Modular Infrastructure for Verifiable DePINs

“Don’t trust, verify.” This quote captures the essence of why decentralization is so powerful. Instead of trusting others, anyone can verify for themselves that a blockchain’s state (i.e., history of users, assets, transactions) is real and trustworthy. The ability to verify also extends to Dapps that are launched on blockchains, as long as the transactions and computations occur "on-chain" via smart contracts. However, some of the most popular Dapps today (e.g., DeFi, GameFi) choose not to be 100% on-chain due to high costs, scalability limitations, and need for off-chain data. Instead, many adopt hybrid on-chain/off-chain architectures, where heavy computations using real world data are performed off-chain while the results of these computations are settled on-chain. But as we know already, a Dapp’s off-chain activities are not guaranteed the same levels of security and verifiability as their on-chain counterparts.

In the world of Decentralized Physical Infrastructure Networks (DePINs), user-owned hardware is orchestrated by blockchain-based protocols to create device networks that generate utility in the form of data, digital resources, real world services, and more. For DePINs, the use of “off-chain” data and computation is not simply a design decision but a necessity, as the value chain originates in the real world where physical phenomena are converted into digital insights to fuel on-chain token economies. While this connection between the real world and the blockchain world opens up an exciting universe of use cases, it also exposes DePIN builders to a unique set of challenges centered around:

Since 2017, IoTeX has pioneered the DePIN sector by building first-of-its-kind infrastructure and defining standards for verifiably connecting the real world to the blockchain world. Unfortunately, there is currently an alarming lack of focus and prioritization on incorporating verifiability into DePIN, where many projects opt for rapid go-to-market strategies using unverifiable centralized infrastructure instead of building DePINs that will stand the test of time using verifiable decentralized infrastructure. We urge all DePIN stakeholders -- builders, users, investors -- to collectively advocate for verifiability in DePIN not only to drive legitimacy and demand-side growth for DePIN today but also to unlock incredible opportunities centered around composability and interoperability in the future. In this blog post, we share our perspective on the importance of verifiability for DePIN, the infrastructure that is needed to empower verifiable DePINs, and the current and future use cases for verifiable DePINs.

The Importance of Verifiability for DePINs

In our increasingly digital world, who you trust and why you trust is more important than ever. When dealing with humans, the most relevant things to consider when verifying someone’s trustworthiness is a) are you who you say you are (i.e., identity) and b) are you doing what you say you are doing (i.e., utility)? One real world scenario where these verifications are applied is a job application – a potential employer will run a background check for any prospective employee to verify they are who they say they are, followed by an interview to verify they are able to do what they say they can do. These basic verifications regarding a person’s identity and utility serve as the foundation for establishing trust between humans in the real world.

For DePINs, the need to verify a device’s identity and utility is also crucial. Just like human workers in a company, devices can be considered “workers” for a DePIN. The device’s identity and attributes (“proof of identity/specs”) and the device’s ability to complete assigned jobs (“proof of work/utility”) are the core components of the “supply-side” of a DePIN. Just like the employees and products of a traditional company, the supply-side of a DePIN (i.e., number of devices/workers, quality of products) is directly correlated with the value and potential of the DePIN itself. As such, any consumer or business that consumes the data, resources, and/or services of a DePIN (i.e., the “demand-side”) should be able to verify the supply-side for themselves before transacting with a DePIN composed of device workers that they don’t know or trust. The ability for the demand-side to verify the devices of a DePIN are what they they are and are doing what they say they are doing is paramount to driving demand for DePINs.

In addition to the physical devices of a DePIN that perform jobs in the real world, there are many other modules involved in downstream jobs that are part of a DePIN’s end-to-end process. We refer to this as the DePIN Value Chain. At a high level, these modules are responsible for processing the output of a DePIN device (e.g., data, resources, services), computing a “proof of real world activity”, settling this proof to a Dapp or smart contract, and issuing tokens to the device’s owner on the blockchain. The end-to-end process will differ depending on the DePIN’s use case, but all processes will involve some form of transmitting data (data in-transit), storing data (data at-rest), and computing over data (data in-use). Just like the physical devices of a DePIN, the servers and nodes that are involved throughout the DePIN value chain must also be verifiable – the value chain is only as strong and trustworthy as its weakest link.

Now that we understand the various components of a DePIN that must be verified – device identity / utility and data in-transit / at-rest / in-use – let’s explore the infrastructure that is necessary to enable end-to-end verifiability of DePINs.

DePIN Infrastructure Overview

Infrastructure is the technical foundation on top of which applications are built. Compared to other categories of Dapps (e.g., DeFi, NFTs), DePINs require a broader and more complex suite of infrastructure that makes it difficult for builders and teams to innovate, grow, and scale. This is due to utilization of physical hardware and the need to transmit, store, and compute information from the real world. Furthermore, DePIN is currently a collection of siloed networks, lacking composability with one another and restricting innovation. From a design principles perspective, the infrastructure that is needed by DePINs to flourish must be modular, composable, and verifiable.

• Modularity: systems should be built with distinct, interchangeable modules that have well-defined functions to facilitate flexibility and scalability for developers. A modular system allows for best-in-class protocols to be integrated together into an end-to-end system. For DePIN, these modules may include device identity, connectivity, data sequencing/storage, off-chain compute, and more that unite in a seamless fashion to form the end-to-end DePIN Value Chain.
• Composability: systems should be designed to enable various modules to connect and interact seamlessly with other modules, thereby fostering innovation by allowing developers to build upon existing infrastructure. Although individual DePINs may target specific verticals (e.g., energy, transportation, connectivity), they share the need for common horizontal infrastructure that applies to all verticals. Instead of recreating each module for each DePIN, composability promotes collaboration across infrastructure builders to create an interconnected system.
• Verifiability: systems should prioritize end-to-end verifiability, as a system is only as trustworthy as its weakest link. By adopting a design that utilizes open-source and verifiable technologies (e.g., zero-knowledge proofs) and restricts the use of black boxes, infrastructure can be “verifiable by design” enabling anyone to verify the output and activities of each individual module and therefore verify the trustworthiness of the entire system. DePINs that choose to build on verifiable infrastructure will not need to replicate verification efforts and can instead focus on cultivating the specific requirements of their projects.

For the past 7 years, IoTeX has built a state-of-the-art tech stack for DePIN that is modular, composable, and verifiable. Consisting of in-house modules (e.g., ioID for device identity, ioConnect for transmission, W3bstream for verifiable compute, L1 for smart contracts) and integrations with leading infrastructure partners (e.g., Streamr for connectivity, Espresso for sequencing, Nuffle for data availability, Filecoin/Irys for storage), the IoTeX tech stack provides infrastructure that covers the entire DePIN Value Chain and is architected to be verifiable by design. This enables DePIN builders to leverage the most sophisticated infrastructure on the market and build DePINs that are also verifiable by design. For more information on IoTeX’s modular tech stack, see here.

The Future of DePIN with ioID & W3bstream

Modular infrastructure is a must-have for builders to tackle the complexity of launching a DePIN, lower the barrier to entry, and identify product-market fit sooner. Amongst the various modules that form the end-to-end DePIN tech stack, IoTeX will be launching two flagship products that will revolutionize the DePIN sector: ioID in November 2024 & W3bstream in December 2024.

ioID is the first-ever on-chain identity solution to issue Decentralized Identities (DID) and Verifiable Credentials (VC) to physical hardware, making devices on-chain entities. Ultimately, DePINs that utilize ioID for their devices enable anyone to verify “are you who you say you are” and trust that the supply-side of a DePIN is real. Furthermore, ioID will play an important role in capital formation for a DePIN, where new miners and community members can pre-purchase ioIDs as part of Initial Device Offerings (IDOs) to bootstrap DePIN networks. Once a device is issued an on-chain DID, the device DID can be bound to its owner’s on-chain identity to establish ownership of physical miners. Furthermore, a set of verifiable credentials can be assigned to a DID after the device completes various challenge/response tests that prove the device has specific attributes (e.g., identity, capabilities, configurations) and/or certifications (e.g., manufacturers, regulators, maintenance). The $IOTX token will be utilized for ioID creation and management, where device owners will burn and stake $IOTX to obtain ioIDs and register their hardware to the IoTeX L1 blockchain. For more information on ioID, see here.

W3bstream is a verifiable compute system tailor-fit for DePIN that utilizes Zero-Knowledge Proofs (ZKP) to validate the computations it performs on real world data/metadata provided by devices. W3bstream is designed to be a permissionless and chain-agnostic computing engine, providing a composable foundation for DePIN builders to prove their devices “are doing what they say they are doing”. For example, for a renewable energy DePIN, W3bstream will ingest data directly from solar panels or other energy hardware and produce a validity proof using ZKPs regarding the amount of energy produced, enabling anyone to verify for themselves a “proof of utility” for each individual device and the DePIN as a whole. In addition to verifying the utility of DePIN devices, W3bstream will also be used to verify the identity of DePIN devices via ioID, where zero-knowledge proofs will be processed by W3bstream in order to issue Verifiable Credentials (VCs) to various ioIDs. The $IOTX token will be incorporated into the design of W3bstream, where decentralized node operators will stake $IOTX and DePIN projects will spend $IOTX to drive the tokenomics of W3bstream. For more information on W3bstream, see here.

Use Cases for Verifiable DePINs

The DePIN sector has evolved dramatically over the years, but there is an unbelievable amount of potential that remains untapped due to lack of verifiability. As of Q3 2024, millions of devices have been “integrated” to DePINs, yet demand for DePINs from enterprises and mainstream consumers is near-zero for the majority of DePINs. Why? The answer is simple – the current state supply-side of DePINs is non-verifiable and therefore cannot be trusted by people and businesses outside of the crypto inner circle. AI model trainers will not utilize data from a DePIN if they cannot verify its origin. Enterprises will not rush to adopt a DePIN’s digital resources (e.g., CPU, GPU, storage) if they cannot verify its 24/7 availability. The masses will not purchase services from a DePIN (e.g., rideshare, delivery) if they cannot verify its probability of success. The hard truth is without the ability to permissionlessly verify the supply-side of DePIN, the demand-side will never flourish.

As such, the first and most important use case of verifiable DePINs is verifiability itself. The DePIN industry must recognize the only way to combat the skepticism of non-crypto natives is to prove without a shadow of a doubt the utility of a DePIN is verifiably real. An individual DePIN that achieves verifiability will build legitimacy and trust across various segments of stakeholders:

• Miners (supply-side): miners want to onboard devices to real networks
• End users (demand-side): end users want to consume real utility
• Investors: VCs and retail require proof of supply-side growth and utility
• Exchanges: CEXs want to list tokens with trusted metrics
• Regulators: compliance begins with the ability to verify DePIN activities
• Enterprises: service level agreements (SLAs) rely on verifiable service delivery

Once a DePIN is verifiable an exciting universe of use cases centered around composability and interoperability is opened that greatly increases the total addressable market (TAM) of the DePIN sector. In an earlier section, we explored the benefits of composability for infrastructure, which enables different infrastructure modules to connect and interact seamlessly with other infrastructure modules. The same is true at the application layer – verifiable DePINs that target specific verticals or geographical regions can be composable and interact seamlessly and permissionlessly with other verifiable DePINs that cover other verticals or regions. However, these DePIN-to-DePIN interactions are only feasible if all of the DePINs that interact with each other are verifiable. This is because DePINs do not blindly trust each other – a network of interconnected DePINs is only as trustworthy as its weakest link.

• Composability across verticals: data from a weather DePIN provides a weather forecast, which informs the future cost of energy from a renewable energy DePIN, which dictates the amount of electric vehicles orchestrated by a rideshare DePIN, which motivates more supply-side participants to provide parking spaces as part of a smart city DePIN, and so on …
• Composability across regions: a connectivity DePIN with hotspots deployed in South America can offer roaming connectivity services to users of DePINs focused Africa, Southeast Asia, and other markets that are traveling to South America. This would expand the reach of previously siloed micro-DePINs to a global audience.
• Composability for resource aggregation: a DePIN that provides digital resources as commodities (e.g., data storage, GPU power, verifiable compute) can aggregate their supply with other digital resource providers to create a larger supply-side to attract more demand. This is similar to DEX aggregators in DeFi that aggregate liquidity across several DEXs to provide a better trading experience for end users.
• Composability across devices: devices with verified attributes/capabilities can contribute to multiple DePINs at once; for example, an all-in-one DePIN device that verifiably proves it has environmental sensors, 5G connectivity, GPU power, etc. can contribute to multiple DePINs simultaneously, or a top-tier weather station can be authorized to share its weather data with multiple weather-focused DePINs simultaneously – a concept we define as “device abstraction”.

DePIN-to-DePIN composability will unlock a new design space for developers to build interconnected services and products, aligning all DePINs under one composable system and driving new forms of revenue and demand for all DePINs involved. But arguably an even larger opportunity lies in the interoperability of the DePIN sector with other sectors, including artificial intelligence (AI), decentralized finance (DeFi), real world assets (RWA), prediction markets, and more. Enabling interoperability between the future multi-trillion dollar DePIN sector with other multi-trillion dollar markets will form unthinkable network effects and cement DePIN as an indispensable part of the real world economy.

• DePIN-to-AI: As more of the physical world moves on-chain, devices will generate an incredible amount of sensor data, meta-data, and other forms of data that can feed AI models; however, none of this data can be utilized if it is not verifiable and trustworthy. By verifying the devices that produce this data, as well as the quality of the data itself, we will enable DePIN data to be used (and monetized) in AI to build collective real world intelligence.
• DePIN-to-DeFi: DePIN networks produce utility in the form of data, services, and resources, which can be used as inputs to a variety of DeFi use cases. Verifiable data from DePINs (e.g., weather data, camera feeds, drone imagery) can inform on-chain insurance markets. Verifiable resources from DePINs (e.g., GPU/CPU, GB of storage, MB/s of bandwidth) can be tokenized into on-chain commodities that can be traded like physical commodities.
• DePIN-to-RWA: DePIN devices that produce verifiable cash flows can be tokenized into tradeable / lend-able real world assets. Similar to a fixed income product, a DePIN device’s principal value and fixed earnings in the form of cryptocurrency can be a unique investment vehicle for investors, as well as an innovative capital formation / fundraising vehicle for physical infrastructure deployers
• DePIN-to-Prediction Markets: DePIN devices can be utilized as “oracles” to measure real world phenomena and provide verifiable insights to prediction markets. On-chain prediction markets for weather, traffic, connectivity speeds, and much more can be verifiably measured by DePIN devices and used to settle prediction markets in the future.

Conclusion

DePIN is the future. With the rapid growth of DePIN, we must take time to assess and be critical of our progress to-date and ensure the capital, engineering hours, and mindshare of everyone involved in DePIN is indeed bringing us closer to our ultimate goal of mass adoption. Experimentation across the DePIN sector is booming with new types of devices and new categories of DePINs being born every day. This curiosity and growth-oriented mindsight is what drives innovation forward, but we must also recognize that innovation must be paired with standards to generate real-world demand. To this end, verifiability is the next great frontier for DePIN and IoTeX is proud to bring together DePIN stakeholders to establish the standards to bring us to the next level. Not only will verifiability enable the masses to trust individual DePINs, but it will also enable composability between DePINs and interoperability across DePIN and other sectors to unlock an exciting universe of new use cases. If you are interested in learning more about IoTeX’s technology and vision regarding modular infrastructure for verifiable DePINs, please visit our website at iotex.io and our detailed documentation at docs.iotex.io – we look forward to building the future of DePIN with you!