Despite its estimated size of over $3.1 trillion in 2024, today’s telecom industry is facing financial, technological, and infrastructural sustainability challenges. As an average of 26% and 29% of households regularly experience unreliable Wi-Fi or broadband and mobile data in their homes, respectively, connectivity problems and service unreliability force people to miss out on opportunities. Regardless of the high rates of unreliability, customers have been paying expensive prices for telecom services, which have further increased due to inflationary pressure.
This op-ed is part of CoinDesk’s new DePIN Vertical, covering the emerging industry of decentralized physical infrastructure.
The telecom industry is also facing a rising threat of security breaches, with a two-fold increase in confirmed security incidents between 2022 and 2023. In fact, the personal data of an estimated over 74 million US telecommunications clients was leaked on the dark web last year. Fortunately, DePIN can provide an effective way to tackle this ongoing challenge with a more resilient and distributed infrastructure that promotes reliable, cost-efficient, and scalable connectivity solutions for telcos.
With Messari estimating its total addressable market to be over $2.2 trillion today and exceeding $3.5 trillion by 2028, the DePIN sector decentralizes the ownership and control of real-world physical infrastructure via blockchain technology.
In the telecom industry, a DePIN solution could enable participants to provide network connectivity by purchasing and setting up antennas or hotspots. These devices are all connected to a decentralized network, where their operators receive token rewards in exchange for service coverage. Money is not printed out of thin air, as incentives are covered by the fees users pay for utilizing the network.
With crowdsourced infrastructure, providers don’t have to invest in the deployment and maintenance of new or existing hardware. Doing so helps telcos offload traffic from their current ecosystems without incurring further CapEx or operational expenditures (OpEx).
At the same time, additional coverage can be created for a fraction of the price of traditional services by incentivizing individuals and communities with token rewards. Obviously, the coverage of DePINs is currently limited compared to the massive networks of telco giants. However, given sufficient distribution, they have the potential to deliver equivalent service levels while offering cost-efficient prices for consumers and enterprise clients.
Since the community is in charge of infrastructure development, DePINs can scale more efficiently than traditional telecom networks. There is no need to sign lease agreements or evaluate whether it makes sense financially for the telco provider to extend its services to a new region. Instead, network participants will handle this task and bear its costs, making expansion feasible even to locations that have long been underserved by traditional infrastructures.
From the perspective of DePINs, their business model doesn’t necessarily involve direct competition with telecom providers. Instead, they can tap into telco giants’ established infrastructures to offer users a decentralized, resilient, and efficient telecom solution at a fraction of the costs of conventional solutions. Simultaneously, while telcos can use this opportunity to generate additional revenue, it allows DePINs to expand their networks, further lowering the costs and increasing service quality.
In fact, a collaborative model is more viable for DePINs in their early stages of development than a competitive one. Even after a couple of years of active infrastructure deployment, their connectivity and reliability won’t be able to match the established networks of telco giants, which have been built and maintained for tens of years. This doesn’t mean that DePINs are slow to expand. On the contrary, it will take some time for them to survive on their own in the telecom market. So, for the time being, decentralized telecom networks will complement traditional telco infrastructures rather than replace them.
By embracing blockchain technology and decentralization, DePINs eliminate traditional telecom infrastructures’ single points of failure, which attackers have repeatedly exploited in data breaches. Instead of a central server, data is distributed across thousands (if not millions) of devices in the ecosystem, making it extremely challenging and expensive to gain access to customers’ records, install malware, or disrupt the network’s stable operation in other ways.
The DePIN model is not just more secure, but it can also accelerate telecom infrastructure development. With the right token incentives, DePINs can deploy their networks at a substantially faster pace than conventional telcos, leading to more rapid expansion and improved service coverage over time. Designed to reward ecosystem participants for building and maintaining telecom infrastructure, these incentives make telecom infrastructure development less CapEx- and OpEx-heavy. In addition to distributing infrastructure deployment and maintenance across a decentralized network of participants, crowdsourcing hardware further reduces the costs of telcos.
DePINs can also fill service coverage gaps, especially in remote areas and locations where traditional infrastructure deployment and maintenance would be too expensive for providers. With crowdsourced hardware and token incentives, decentralized telecom networks can expand connectivity to these underserved regions as well. By joining forces, DePINs can significantly extend the coverage of telcos and enhance service reliability and network performance, as well as decrease the frequency of outages through an interconnected telecom network that encompasses both conventional and decentralized infrastructure solutions.
As I see it, what poses the most significant barrier is onboarding traditional telcos into the Web3 ecosystem. Despite a history of embracing innovation and new technology, the telecom sector largely operates within the Web2 framework. To address this issue, DePIN providers must reduce Web3 complexities and streamline the onboarding process for telcos.
Infrastructure deployment presents another challenge for DePINs. Many organizations within this sector believe that it is enough to simply incentivize the establishment and expansion of decentralized infrastructure. But this approach is not sufficient to solve telcos’ and their customers’ real problems with connectivity.
As a long-term solution, DePINs should not only incentivize infrastructure development but also guarantee that they are deployed in locations with genuine demand for connectivity. Simultaneously, incentives should be created to ensure enterprise-grade signal quality and network stability.
Despite all the challenges, I believe DePIN is the killer use case for enterprises adopting blockchain, and it has the potential to become the next trillion-dollar industry. After the mass adoption of DePIN, distributed ledger technology will have a transformative effect on the telecommunications sector, similar to the launch of the internet. In the end, it will lead to efficient infrastructure deployment and maintenance with automatic settlements and billing among all parties, fostering decentralization, independence, and seamless collaboration between multiple stakeholders.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.