DePIN & The Need To Automate Network Contribution

Decentralized physical infrastructure networks (DePIN) are starting to replace traditional, centrally managed infrastructure. This requires a large number of individuals to contribute to the network to replicate the services traditionally offered by central infrastructure. It happens that contribution to these networks involves manual tasks (active contribution).

Active contribution to DePIN projects, in which users are explicitly measuring, recording,… to contribute to the network, is an approach that in combination with gamification and incentivized point farming helps to bootstrap the network. However, we believe projects need to focus on moving to passive (or automated) contribution, in which no specific action is required from the contributor, as the project moves to sustainable maturity.

Bringing Value To The Network

Before continuing, it is important to understand the difference between active and passive contribution to DePIN projects:

As shown below, assuming that users get awarded proportionally for the value they bring to the network, a path towards passive (automated) contribution lowers the hurdles which contributors need to be rewarded to, because contributing takes less effort, unlocking a larger number of contributors. On the same token, if it takes a lot of effort (manual) to contribute and the benefit isn’t clear, the installed base or penetration of the network gets capped and limits the overall value created.

For our detailed view on DePIN, read DePIN And The Platform Economy

Unpacking The Rationale

In the section to follow we dive deeper into these separate observations, the conclusion and hint at a solution to increase passive contribution.

We start by laying out three general observations when it comes to contributing to DePIN:

1. Active contribution is important but adds extra friction.
2. Contribution by individuals only happens when the benefits outweigh the friction.
3. The benefits for the contributor need to reflect the value they bring to the network.

From this we derive that active or manual contributions to DePIN projects is a short-term strategy and limit the long-term potential of the network by introducing excessive friction to the broader contributor community.

We bring this to life by weaving in an example of a fictitious DePIN project which is focused on creating a data network using edge devices.

The Example Of LightMap
Imagine a company called LightMap, which aims to create a comprehensive global map of light pollution to aid in environmental research and urban planning. LightMap relies on contributions from individuals who use their smartphones to take photos of the night sky in their local areas. These photos are then uploaded to the LightMap network using the mobile application, after which the photos are analysed and aggregated to create detailed maps of light pollution levels on geographically important locations.

Active contribution is important but adds extra friction

Active contribution adds friction to DePIN networks because it requires users to consciously think about and take specific actions to contribute, such as uploading data or providing services. This active involvement can be cumbersome, leading to inconsistencies in participation and potential lapses in contributions. As a result, users may not capture and upload the full extent of possible data, thereby limiting the network’s overall potential and effectiveness.

As shown on the horizontal axis above, market by the grey arrow, we point out the active and passive contribution as no binary terms. Instead there exists a spectrum between both.

There are a lot of ways active contribution can add friction. Below the most common ones.

• Time and effort
• Technical challenges
• Resource requirements
• Security or privacy concerns

Example
As a contributor to LightMapper, there is friction related to uploading images of light pollution.Every time I want to contribute, I need to take out my phone.I constantly need to monitor when to take a picture of the sky.It takes time to upload and add geolocation information to the picture taken.…
→ The more active and manual the contribution, the more friction it causes for the contributor.

Contribution by individuals only happens when the benefits outweigh the friction

For contributions to be worthwhile in a DePIN project, the benefits from contributing must outweigh the frictions involved with uploading the contribution. Contributors need to perceive tangible rewards that make their efforts valuable, such as financial incentives like earning tokens or fees, as well as intrinsic rewards like community recognition, enhanced reputation, or personal satisfaction from supporting a valuable network. Open source projects, in particular, rely heavily on the contributions of individuals, who need to be incentivized, especially at the start, to ensure active and sustained participation. Ensuring that contributors clearly understand the value and impact of their efforts is crucial, as it motivates comprehensive engagement and ultimately drives the project’s success and growth.

Below is the visual representation of how benefits need to be worthwhile for contributors.

Example
Like many things in life there’s an action and a reward. This is the same in DePIN when contributing to the network. The reward I get in terms of tokens or other platform benefits on LightMapper need to be worth the effort of getting out the phone, taking a picture etc. If we feel that the reward is not enough,we won’t go through the effort. The reward can be financial, social or even altruistic just because we want to contribute to a greater cause. Nonetheless it needs to be worthwhile.
→ Without the right benefits, contributors wont sustainably put up with the friction and will churn.

Contribution needs to reflect the value brought to the work

Each contributor brings unique value to the DePIN project and the network effect. The benefits they receive as contributors should be reflective of the value they bring to the network. In network effects, early contributors bring more value than later ones. That same dynamic needs to be reflected in benefits for contributors in which the early contributors need to receive outsized rewards. This dynamic is deemed fair and adds to a more sustainable relation between the project and its contributors.

This is a basic principle of how network effects operate. As a recap:

Network effects occur where the value or utility a user derives from a product, service or platform depends on the number of users already using the service. The more users, the higher the value offered to each user by the service. In the case of DePIN we call them contributors.

The exhibit below shows the relation of the number of contributors and the value of the network effect, which follows a logarithmic relation. As is seen, Contributor A increases the value of the network effect significantly during the early stage. Contributor B on the other hand brings marginal value to the network effect when joining while there are already quite a few existing contributors.

Example
The value of contributions to LightMap is directly tied to the quality and usefulness of the data provided. As a fundamental principle of an open-source network, users should receive a fair share of the value they bring and be rewarded for the additional friction they endure, especially in the early stages when the app might be in alpha testing. For example, contributors who upload high-quality images from areas with previously undocumented light pollution levels might receive higher rewards. This approach ensures that contributions are fairly recognized and valued, encouraging more substantial and impactful participation.
→ In order to be successful, value distribution needs to be proportional to contribution.

Conclusion

We believe that active contribution combined with gamification or point farming can efficiently kickstart the contributor network effect of DePIN. However, as the network matures and the value each new contributor brings decreases, active contribution strategies should become passive over time. There is a rare case where active contribution persists where the project somehow continues to make it rewarding to put up with the friction.

What will help DePIN projects transition from active (manual) to passive (automated) contribution? We believe the answer lies in AI agents and agentic systems, which will start automating contribution processes and reducing complexity and friction for the end user. It’s also important to remember that active and passive contributions are not binary concepts but rather exist on a spectrum. We expect some DePIN business models to move more quickly towards passive contribution than others. However, as smart contract execution and AI agents become more integrated into DePIN-supporting edge devices, we anticipate active contribution will almost completely disappear.

Source - Outlier Ventures