- Distributed computing providers are benefiting from the AI boom.
- One report predicts that investment in and adoption of distributed computing providers will outpace other sectors.
- But there are concerns about whether such projects can align economic incentives.
Amid the market frenzy over all things artificial intelligence, some are looking to jump on the bandwagon by using blockchain.
One recent trend is an emerging cryptocurrency sector called DePIN, short for a longer term: Decentralized Physical Infrastructure Network.
DePIN projects, especially those procuring decentralized computing power, are typically deployed on fast, low-cost blockchains such as Solana or Cosmos.
Keren Blumberg, data scientist at crypto data platform Flipside, said: DLNews The DePIN project can offer faster, cheaper and more secure services compared to centralized providers.
Demand for computing power is growing: experts estimate that the computing power required to keep up with AI advances is doubling every 100 days, or roughly 1220% per year, creating a potentially lucrative opportunity.
Flipside published a report predicting that investment and adoption in distributed computing providers will outpace other DePIN sectors.
Meeting the demands of AI
The DePIN project aims to reduce the costs of everything from mobile services to procuring the computing power needed to train AI.
They achieve this by leveraging a decentralized network of participants, rather than a single centralized provider like Amazon Web Services or Google Cloud.
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Distributed computing providers recruit individuals with unused computer hardware, such as graphics processing units (GPUs).
Providers integrate the GPUs in their network into a pool of computing power that they rent out, and on the other end, users use the GPUs to train AI, conduct scientific research, or perform other tasks that require large amounts of processing power.
Render, a Solana-based decentralized computing provider focused on media rendering and AI, is currently the highest valued company with a market cap of over $3.8 billion.
Since its launch in 2017, Render has accumulated roughly 33,000 hours worth of networking time using high-end GPUs, according to a report from Flipside.
Other projects like Cosmos-based Akash claim to undercut prices from centralized computing power providers like Amazon Web Services and Google Cloud by up to 70%.
Both Render and Akash have issued tokens that have skyrocketed in recent months: Render’s RNDR is up 127% since the beginning of the year, while Akash’s AKT is up 113%.
DePIN Token
According to Chris Newhouse, a DeFi analyst at Cumberland Labs, there are reasons to be cautious.
“Some of the new DePIN protocols have struggled to truly align economic incentives with the way they demand tokens,” Newhouse said. DLNews.
Most tokens issued by decentralized computing providers act as ecosystem currencies, allowing those who lend their computing power to make payments in the project’s native token and those who lend their computing power to the network to get paid in the token.
At the same time, traders use the token to speculate on the future adoption of a particular DePIN protocol.
Neuhouse questioned why a project like this needs a token in the first place.
“If payments are made in native tokens, what will happen to the demand and supply of the computing power we are lending out? Why not pay in US dollars or stablecoins?”
Some DePIN projects are using their native tokens as an incentive to bring more computing power to the network, Blumberg said. “Incentives help attract early users, but sustainability is really important.”
The situation is similar to that of cryptocurrency airdrops, where DeFi projects reward early users with newly created tokens to attract users and deposits. However, in recent months, many projects following this strategy have failed.
After the airdrop incentives wore off, the value of some projects’ newly launched tokens plummeted in line with user activity.
DePIN projects may also be affected.
“Projects that rely solely on high rewards or token trading activity without demonstrating real utility or adoption related to their stated purpose should be avoided,” Bloomberg said.
Tim Craig is the DeFi correspondent for DL News. Got a tip? Email him. email address.
