Disclaimer: This is not financial advice. Anything stated in this article is for informational purposes only and should not be relied upon as a basis for investment decisions. Triton may maintain positions in any of the assets or projects discussed on this website.
TL;DR
Introduction
Last week we explored the tremendous value flowing through onchain trading protocols, looking at both spot and derivative exchange volumes. We also touched on where the industry is going regarding tokenization, increasingly bringing traditional financial assets onchain and opening up entirely new products that are impossible through traditional vehicles. While financial assets are likely the largest addressable market for tokenization (e.g. $ trillions), the value of tokenization and blockchain capabilities is not limited to strictly financial assets. Hardware network coordination, compute resource provision and gaming, as examples, can all be improved by introducing internet native value transfer platforms.
Decentralized Physical Infrastructure (DePIN)
While a mouthful to say, Decentralized Physical Infrastructure, or DePIN, has become one of the leading narratives in digital assets. In essence, DePIN enables the coordination and orchestration of physical assets while providing the infrastructure to enable payments and incentivization. To date, the top DePIN projects have largely centered around aggregating computational resources (e.g. data center capacity) and providing on-demand access to that aggregated power for computation or storage. The largest in terms of market capitalization, Render Network, built by top rendering software provider OTOY Inc., has built a distributed network of GPUs (5600 nodes to date) delivering unlimited, scalable GPU rendering through various front end clients. Render has also partnered with leading AI projects such as Stability AI to lend compute power to run their models. Owners of GPUs (individuals and data centers) can provision their hardware to the network to earn rewards. Models like this are incredibly well-designed to address the exponentially growing computational requirements to run AI workloads.
Source: ourworldindata.org
IO.net is a highly promising project that recently launched, dedicated to providing GPU power (including top of the line Nvidia A100s and H100s) specifically for AI tasks, with 65,000 verified GPUs and 16,000 verified CPUs on the network. In a nod towards the composability of blockchain, IO.net has onboarded Render’s and Filecoin’s chip supply to their network and just announced a deal with enterprise-grade decentralized cloud platform Aethir to onboard their GPU supply, including up to 1,000 H100s ($35,000+ per chip). Platforms like this allow AI/ML developers from smaller companies, research institutions, or operating independently to access these top-of-the-line chips that until now have only been available to the best resourced companies in the world such as Microsoft, Meta and OpenAI.
Source: IO.net
Filecoin and Arweave are two of the leading data protocols, providing users access to distributed storage solutions in differing ways. Filecoin itself is essentially an open-source cloud storage marketplace built to provide a financial infrastructure overlay on top of the InterPlanetary File System (IPFS), a peer-to-peer distributed data network. Currently, Filecoin has capacity to store 23.2 EiB of data across 2660 active providers (miners). Taking a different tack, Arweave provides permanent data storage, guaranteeing immutable data storage for 200 years. While much smaller than Filecoin’s capacity, Arweave has 170 TiB posted to its network with capacity for 200 PiB total. Recently, AO Computer has been proposed as a layer 2 on top of Arweave that leverages the permanent storage capabilities of the network to enable a stateless actor-oriented compute platform. This brings full programmability to the Arweave stack, opening the door for far more advanced applications to be built natively on the network. If successful, this potentially unlocks an entirely new paradigm in blockchain scalability and performance across the board, not just among DePIN projects.
Akash Network is building a more generalized decentralized cloud computing platform on its own Cosmos-SDK based blockchain. Rather than simply provide an app-specific compute marketplace (as do e.g. Render and IO.net), Akash provides all the infrastructure via its Container Platform to compete directly with centralized cloud platforms such as AWS and Google Cloud, but with far higher flexibility from an end-user standpoint (e.g. no contracts or vendor lock in and competitive pricing). Since launching in early 2021, Akash has facilitated almost 200,000 ‘leases’ (P2P deals) on the network.
Source: stats.akash.network
Helium has built a global, decentralized LoRaWAN (IOT) and 5G data network that leverages hundreds of thousands of hotspots owned by individuals around the world to provide data coverage for mobile and smart devices. Individuals are incentivized to purchase and deploy hotspots to help grow the network via network-issued tokens as rewards, while users must purchase credits denoted in the native network token to access those resources. Helium has broken through to ‘mainstream’ use via its Helium Mobile cellular plans, offering unlimited 5G mobile phone plans for just $20 per month. Helium has partnered with Google to provide Helium Mobile on their flagship Pixel phones (Pixel 7A, 8 and 8 Pro), and with Telefónica (383 million customers globally) in Mexico to deploy 5G hotspots and improve wireless customer network coverage around the country. Helium uses a second token, MOBILE, to incentivize users to share information back to the company, paying them for their data. Users can also prepay in MOBILE and receive the Helium Mobile plan for free.
Source: Hotspot Map from explorer.helium.com
Gaming
Gaming has seemingly been heralded as the ‘killer app’ for blockchain for years, promising to provide players the ability to own in-game assets such as skins and items, while being enabled to monetize their time spent playing. The first iteration of blockchain gaming largely centered around Play-to-Earn (P2E) models, popularized most famously by Axie Infinity in 2021. At its peak, Axie was generating $100M per week in revenues, amassed a $3.3B treasury, and cumulatively has earned almost $1.4B over its life. This introduced many to the potential product market fit of games that rewarded players for time spent, but also put a spotlight on how unsustainable games focused entirely on P2E mechanics are. The bright spot? Axie and similar early P2E games spurred a massive inflow of capital into the space – according to Token Terminal, gaming-related protocols have received $4.4B in investments since 2021, and almost $400M in 2024 to date.
Source: Axie Infinity weekly revenues, Token Terminal
Now, many of the top gaming projects focus on the infrastructure rather than specific games. Axie’s creators, Sky Mavis, built the Ronin Blockchain, a gaming-specific chain to enable 3rd party developers to integrate blockchain technology into their games. Similarly, Immutable, with a treasury of $750M and almost $300M in funding, provides the entire tech stack needed to enable in-game asset ownership and trading. Given the multi-year timeline for game development, many of the titles and studios that received funding in 2021 and 2022 are just now starting to come to market; Immutable has over 200 games currently in development using its technology stack.
Mythical Games, led by former heads of massive franchises such as Call of Duty and Diablo, began as a 1st party developer but has since repositioned their platform to support 3rd party publishers as well. Historically, major gatekeepers such as Apple and Google restrict games in their app stores from using blockchain technology, largely due to past predatory practices of some games, the close tie in with gambling, and the fear of financial risk it poses to publishers (and thus the 30% cut to the app stores) if gamers can monetize in-game assets on secondary sales rather than directly through the game. This is starting to change as more games implement blockchain tech as underlying technology enhancements, rather than the core focus of the game. Mythical’s tech stack has been accepted by the Apple and Google app stores because of the benefits it has proven: sustainable 25% revenue uplift to developers, driven by secondary market sales of in-game assets.
Conclusion
As in all posts, we stress that blockchain technology is still very early in its development and has a long way to go before it is on par with today’s leading technologies. However, there are increasing signs that there is true value that this new functionality provides, enabling new operating and resource provision models that have been impossible or prohibitively inefficient in the past to execute. DePIN projects are able to build global crowdsourced networks and offer national cellular plans that can compete with the major telecom providers, unlock near unlimited on-demand compute power for the massive number of AI use cases coming to market, and generate true sustainable revenue lift in gaming applications. While still very early, these all represent promising signs towards more sustained, widespread adoption beyond crypto-native applications.
MEV (Maximum Extractable Value) is the value captured by third parties on blockchain networks
