The blockchain industry is full of countless buzzwords, from Web3 to DeFI to DAO and many other acronyms. Some of these slogans become the focal point of innovation, while others simply disappear.
One such term that emerged last year is DePIN, which refers to a distributed system relying on global collaboration to provide physical infrastructure for decentralized networks. Beyond being just a buzzword, DePIN offers significant potential to address cloud challenges and unlock new scalability opportunities.
What is DePIN?
Decentralized Physical Infrastructure Networks (DPIN) encompass initiatives that use blockchain technology, governance mechanisms, and a token-based incentive system to incentivize independent entities to deploy physical hardware and devices to create networks infrastructure.
These networks disrupt services traditionally provided by centralized companies through a peer-to-peer provisioning mechanism supported by blockchain technology and economies of scale. Although DePiN is a relatively new concept, its operational framework requires careful consideration. Projects like Filecoin have long advocated a similar approach. It is therefore crucial to understand how DePIN will directly impact the cloud computing technology and business landscape.
Decentralized marketplaces
While the global IT market is expected to reach approximately 2,321.1 billion by 2032, only eight centralized suppliers dominate 80%. DePIN introduces an interesting alternative: decentralized markets.
These markets allow individuals, server farms or institutions with excess computing resources to offer them to other users. Unlike centralized providers, they bypass complex pricing models to deliver compute resources that meet dynamic user needs without requiring a long-term commitment.
For example, Spheron Network allows providers and users to engage in its decentralized marketplace for computing power. Users can leverage the marketplace to specify their IT needs and find vendors suited to their needs. Decentralized marketplaces disrupt traditional centralized providers and introduce flexibility into compute-shopping.
Monopoly at a reduced price
According to Radixweb, 80% of companies set aside more than $1.2 million annually to support cloud computing needs. With a few centralized tech giants controlling the majority of cloud infrastructure, the result often leads to a monopoly on pricing.
Faced with sudden price increases, businesses are often left with limited options and may see reduced profitability as escalating costs eat into their budget, increasing their overhead. This can stifle growth and hinder innovation, especially for companies in the AI/ML sector where high-performance computing power is essential.
DePIN levels the playing field by dismantling pricing monopolies, allowing companies to leverage computing resources from various decentralized providers. This promotes competitive prices and stimulates innovation.
Which public cloud providers does most of the organization use?
Reduced entry barriers
The requirements of starting a cloud computing business are enormous, encompassing construction costs, hardware/software infrastructure requirements, employee salaries, etc., making it a high-intensity business of capital. Typically, only a few large companies have the necessary capital and extensive resources to offer such services. Significant start-up and operating costs create a formidable barrier to entry, making it difficult for new players to enter and succeed in the cloud market.
Since DePIN projects do not require this infrastructure to be set up, they can quickly provision computing resources without incurring as much overhead. Therefore, DePIN lowers the barrier to entry into the cloud computing industry and allows decentralized providers to offer their services in a more affordable pricing model.
Anti-cloud lock
Cloud lock-in, also known as vendor lock-in, occurs when businesses are unable to move their data, storage, services, or computing needs to another provider due to technical difficulties, legal constraints, or very inflated costs.
When companies develop their products or services for a specific vendor platform, migrating to other platforms in case of adverse experience, such as downtime, price increase or better alternatives, can be a significant challenge. Some centralized providers may also lock in businesses by limiting the compatibility of their products and services with other providers.
Cloud lock-in poses a significant challenge to the adoption of cloud computing solutions, with 47% of companies stating that this was their biggest cloud implementation issue. DePIN effectively addresses this problem by advocating a multi-cloud or hybrid cloud strategy. Businesses should scale their products using multiple decentralized cloud providers for all IT needs, rather than relying on a single centralized provider.
Profitability
THE Flexera 2022 “State of the Cloud” The report reveals a staggering statistic: businesses are wasting more than 32% of their cloud budget. Nearly 66% of businesses attribute this waste to unused or underutilized resources. However, there is a solution. The DePIN approach allows decentralized providers to accurately estimate and match GPU supply and demand, effectively minimizing cloud waste and significantly reducing enterprise cloud spending.
Conclusion
DePIN presents a revolutionary solution model that addresses many of the cloud industry's challenges. As it continues to mature and evolve, we anticipate widespread implementation of the myriad opportunities it offers the cloud computing industry. Could DePIN potentially unseat centralized players to become the undisputed cloud leader? Only time will tell. The blockchain revolution is poised for even greater advancements in the future.