Patrick WoodheadAttending ETH Denver this year, particularly the side events focused on DePIN (Decentralized Physical Infrastructure Networks), gave me a fresh perspective on how the space is evolving. The conversations, trends, and challenges discussed highlight a maturing industry—one that’s slowly, but encouragingly, moving past hype cycles and beginning to face real-world business realities.
From Data Availability to AI Agents: Shifting Buzzwords
Last year, data availability was the phrase on everyone’s lips. This year? I barely heard it mentioned. Instead, the dominant buzzword was AI agents - a testament to how quickly narratives shift in Web3. But while the hype may change, the underlying challenges remain consistent: how to create real utility and sustainable demand in decentralized networks.
The Token-Led Model Is Losing Steam
One of the most striking changes this year is the waning optimism around token launches as a go-to-market strategy. Over the past years, many DePIN projects have launched tokens, yet few have been able to generate genuine, lasting demand for their networks. Even those that claim traction often reveal a more complicated reality - whether through foundation-led subsidies or incentives that obscure true market adoption.
For investors, particularly VCs backing these projects with token launches, the strategy has also proven risky. Many early-stage investors have learned that holding onto tokens post-launch can be a dangerous game, as token liquidity dynamics often encourage early sell-offs, undermining long-term sustainability.
DePIN’s Challenge: Selling to the Right Audience
One issue that stood out at DePIN events was the disconnect between builders and real-world markets. Many panels felt more like teams pitching to each other, rather than focusing on how DePIN can compete in existing industries.
Talking with projects that are trying to break into traditional markets, the common challenge is clear: Web3’s reputation remains a major blocker. Many businesses and consumers still see crypto as speculative and untrustworthy, making it difficult for DePIN solutions to gain traction. Yet for DePIN to truly succeed, it must compete with and take market share from Web2 incumbents—not just exist within the crypto bubble.
Decentralized Compute: Still an Unproven Use Case
Another hot topic was decentralized compute, particularly in the context of AI agents. Yet despite the enthusiasm, I have yet to hear a truly compelling argument for why decentralized compute is a superior alternative to centralized solutions.
Decentralized networks come with significant trade-offs:
- Verification overheads make them far less efficient for compute-intensive tasks.
- Coordination challenges can slow down performance compared to centralized infrastructure.
- Cost-effectiveness remains uncertain, especially when competing with traditional offerings like AWS, Google Cloud, and Azure.
If decentralized compute is to gain mainstream traction, it needs more than just ideological arguments - it needs clear, practical economical benefits that drive real-world adoption.
Looking Ahead: Beyond Tokenomics
Despite these challenges, there’s no shortage of brilliant minds in the DePIN and Web3 space. The creativity and ambition are undeniable. However, if the industry is to move beyond speculation and hype, more teams need to focus on building sustainable business models rather than relying on tokenomics as a distraction or a crutch.
DePIN projects should ask themselves:
- Are we solving a real problem, or just creating quasi demand within the Web3 bubble?
- How can we leverage decentralized networks in a way that creates a competitive advantage when compared to trusted offerings, rather than just using Web3 for speculation?
- Can we build a product that traditional markets will adopt without needing them to “believe” in crypto first?
Final Thoughts
ETH Denver 2024 showed that DePIN and Web3 are maturing, but there’s still a long way to go. The projects that succeed will be the ones that leverage the properties of Web3 technologies to build real demand, solve tangible problems, and avoid getting lost in the ever-changing narrative of Web3 buzzwords.
It’s time for DePIN to grow up and prove its worth—not just to crypto enthusiasts, but to the broader world.