There are over 15 billion connected IoT devices worldwide and they are projected to grow to 75.4 billion devices by 2025. Let that sink in.
Most of these IoT devices are under-utilized and generate massive amounts of data everyday. Decentralized Physical Infrastructure Networks (DePINs) are enabling said devices to reach their full potential using a mix blockchain technology and crypto economic incentives, liberating our built environment from monopolistic business models. DePINs are expected to be valued at a whooping $3.5 T by 2028.
While DePINs need to be cost and price competitive with traditional players in physical infrastructure intensive businesses such as cloud storage, telecom, energy production, and ride-sharing, the success of DePINs is equality dependent on reaching (and exceeding) the quality of service provided by traditional players.
In a decentralized network, there is no central customer service department or customer champions who you can complain to or register grievances so how do you ensure the end users/customers of DePINs are satisfied? I would argue that the answer lies with decentralized reputation systems. Not a single reputation system but many systems serving different network stakeholder needs.
Let’s ground this using an example.
In the world of “Web2”, we are familiar with review and rating systems for the various apps and services we use on a daily basis. Some of these are built in-house, such as Uber’s rating system, Airbnb’s review system, while others are are “independent” such as yelp and trip advisor. These systems hold the service providers accountable and ensure that they deliver the SLA they committed to, else they might be publicly shamed and their ratings significantly drop from a metaclious 4.9 to a concerning 4.7.
Fast forward to the world of web3 and DePINs, there is no central authority to enforce the review and rating systems, the service providers are often anonymous who merely have an on-chain ID to represent themselves and lack time and resources to engage in extensive branding, or hiring TikTok influencers to market their services. This leaves many users confused when selecting a provider, especially in cases where automated matching is lacking (such as Uber).
In such a scenario, the service providers/Supply side of DePINs have an unfair advantage, because they can get by by doing the bare minimum to be a service provider on the network, especially as DePINs hand out outsized subsidies through block-rewards to bootstrap their supply side with hopes to initiate the flywheel.
This challenge was formally listed as called DePIN Verification by a16z Crypto.
At Reppo Labs, we are building the open reputation infrastructure for DePINs (and beyond) to bootstrap AI-powered reputation models.
Using our infrastructure, we expect a plethora of new primitives and businesses to launch and enable such existing networks to scale massively.
