Case study: DePIN: decentralized infrastructure for energy & sensing — a pilot that failed (and what it taught us)

The Decentralized Physical Infrastructure Network (DePIN) sector reached a $32 billion market capitalization across 1,500+ active projects by late 2024, with over 13 million devices contributing data daily. Yet beneath these impressive headline figures lies a sobering reality: the majority of energy and environmental sensing pilots launched between 2022-2024 failed to achieve sustainable operations. This case study examines what went wrong—and what the survivors did differently.

The DePIN thesis promised to democratize infrastructure ownership through token incentives, enabling citizens to deploy sensors, energy hardware, and connectivity devices in exchange for cryptocurrency rewards. For energy and environmental monitoring specifically, this model offered tantalizing potential: hyperlocal air quality data, peer-to-peer renewable energy trading, and grid-edge intelligence gathered at a fraction of centralized costs. Instead, most projects discovered that building decentralized hardware networks requires far more than clever tokenomics.

Why It Matters

Traditional environmental monitoring infrastructure suffers from fundamental coverage gaps. Government air quality stations cost $100,000-500,000 each, limiting deployment to major urban centers. Satellite remote sensing provides broad coverage but lacks the temporal and spatial resolution needed for actionable local decisions. Energy grid operators rely on centralized SCADA systems that create single points of failure and struggle to integrate distributed renewable resources.

DePIN architectures propose to solve these problems by crowdsourcing infrastructure deployment. Instead of capital-intensive centralized buildouts, networks incentivize individuals to purchase and operate hardware—sensors, solar inverters, EV chargers, weather stations—with token rewards proportional to data contribution or service provision. The model theoretically enables infrastructure scaling at a pace and cost structure impossible for traditional utilities or governments.

The stakes extend beyond operational efficiency. Climate adaptation requires understanding environmental conditions at unprecedented granularity. The World Health Organization estimates that 99% of the global population breathes air exceeding safe pollution limits, yet monitoring coverage remains sparse in most developing regions. Decentralized renewable energy coordination could unlock billions of kilowatt-hours currently lost to grid constraints. The approximately $3.5 trillion infrastructure market represents the addressable opportunity that DePIN advocates cite when projecting sector growth through 2028.

However, the 2024-2025 period revealed that potential and execution remain far apart. Energy represents approximately 38% of DePIN deployment share, making it the second-largest category after compute—but also the category with the highest pilot failure rate. Understanding why matters for anyone building or investing in decentralized infrastructure.

Key Concepts

Token Economics and the "Flywheel" Theory

DePIN projects typically launch with generous token emissions designed to bootstrap network growth. Early participants receive substantial rewards, creating a speculative flywheel: rising token prices attract more hardware deployers, expanding network coverage, theoretically attracting paying customers, generating revenue to sustain token value. Messari's 2024 State of DePIN report documented 350+ tokens trading at approximately 100x annual recurring revenue—valuations supported entirely by speculative demand rather than operational economics.

This model works when token prices appreciate or remain stable. It collapses when they don't. Energy and sensing hardware requires ongoing maintenance: sensor calibration, connectivity costs, physical repairs, electricity to power devices. When token rewards no longer cover operating expenses, contributors churn. Networks that peaked at thousands of nodes have contracted to hundreds as the 2024 bear market exposed unsustainable unit economics.

Hardware Cost Structure Realities

Environmental sensors and energy monitoring equipment occupy an uncomfortable middle ground: expensive enough to represent real capital commitment, but commodity enough to face brutal margin pressure on data sales. A professional-grade air quality sensor costs $300-1,000. An OBDII vehicle data device runs $100-200. Solar monitoring hardware adds $200-500 per installation. These aren't prohibitive amounts, but they're significant enough that contributors expect reasonable payback periods.

The challenge is that environmental data itself is commoditized. Government weather services provide free data. Commercial providers like IBM Weather and Tomorrow.io aggregate satellite and station data at scale. A decentralized network selling raw sensor readings competes against established players with billions of data points and sophisticated analytics layers. Without differentiated data products or integration into decision-making workflows, raw data revenues approach zero.

Regulatory Surface Area

Energy infrastructure faces heavy regulation in virtually every jurisdiction. Peer-to-peer energy trading requires utility interconnection agreements, net metering frameworks, and often securities law compliance for token issuance. Environmental monitoring data used for regulatory compliance—carbon accounting, emissions verification, air quality reporting—faces strict chain-of-custody and calibration requirements that decentralized networks struggle to satisfy.

Projects that ignored regulatory complexity discovered expensive lessons. Securities regulators in multiple jurisdictions have challenged DePIN token classifications. Utility partnerships stalled over liability and interconnection concerns. Carbon credit registries refused to accept data from decentralized sensor networks lacking third-party verification. The "permissionless" ethos that makes Web3 compelling runs directly into infrastructure sectors defined by permission-based governance.

What's Working and What Isn't

What's Working

Full-stack integration beats raw data sales. Hivemapper, the decentralized mapping network, pivoted from selling raw dashcam imagery to offering complete mapping solutions including computer vision processing, map tile generation, and enterprise-ready APIs. This shift from commodity data to value-added services enabled sustainable unit economics. Projects that treat DePIN as infrastructure enabling applications—rather than applications themselves—show stronger retention.

Hybrid revenue models outperform pure token economics. Successful projects generate off-chain revenue from enterprise customers while using tokens for network coordination and contributor rewards. DIMO, the vehicle data network, secured partnerships with insurance companies and automotive OEMs paying in fiat for aggregated vehicle intelligence. Ambios Network, focused on environmental monitoring, integrated with SAP Datasphere and Google Cloud to monetize sensor data through established enterprise channels. Pure token-for-data exchanges without fiat revenue bridges have proven fragile.

Regulatory clarity accelerates compliant projects. Fuse Energy obtained an SEC no-action letter for their energy token structure in early 2025, immediately differentiating from projects facing regulatory uncertainty. Building compliance-first—engaging with regulators, structuring tokens appropriately, documenting utility clearly—enables partnerships that regulatory-ambiguous projects cannot access.

Narrow vertical focus enables differentiation. GEODNET built the world's largest real-time kinematic (RTK) positioning network, achieving centimeter-level GPS precision impossible with consumer devices. This specific capability commands premium pricing from autonomous vehicle developers, drone operators, and precision agriculture companies. Broad "general sensing" networks struggle to compete; focused networks with unique technical capabilities sustain value.

What Isn't Working

Token-only economics collapsed under price pressure. The 2024 cryptocurrency downturn exposed projects relying exclusively on token appreciation to sustain contributor rewards. When token values fell 60-80%, reward payouts no longer covered hardware operating costs. Contributors stopped maintaining equipment, data quality degraded, and networks entered death spirals. Projects without revenue diversification proved non-resilient.

Supply without demand generation failed systematically. Messari documented 20 DePIN projects reaching 100,000+ devices in 2024, but noted ongoing challenges in demand generation and monetization. Building sensors is relatively straightforward; finding paying customers willing to integrate decentralized data into production workflows is hard. Projects that scaled supply before validating demand wasted contributor capital on idle infrastructure.

Commodity positioning invited competition from scale players. Networks selling undifferentiated environmental data compete against Google, AWS, and traditional data providers with massive distribution advantages. A 10,000-sensor DePIN network cannot match the coverage, integration, or service level agreements of centralized alternatives without a defensible moat—whether technical capability, community engagement, or regulatory positioning.

Operational complexity overwhelmed amateur contributors. Professional sensor networks employ trained technicians for installation, calibration, and maintenance. Citizen-deployed DePIN hardware requires simplified onboarding—but environmental and energy hardware often demands technical expertise that casual contributors lack. Networks discovered high installation failure rates, poor calibration consistency, and rapid equipment degradation when deployment quality was not controlled.

Key Players

Established Leaders

Helium pioneered the DePIN model with wireless connectivity, raising $364.8 million across six funding rounds and deploying 350,000+ hotspots globally. Their T-Mobile partnership demonstrated enterprise demand for decentralized coverage. Though primarily focused on telecommunications, Helium's IoT network infrastructure enables environmental sensing applications.

Hivemapper raised $23 million including an $18 million Series A led by Multicoin Capital. Their dashcam-based mapping network combines hardware sales with token incentives, having pivoted successfully from raw data to integrated mapping solutions. The Helium co-founder joining Hivemapper's board signals ecosystem convergence.

DIMO secured $20.5 million in funding with CoinFund leading their 2024 Series A. Their vehicle data network connects 180,000+ vehicles, demonstrating sustainable DePIN model execution through enterprise partnerships with insurance and automotive companies.

PowerLedger operates peer-to-peer renewable energy trading platforms, enabling households with solar panels to sell excess electricity directly to neighbors. Their Australian-based operation navigated regulatory complexity successfully, providing a template for compliant energy DePIN.

Emerging Startups

Ambios Network raised $2 million in seed funding led by Borderless Capital with participation from Solana Ventures and a $200,000 Google Cloud grant. Their environmental monitoring network spans 25,000+ sensors across 20+ countries, with enterprise integrations including SAP Datasphere, Best Western hotels, and CMG Companies (Taco Bell, KFC, ACE Hardware).

GEODNET built the world's largest RTK positioning network using Solana blockchain infrastructure. Their precision GPS capabilities serve autonomous vehicle, drone, and robotics applications requiring centimeter-level accuracy impossible with standard GPS.

Natix focuses on mobility data collection through smartphone sensors, reducing hardware barriers by leveraging devices contributors already own. Their commoditized approach trades data density for deployment friction.

Silencio operates noise mapping networks, collecting acoustic data for urban planning, real estate valuation, and public health applications—a specialized environmental sensing vertical.

Key Investors & Funders

Multicoin Capital has been "extremely bullish on DePIN" since 2022, leading investments in Helium, Hivemapper, IO.net, Render Network, and GEODNET. Their February 2025 $8 million strategic acquisition of GEODNET tokens signaled continued conviction.

Borderless Capital launched their $100 million DePIN Fund III in September 2024, backed by Peaq, Solana Foundation, Jump Crypto, and IoTeX. The fund specifically targets "commodity DePINs" using accessible hardware and "Web 2.5" projects bridging decentralized networks with traditional payment rails.

CoinFund led DIMO's Series A and earlier rounds, with partner Alex Felix joining the board. Their vehicle data focus represents a thesis on automotive IoT infrastructure.

Solana Foundation provides ecosystem funding and grants supporting DePIN projects building on Solana infrastructure, which has emerged as the dominant blockchain for physical infrastructure networks.

Examples

Example 1: The Commodity Sensor Trap

A 2023-vintage environmental monitoring project deployed 8,000 air quality sensors across Southeast Asian cities. Initial token rewards averaged $15-25 monthly per sensor, attracting thousands of contributors. When token prices declined 70% in mid-2024, effective rewards dropped to $4-7 monthly—insufficient to cover electricity, connectivity, and maintenance costs. Within six months, active sensors declined to 2,100 as contributors decommissioned unprofitable hardware. The network faced a "ghost town" problem: sparse coverage produced data with limited commercial value, preventing revenue recovery. The project suspended operations in late 2024.

Lesson learned: Revenue must be established before token price volatility tests contributor economics. Building to 8,000 sensors without paying customers meant token incentives bore the entire cost burden.

Example 2: Regulatory Rejection for Energy Trading

A European peer-to-peer energy trading platform launched tokens representing energy credits in 2022. The model enabled households with solar installations to sell excess generation to neighbors via blockchain settlement. By 2023, the project connected 1,200 prosumers generating meaningful transaction volume. However, energy regulators classified the tokens as transferable energy instruments requiring licensed intermediation. Unable to obtain the required licenses cost-effectively, the project was forced to restructure as a traditional licensed platform—eliminating the token incentive model that had driven adoption. Contributor growth stalled as rewards disappeared.

Lesson learned: Energy infrastructure operates under frameworks predating blockchain. Projects must design for regulatory reality, not hoped-for reform.

Example 3: Hardware Quality Degradation

A vehicle data network scaled rapidly to 50,000+ connected cars using low-cost OBDII devices manufactured in China. Initial data quality met enterprise customer requirements. Within 18 months, failure rates exceeded 35% as cheap components degraded. Insurance company partners suspended pilots when data gaps compromised actuarial models. The network faced a choice: subsidize replacement devices (destroying unit economics) or accept ongoing quality decline (losing customers). They chose a hybrid approach—subsidizing replacements for high-value contributors while accepting churn elsewhere—but never recovered enterprise confidence.

Lesson learned: Hardware quality shortcuts create technical debt that compounds. Enterprise customers require SLA-grade reliability that commodity hardware cannot deliver.

Action Checklist

• Validate paying customer demand before scaling hardware deployment—signed letters of intent or pilot contracts provide evidence that theoretical demand translates to actual revenue
• Design token economics assuming token prices decline 80% from issuance—if contributor economics remain positive under stress scenarios, the model is resilient
• Engage regulators proactively for energy and environmental applications—understanding licensing requirements before launch prevents expensive restructuring
• Build revenue bridges to fiat-paying enterprises rather than relying exclusively on token-for-data exchanges
• Establish hardware quality standards and verification processes before opening contributor enrollment
• Integrate with existing enterprise platforms (cloud providers, ERP systems, industry-specific software) rather than requiring customers to adopt new infrastructure
• Create data products with differentiated value rather than competing on raw commodity data against established providers
• Implement systematic maintenance and calibration protocols appropriate for citizen-deployed hardware quality levels

FAQ

Q: How can DePIN projects achieve sustainable unit economics without relying on token appreciation?

A: Sustainable DePIN economics require three components: minimized hardware costs through standardization and scale, diversified revenue including fiat-paying enterprise customers alongside token incentives, and operational efficiency enabling automated network management. Projects that generate $0.50-2.00 in monthly fiat revenue per device can sustain modest token rewards without depending on price appreciation. The key is establishing revenue before scaling deployment, ensuring each marginal device adds to rather than depletes network economics.

Q: What regulatory frameworks apply to decentralized energy and environmental sensing networks?

A: Regulatory requirements vary by jurisdiction and use case. Energy trading typically requires utility interconnection agreements, net metering compliance, and potentially securities registration for tokens representing energy credits. Environmental data used for regulatory compliance (emissions reporting, carbon accounting) must meet chain-of-custody and calibration standards that most DePIN networks currently cannot satisfy. Projects should conduct jurisdiction-specific regulatory assessments before launch and consider structuring tokens as utility tokens without investment return expectations to minimize securities exposure.

Q: How do enterprise customers evaluate decentralized sensor networks versus traditional data providers?

A: Enterprise procurement prioritizes reliability, integration simplicity, and clear accountability. DePIN networks often lack service level agreements, dedicated support, and proven uptime track records. Successful projects address these concerns by offering enterprise contracts with traditional terms (SLAs, support, liability clauses) even when underlying infrastructure is decentralized. The decentralized architecture becomes an implementation detail rather than a customer-facing complexity.

Q: What distinguishes DePIN projects that recovered from early-stage difficulties versus those that failed permanently?

A: Recovery typically required three elements: pivot from commodity positioning to differentiated products or services, establishment of fiat revenue streams reducing token dependency, and community retention through transparent communication about challenges and restructuring. Projects that attempted to maintain unsustainable token emissions or obscured operational difficulties generally failed. Survivors acknowledged reality and executed pragmatic changes even when departing from original vision.

Q: Should founders prioritize decentralization ideology or practical adoption when facing tradeoffs?

A: Multicoin Capital's investment thesis explicitly deprioritizes "maximal decentralization" in favor of value accrual and user experience. Projects that compromise on decentralization purity to achieve product-market fit consistently outperform ideologically pure alternatives. Practical guidance: decentralize where decentralization creates genuine advantages (censorship resistance, reduced single-point-of-failure risk, aligned incentives) and centralize where centralization improves user experience or operational efficiency. The goal is useful infrastructure, not philosophical validation.

Sources

• Messari, "State of DePIN 2024," January 2024 — comprehensive sector analysis covering market size, project metrics, and operational challenges across 350+ tokens
• Borderless Capital, "DePIN Thesis 2.0," September 2024 — investment framework and $100 million fund launch documentation
• CoinMarketCap and CoinGecko, DePIN sector tracking data, November 2024-January 2025 — market capitalization and project metrics
• Grayscale Research, "The Real World: How DePIN Bridges Crypto Back to Physical Systems," Q1 2025 — institutional perspective on DePIN investment thesis
• Intel Market Research, "Decentralized Physical Infrastructure Networks Solution Market Outlook 2025-2032," 2024 — market sizing and growth projections
• ForkLog, "DePIN After the Boom: Revenue is King as Energy and AI Set the Pace," 2024 — post-hype sector analysis focusing on sustainable business models
• DIMO corporate announcements and CoinFund investment documentation, January 2024 — Series A details and network metrics
• Ambios Network documentation and Messari project analysis, 2024-2025 — environmental monitoring DePIN case study