? Cloudless Data Storage for Collaborative Consumption

Society's vital infrastructure is centralised, prone to failures, and enriches the few at the expense of the many. This infrastructure includes supply chains, energy grids, and data storage facilities. However, only a few solutions exist to replace centralised providers due to technological shortcomings or professed belief in the utility of centralisation. There are legitimate uses for centralised infrastructure, but a more decentralised layout would provide more benefits overall.

One solution to the problem of centralised physical infrastructure is the idea of DePIN, or 'decentralised physical infrastructure networks'; DePIN is also known as 'decentralised pinning.' DePIN is a new buzzword that denotes using blockchain technology to decentralise and enhance physical infrastructure. Typically, these networks tokenise hardware and physical networks, bringing value and incentivising private or independent parties to use their services.

The technology aims to mitigate the weaknesses of centralised infrastructure and provide more security, accountability, efficiency, and transparency. An exciting use case for DePIN is in data storage, which has previously been centralised via businesses like Amazon Web Services and Google Cloud. To use Rachel Botsman's term, DePIN represents a revolution in 'collaborative consumption' where parties work together over a peer-to-peer network to improve resource efficiency with a shared incentive agreement without a single failure point. In other words, they 'collaboratively consume and share data storage space.'

Let's unpack the idea of DePIN and understand decentralised data storage in the context of DePIN.  

Scope and Types of DePIN: PRN and DRN

The DePIN space has expanded in the last few years and encompasses multiple industries. Messari, who coined the term, said, 'The DePIN ecosystem has grown to over 650 projects in 2023, spanning six subsectors: compute (250), AI (200), wireless (100), sensors (50), energy (50), and services (25).'

The purpose of DePIN is to disperse the authority and management of a physical infrastructure among various actors and their hardware. This prevents power from consolidating around one particular entity and improves efficiency in those networks.

There are two different types of DePIN networks, 'physical resource networks' (PRN) and 'digital resource networks' (DRN)

  • Physical resource networks include any networks that rely on location-dependent physical infrastructure and provide real-world utility. Examples include supply chain networks, sea-based debris sensors, and energy sector equipment. PRNs represent digital infrastructure applied to hardware, which creates a more efficient and democratised way to manage and optimise resources. Importantly, cryptocurrency rewards are often distributed to network participants.

    According to a Technopedia article, the critical feature of PRN is 'decentralisation, which allows participants to deploy and share spare technological capacity without using centralised platforms. This aims to democratise access to infrastructure, limiting corporate or government control and censorship. PRNs' hardware is typically consumer-grade, making it affordable and accessible to many participants
  • Digital resource networks leverage tokens to incentivise users to deploy hardware and gain rewards for running it. These networks rely on peer-to-peer or 'cloudless' infrastructure, where users validate a network or share resources. The primary difference between DRN and PRN is that DRN is location-independent, and users can opt-in from anywhere if they possess the necessary hardware to participate. A prominent example of a DRN we will explore is cloudless data storage and storage marketplaces.  

DRN and 'Cloudless' Storage Solutions

One specific area of interest for DePIN networks is data storage. This sector represents a DRN that could reshape how the Internet is maintained and evolves. As mentioned, most data is stored in the 'cloud' via a centralised, monolithic service. In a way, these types of businesses monopolise the market for data storage and create barriers to entry. In other words, these services reduce efficiency and deter incumbents from competing. Cloud-based storage arrangements such as these also represent a significant risk of data censorship, a growing concern in modern times.

Thankfully, this paradigm is shifting; 'cloudless' data storage solutions are emerging. This type of storage (with exceptions) seeks to be p2p, censorship-resistant, and based on a marketplace of relationships, some trustless and some trust-based, where individuals provide storage, storage-related hardware, GPUs, and computational resources. Through this 'decentralised' model, the market opens to players who would have previously been outcompeted or otherwise prevented from engaging. In this way, new market actors get to price their storage fairly in a decentralised fashion; they also receive incentives to maintain the network,  and some try to eliminate occurrences of data censorship trustlessly.    

Let us unpack aspects of the Codex protocol, an open, permissionless, and trustless DRN with censorship data storage capabilities.

The Codex DRN

The Codex network is a DRN with data storage, retrieval, and archival functionality. It is a trustless, peer-to-peer, decentralised, and cloudless storage network that boasts p2p data durability. Codex also has in-protocol dynamic data, allowing for use cases around blockchain data storage and scalability. Importantly, Codex will protect data with strong data privacy guarantees that offer plausible deniability and censorship resistance. Most DRNs do not currently have these capabilities.

The protocol leverages a marketplace where 'SPs' or storage providers can offer their excess storage space to end-users as a contractual service. The platform uses storage proofs to maintain and secure the network. The storage proofs allow the network to restore data when an SP disconnects, speed up downloads, and increase the probability of detecting missing data.

The key to Codex being a DRN is that SPs can live anywhere and deploy their additional disc space and hardware. They will allow the end-user to store data on their hardware for a fee paid to the SP in the network token called CDX. The SPs must also collateralise CDX if they agree to a storage contract. These CDX tokens count as a kind of bond that can be slashed if the SPs misbehave or do not fulfil their service contract.

Overall, using a token aligns incentives between the SPs and end users; it also acts as a reward for participating in the network. These aligned incentives keep the network running in an open, decentralised fashion. The goal is to provide more efficient storage services with decreased censorship risk. In this regard, services like Codex and similar peer-to-peer incumbents like Filecoin and Arweave represent a movement toward 'collaborative data storage and consumption.'

Conclusion: Collaborative Data Storage and Consumption  

In her book, 'What's Mine is Yours: The Rise of Collaborative Consumption' Rachel Botsman says:

'Every day, people are using collaborative consumption — traditional sharing, bartering, lending, trading, renting, gifting, and swapping redefined through technologies and peer communities. Collaborative consumption enables people to realise the enormous benefits of access to products and services over ownership.'

In this way, the sharing and lending of 'data storage space' represents the collaborative use and consumption of digital storage capacity. Ironically, though, ownership over data still exists with the original user, and the person benefits from the promise that their data will remain mostly safe from censorship, outages, and failures that characterise the status quo. That is the power of DePIN, although it remains to be seen how the ecosystem will mature.