Flamingo Joe #6

• Decentralized Physical Infrastructure Networks

• DePIN Platforms

  • Solana and Polygon: The major players now

• Neo: A DePIN L1?

  • NFIs: I’ll Drink To That

• The Bigger Picture

Decentralized Physical Infrastructure Networks

Decentralized physical infrastructure networks (DePIN) is a term that refers to the application of blockchain technology and decentralization principles to physical infrastructure and systems. These networks use crypto-incentives to efficiently coordinate the buildout and operation of critical infrastructure. Examples of these real world tasks include contributing GPUs to a distributed compute network, deploying a wireless hotspot, and fitting a dashcam to a vehicle.

While still a relatively small niche within the greater crypto universe, DePINs have continued to grow and attract attention from investors seeking “tangible real-world value” that caters to existing demand. During the last cycle, DePIN revenues proved to be the most resilient of on-chain revenues, generating in excess of $15m annualized on-chain revenue across six core business models.

In their 2023 report, Messari research summarized the DePIN flywheel as infrastructure networks that get stronger as they get bigger. How big? DePIN’s flywheel is powerful enough to add +$10T to global GDP over the next decade and +100T in the decade after that.

Currently, the estimated total addressable market for DePINs exceeds $2.2 trillion. The growing size and potential total market for DePINs present a massive opportunity.

In this current bull cycle, there is a lot of attention being given to meme coins, ETFs, mainstream adoption, and AI-related projects. Some DePINs have made a splash in the storage network space (like Filecoin after the announcement that Solana would be relying on their network for storage).

DePIN Platforms

Developers have faced limited options when looking for platforms to build DePIN projects. The choices they have faced are either build their own L1 solution or rely on Ethereum. Both of these options have their limitations.

Helium network, for example, chose to build their own L1 for their decentralized wireless network in 2019. They later decided to migrate to Solana April 2023.

Livepeer, a decentralized video editing infrastructure, was built on Ethereum but later migrated to Arbitrum because if transaction fee costs on Ethereum.

Solana and Polygon: The major players now

Over the past year, Solana has emerged as a leading choice for new DePINs and existing DePINs alike. Helium and Render both migrated to the chain because of the advantages it offered when compared to the original platform options those projects chose. Polygon is another platform that has gained traction as a DePIN platform because of its high throughput, low fees, and EVM compatibility.

The biggest factors in choosing between these platforms can be broken down into the following:

• Compression technology: Solana’s state compression technology allows for cost-effective storage and execution by employing Merkle trees to decrease the volume of data stored on chain. It’s most popular use case has been for NFTs. Helium and Render both exploit this technology.

• High throughput: Solana handles an average of 4,000 transactions per second. Polygon has the potential to handle up to 65,000 transactions per second.

• Low fees: The average Solana transaction fee is $0.00018. The average cost per transaction on Polygon is $0.015

• Large developer community Options: Solana offers compatibility for Rust, C, and C++, developer languages that are more popular than solidity. Polygon network programming languages are Golang, solidity, and Vyper.

While Polygon does present an alternative to Solana, it is the latter of these platforms that has been gaining the most adoption. New DePINS like Oncoy and Teleport, as well as the migration of existing projects, have created a network effect attracting others to join Solana.

The network effect of Solana is growing, but it is not without competition. The success of any DePIN project on Solana is dependent on the underlying chains’ capacity to perform, scale, and remain cost-effective. We’ve seen Solana go down at times. I can’t think of a greater issue to an infrastructure project than the well documented failures of Solana network outages.

Neo: A DePIN L1?

Neo is a platform that developers should consider when looking for a chain to build on. Looking at the factors mentioned above, here is how Neo compares to Solana and Polygon:

Consideration for Neo extends beyond a simple table though. As described by Tyler Adams of COZ “a long reliability tenure, single block finality, turing completeness, and language flexibility are major considerations.”

The fact that Neo does offer so many major considerations is important. There is language flexibility for developers. The chain has demonstrated longevity in existence and, to this date, has not experienced downtime failures (like Solana has).

Unlike Solana, Neo has NeoFS for storage solutions on the same chain if the use case need arises. The addition of the NEO X sidechain will bring Solidity developers into the Neo ecosystem. The Neo Council can vote upon transaction costs and, if the volume justifies it, could reduce them.

That said, Neo does not have the network effect to offer projects that Solana is currently experiencing. For many reasons, this does not exist at the moment (“wen marketing?” among them). Does that mean there is no future for DePIN on N3?

Neo does have an already existing DePIN use case that is novel and has not been implemented on other chains yet.

NFIs: I’ll Drink To That

In October of last year, two ecosystem developers joined forces to form Item Systems. Covered by Neo News Today, the collaboration between AxLabs and COZ was driven by the desire to build upon the momentum generated by NFI technology innovations demonstrated at events like Consensus 2023, Token 2049 2023, and the Tribeca Film Festival.

As explained in that NNT article,

Since the time of that article, Item Systems has used this NFI technology at the Denver Walls and is currently preparing for the upcoming Paris Blockchain Week.

What makes the NFIs and Item Systems so interesting is this: a real-world use case coupled with blockchain abstraction. Using a recent event hosted by the Smart Economy Podcast and Item Systems during Ethereum Denver as an example, the event attendees scanned two NFI waypoints located at different murals (part of the Denver Walls) and then redeemed a free pint at a brewery.

The acts of “tapping” the waypoints (plaques located on different murals) occurred via each person’s mobile phone web browser. There was no need to download an app, save a seed phrase, or download a wallet and fund it with GAS. The redemption process for the beer at a point of sale terminal did interact with the Neo blockchain, but the users didn’t know it (until Dylan Grabowski, a.k.a The Golden Dylan, host of the SEP, reminded them it’s on Neo, surely).

Cheers 🍻 to chain abstraction! Mass adoption and use of Web3 is going to occur via use cases like the Item Systems NFIs where the end users are interacting with blockchain at different points unknown to them. Visit two murals and then redeem a beer at a local brewery . . . don’t threaten me with a good real-world web3 use good time!

The potential use cases are truly exciting for the Item Systems technology. There are many possibilities: events like Consensus, a district tourism use case like the Denver Walls, a customer loyalty program or “buy one get one” use at a business like a brewery, or other “proof of attendance” usages.

The upcoming Parish Blockchain Week will feature a fashion-related use case for NFIs. As Guil Machado expressed in a recent interview: 

Now that there is a body of work for Item Systems implementing NFI technology, it begs the question: Why hasn’t this been done on other blockchains?

The Bigger Picture

Neo offers a lot for developers to consider when looking for a DePIN platform. The biggest buzz in DePIN currently is Web3 GPU networks to address big business and retail uses. Neo may not be the blockchain that comes to mind for this use case. However, it should be a chain considered by developers for addressing other use cases.

I hope the Item Systems NFI tech creates its own flywheel within the Neo ecosystem by attracting devs to build upon it.

As stated by co-founder Tyler Adams, “ . . . the plan is to produce a significant number of dev kits (quickstart tutorials + physical assets) and airdrop them en-masse to both traditional and web3 developers at various strategic targets. We believe that the novelty of the technology will drive engagement and set the ecosystem above the numerous options for developers which start to look very similar without a lot of scrutiny . . . We will also be implementing an app store that will allow projects to register so they can leverage the NFI ecosystem that we are deploying. . . In the near future, we will be publishing a technology brief and platform map which outline where we’re planning to take things.” (wen roadmap Tyler? JK)

More importantly, the NFIs are just one example of the real-world use cases being built on Neo. In a growing niche within the web3 universe there will be many other use cases that arise within the imagination of devs. The hope is that the imagined use case and the capacity to implement them point devs to Neo.

Should Neo be considered a DePIN L1 platform? Yes, it should and we should all do our part in spreading that message.

Thank you to Item Systems for shining a light on this Neo path for others. This is just the beginning.

1  Messari, State of DePIN 2023 report.

2  https://www.reddit.com/r/NEO/comments/1btzv69/nfis_at_paris_blockchain_week_beyond/

Thank you for reading! I could use your help. I want to raise funds for the Flamingo Joe Public Wallet. The wallet will be an educational tool to show (1) how to invest on Neo and (2) different investment methods.

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