DePIN Shows Promise, But Faces Hurdles: Moody's

According to a report by Moody's Ratings, the DePIN (Decentralized Physical Infrastructure) industry has potential to enhance existing networks and foster innovation, but several risks, including regulatory uncertainty, could hinder its development.

The report, Moody's first on DePIN, states that by connecting existing infrastructure with blockchain technology, DePIN can improve network reliability and efficiency, reduce operational costs, and optimize resource utilization and industry collaboration.

However, significant hurdles remain for widespread DePIN adoption, including regulatory and interoperability issues, cybersecurity risks, and the need for substantial infrastructure and technology investments.

The report points out that incumbent network operators, such as telecoms, utilities, and transportation, face increasing user demands requiring capital-intensive infrastructure buildouts. The report adds that adopting decentralized models could help these operators mitigate some of these pressures and remain competitive as AI and IoT disrupt traditional business models.

One of the attractions of DePIN is the ability to issue its own digital tokens, which can help projects incentivize participation and network expansion. However, the current unclear global regulatory landscape creates compliance issues, potentially stifling industry growth. Connecting existing infrastructure with blockchain technology could also open up new attack vectors, posing cybersecurity risks.

Rajeev Bamra, Senior Vice President and Head of Digital Economy Strategy at Moody's Ratings, told CoinDesk:

"The motivation behind writing about DePIN is to highlight the real-world need for industries to re-evaluate their infrastructure management strategies in a world increasingly driven by digital transformation."

The growing interest in DePIN is reflected in the increase of venture capital funding, according to a report by digital asset market maker Wintermute. Investors have already poured $583 million into DePIN projects this year, surpassing the previous record set in 2022.

The Moody's report highlights the Helium (HNT) project as an example of promising developments in the field. Helium rewards users with tokens for deploying and maintaining wireless network hotspots, attracting over 350,000 participants and garnering over 100,000 subscribers, the report states.