Shattering oligopolies
Is this the demise of big electric and telecom providers?
I recently chatted with my uncle in India. He recounted the days he had to stand in line for hours to pay his monthly bills—utilities like electricity, telephone, and water connections.
“And now, my bank just tells me in my email (sic) when they’ve taken the money!” he said, eyebrows raised, eagerly thumbing through the apps on his phone as if proud to show me how many he had downloaded.
A lot has changed throughout my lovely boomer uncle’s life.
In tech’s next inning, or “Web 3.0”, the utilities he is so happy to pay for with such ease may become unrecognizable.
Your friendly local oligopolies - the power company, internet service providers, and giant telcos - are all in the crosshairs of an emerging Web 3.0 trend.
It’s called “DePIN” - short for Decentralized Physical Infrastructure Networks.
It’s sexy technology with a drab name.
To make up for the lousy branding, a lot is going for it.
For example, one DePIN project rolled out a wireless network to 161 countries and 34,000 cities in just one year.
It’s the fastest growth of network infrastructure in history.
Before we continue, please bear my rude interruption…
Alternative investing shouldn’t just be for hedge funds and the ultra-wealthy.
Alt Macro is written for individuals like yourself to stay ahead of the pros.
If you feel like this publication would benefit people you know, please refer your friends using the button below.
5 referrals unlock your first reward: Free access to the “Bitcoin for non-techies” course, scheduled for release on March 31st, 2024.
Your support will allow me to continue sending you new opportunities, which I hope will transform your financial life.
…And now, back to regular programming
Oligopolies are so yesterday
Chances are that you hate dealing with the companies that provide your electricity, cell phone service, or internet connections.
Energy and telecom providers are the largest companies in the world, and they regularly rank the lowest of all industries in net promoter scores, or ‘NPS’ - a measure of customer satisfaction.
Oligopolies like these have high barriers to entry - it takes billions of dollars to set up the equipment (“capex”) and logistics to deliver AT&T’s cellular service, for example. The sheer amount of capital needed prevents new players from entering the game, and the lack of competition takes away any incentive to keep customers happy.
These oligopolies also get the luck of the draw with regulatory frameworks.
This power dynamic stifles innovation, inflates prices, and makes you wait countless hours after hitting “0” for the privilege of speaking to someone from customer service.
Just like my uncle was giddy about the conveniences that technology brought to his life, we may soon breathe a sigh of relief when we finally land some competition for our utility providers.
We have an army of nerds coming to our rescue, and I’m hopeful for them.
Here comes DePIN
DePINs counter the capital advantage of oligopolies by crowdsourcing costs and using a trustless and immutable ledger, or a blockchain, to incentivize members to maintain and expand the network.
Helium - a decentralized internet service provider and the most established DePIN - is a great case study for visualizing this process.
Helium uses a technology called LongFI that gives its network a cheap and long-range data frequency band.
Anyone purchasing a ‘Helium Miner’ - a high-performance wireless hotspot - can transmit the network for miles.
Rewards for propagating this data network are delivered via its blockchain-based incentive system. Participants receive the native Helium token, “HNT,” redeemable for USD or other fiat currencies.
These payouts are adjusted according to coverage and demand.
A similar blockchain-based incentive structure can be used to create or supply power grids.
Homeowners with solar panels can feed their local grid with the surplus energy they produce while receiving compensation. In this setup, equipment costs (solar power kits) are crowdsourced, and the blockchain ensures a transparent and secure structure for the network’s growth and operations.
The magic of DePIN is in its ability to incentivize a network of people to work towards a shared goal.
Beyond big infrastructure
It’s not just the multi-billion dollar service networks that DePIN is going after.
Digital resources—such as file storage, bandwidth, and the data you capture of your surroundings—can also be shared on a network:
Filecoin is a network of cloud storage providers that rivals centralized players - such as Microsoft’s Onedrive and Google Drive - but with all the security and advantages of the blockchain. Miners provide the network with storage capacity and are rewarded with the ‘FIL’ token.
Hivemapper crowdsources traffic and terrain data. Drivers can place Hivemapper’s dashboard cam on their vehicle to capture live footage of their city. of
Render is a network of high-performance processors (‘GPUs’) that gives 3D artists access to substantial on-demand computing power.
Anyone with a couple thousand dollars can buy some hardware, get it on the network, sit back, and meditate on the sweet sound of cash rolling in.
How to play this
I would rather have the extra time in my day for a spontaneous siesta than learn how to become a miner with new hardware and futuristic tech.
If you’re like me, there’s some good news.
You can invest in a DePIN network without being an active participant by simply acquiring its native token.
This is what’s used to pay for the service, and as demand for the network grows, so will the token value in US Dollars.
You’ll also have the bragging rights of investing alongside VC A-listers such as a16z, Sequoia Capital, Outlier Ventures, etc.
Yes, they’re all investing in DePIN, and you can too.
The few largest projects have attracted the vast majority of funding in this space, and they’re all accessible on easy-to-use exchanges.
Coinbase, Kucoin, Bybit, and Binance will give you access to the most established DePINs such as Helium (HNT), Fetch.ai (FET), Filecoin (FIL), Livepeer (LPT), Hivemapper (HONEY) and others.
Before investing, don’t slack on the due diligence and always remember that you’re taking on a high-risk bet when investing in nascent technologies.
Will we organize large capital-intensive businesses using DePIN, or is this just another nerdy wet dream? Leave me a comment, or hit reply if you’re reading this from your inbox - I would love to hear from you!
Disclaimers:
The author owns some of the digital assets mentioned in this article
All material on the Alt Macro web/server and newsletter is not investment advice, but is for general information only. You are solely responsible for making your own investment and financial decisions. Owners of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority.