IoTeX executive: The uniqueness of DEP and the necessity of strengthening DEP supervision

Author: Aaron Basi, Product Manager at IoTeX, CoinTelegraph; Translation: Wuzhu, Golden Finance

Looking ahead to 2025, political trends indicate that the Trump administration will have a more friendly attitude towards cryptocurrencies, and both major US parties have promised to provide clear regulations. While this shift is good news for Web3, there is one area that requires special attention: the Decentralized Physical Infrastructure Network (DePIN).

DePIN represents an emerging industry worth $38.4 billion. They are not typical cryptocurrency projects. The DePIN project connects blockchain incentives with real-world infrastructure, allowing everyday users to monetize their electronic devices. Many crypto veterans tend to avoid regulation, believing that it stifles innovation or hampers everyday freedom. The unique hybrid nature of DePIN requires a robust framework to protect and guide trust, in order to fully unleash its transformative potential.

What makes DePIN unique?

DePIN has created a self-sustaining economy, where participants are directly compensated for their contributions to the network. This makes DePIN particularly suitable for addressing issues in industries that rely on digital innovation and physical presence, such as geolocation, distributed storage, and IoT connectivity. This hybrid nature also brings challenges, as it goes against the logic of existing regulatory structures and requires new rules.

Challenges Faced by DePIN

The DePIN project has created real economic value from the very beginning. Geodnet is a relatively new project that has already achieved approximately $1 million in annual recurring revenue (ARR) through satellite miners. The wider DePIN ecosystem has reported over $15 million in ARR. All of this real success highlights the economic viability of the industry, but it also brings an urgent need for clear supervision.

DePIN networks typically need access to user device data to function effectively, whether for precise mapping geolocation data or storage capacity for distributed cloud solutions. Without clear guidelines, both users and operators cannot determine the limits of data collection. How much data can the DePIN protocol access? What protective measures are in place to ensure privacy and prevent misuse? Without answers, users may hesitate to participate, thereby limiting network growth.

The DePIN network rewards users for contributing their devices or data with tokens. Similarly, without clear regulation, there may be issues regarding fair compensation. How should the contribution of users be evaluated, especially when their devices are crucial to the network? The lack of standardization may lead to predatory behavior, thereby undermining trust in the ecosystem.

DePIN Network promises decentralization, but early projects often rely on centralized leadership for decision-making, leading to a lack of transparency in governance and income distribution. Some DePIN projects have failed to disclose their governance structure or decentralization roadmap, leading stakeholders uncertain about who controls the network and how the project shares revenue with users. This lack of transparency undermines the fundamental principles of the industry and may hinder user participation in seeking a truly decentralized system. A tailored regulatory framework can address these issues by incentivizing transparency.

Traditional regulations typically treat physical infrastructure and digital currencies as separate domains, rarely considering the hybrid nature of DePIN. For example, a Web2 company with publicly traded shares must disclose its revenue, while Web3 transactions are typically visible on the blockchain. However, what if a theoretical DePIN project generates millions in revenue but keeps this information confidential, only rewarding users with a few thousand dollars on-chain? What if users have already made significant contributions with their physical devices, but the project's tokenomics undergo significant changes? These unresolved issues can pose operational and compliance risks for everyday users.

The Necessity of Regulation

A strong regulatory framework is crucial for unleashing the potential of DePIN as a force for technological and infrastructural transformation. Regulatory authorities must adopt a nuanced approach to address the complexity of DePIN's hybrid nature.

The United States has a tradition of embracing innovation, and it has the opportunity to lead the industry by enacting tailored regulations that set a global benchmark and ensure accountability and innovation thrive within the DePIN ecosystem. Regulators can position DePIN as the foundation for a hybrid and decentralized future through decisive action. The benefits go far beyond the technical realm. This is a regulatory challenge and a rare opportunity to redefine the way the economy and society operate. Let's seize this opportunity and establish a framework that enables DePIN to flourish and ensures decentralization, inclusivity, and prosperity in the IoT space.