State of DePIN:Redefining Ownership and Incentives in Infrastructure|Christopher,Lacey,Prashant,Arth

how are we doing day two looking alive I feel like they send the most enthusiastic ones to MC yeah just to get things rien R what's the word English is my second language so Riven up again reved okay anyways revved up again revved up again okay we don't have too much time in between transitions so I'm just going to make this pretty quick our next panel is going to be on this dat of deepin with Christ Chris Hyman from 1kx moderating All Right Round of Applause y thank you I okay I I don't think I'm moderating but that's yeah that's that's okay so yeah yeah so um thank you for joining the panel on state of deepen so my name is arth Patel I'll be moderating this session um I'm the co-founder and president of light no Adventures we're web 3 advisor and consulting firm based out of New York um thank you guys for joining us I let the panel introduce themselves yeah uh my name is Prashant and I've been building into the infr space for close to around 5 years now in vi3 alone and uh my whole focus and passion is around like making the programmable Compu even the compute more and more easily accessible to the end users so that's what we are going of working on at spon thank you I'm Lacy wisdom I'm a GP at protocol VC so we spun out of protocol Labs have been investing since 2017 protocol Labs is of course the creator of ipfs lip2p and fcoin we invest broadly in web 3 ecosystem with a focus on backing breakthroughs and Computing and we've made several deep in Investments over 15 at this point so very excited about this panel yeah hi I'm Christopher at the moderator um and um yeah I used to be an entrepreneur myself um I used to yeah like work as a CTO in startups um through a couple of like lucky coincidences you know got in touch like early with like the technology Bitcoin and ethereum um but only like in 2017 actually like made the jump into the space um and yeah like together with my co-founder from back then his name is Lassa and we then started our own Fund in 2018 and yeah being like former Founders um we always um had the we you know we raised money ourselves from other Founders uh sorry from other investors and you know they were actually like pretty decent investors but we always felt like they could have had like a much bigger impact on our success than if actually had um and so you know like when we got offered the opportunity to um launch our own fund uh we said okay like the number one thing that we want to do is we want to want to always like try to op maximize uh the impact we can have like on the founder success um and yeah I think we've done like a pretty solid job so far you know like on building up like this culture at 1kx um and yeah we're now at 25 people and we are like investing um across the whole industry I would say um deepen is like one of the first uh really like exciting things that we started out investing um in in 2017 18 um so yeah also super happy to be here thank you you so I want to start with the basics so like how do each of you would you define deepen and like what industries do you see the most use cases or the most potential in um okay I can take it um I mean like be before I think like the term deepen was only like coined in like 2022 or something like that and before that we were actually like internally calling them Hardware resource coordination networks horrible word uh you know that doesn't sound as cool as like deep in but I think it's actually like a little bit more accurate because um for us it's more about um for us it's like more it's a business model Innovation right similar to how how Uber for example right disrupted the taxi industry uh by just you know like Outsourcing like the driving to like um a lot of you know like other drivers you know and therefore boy therefore it created like a lot more value in the whole taxi segment I think the same thing is going to happen to deepend right and that's in a sense you know like it's not necessarily like a major technological breakthrough even though you know like there are like that's like really really cool technology build for us it's mainly like a um a business model Innovation um and yeah that's I don't know that's if that helps but that's kind of like roughly like how we're defining it yeah I think today a lot of people think of deep in networks as like these decentralized you know physical infrastructure networks that are leveraging crypto incentives to help power everything um I'm also from the school of like before there was a term for deepend so I think in our book we're always looking at the things like iot I don't know if that anyone even still uses that term anymore but first it was iot and then um when we when protocol lobs launched the filecoin network you know like the term deepin didn't really exist it was probably the second deepin Network in all of web 3 um and we just basically saw like oh we're aggregating all this compute power um I think that like physical infrastructure is still very important to deep in but I see it kind of changing over the the next few years as it becomes more Hardware agnostic yeah so for for me I'm I think when it was not quite deep in I was also building the same ecosystem um but for me as understanding how I basically look at as a Founder in the entire space that it gives me as a founder and leverage an opportunity to go ahead and raise a capital not capital capital as such from the public but raise a capital as an Hardware as a capital openly in the market and allow Community to participate in that just imagine like at spon when we we never imagine we were able to like raise at least $60 Million worth of compute from the market just by launching a network right it was so crazy to kind of look at so it really given me an understanding that if we combine the right level of Hardware infrastructure and along with the right level of incentive on the layer I I I I can speak more about incentive later but right Tech connected with the right crypto payment infrastructure just opens up a new opportunity for as a as what uh Chris also just told is like a new opportunity a business model where everyone from the community can participate and everyone from Community can also pay back to the same Community as well so that's how I look at dein got it so I want to actually build on what you said pan regarding incentives so like deepin is revolutionizing ownership and incentives um regarding structure but for some long-term value what could we do or see in the deep in space that can move it away from just the token incentives and financial incentives involved and make it more of like real world long-term value yeah I think um you know we've been really good in dpin and building up the supply side on things and we've often neglected the actual demand side um and so I think part of the reason it's been so easy to build up Supply is that like crypto Deens are really good at like gamifying things like getting people really excited to kind of ape into the networks but then this Le that leaves this void like post tge when people basically no longer have incentive of like oh you're going to get the air drop and they basically leave the network um and then that like leads to all these like other kind of domino effects where people are like oh the Network's dead and it's like kind of a fire sale right so I think we need to focus a little bit more on like building up that demand before you know launching the the token and like before it becomes basically very open market yeah I mean I would even go like one step further and saying like you know if you're launching a deepend network in 2025 and you don't have like I don't know let's say at least like 1 million in AR lined up in demand um like don't even bother um so yeah I think like the demand side is is super super critical I mean unfortunately you know the market can stay like a lot longer irrational you know that we can stay solvent as investors right so and and so far right the market has been um really like rewarding you know just like massive over Supply right I mean you've seen all of like the the the projects you know that claim that have like hundreds of thousands of gpus um on the network work okay but who's using them like their utilization is literally at zero and so like all of these gpus they're like they're just cost on your token holders and but still like token holders um you know just bought more and so um yeah I don't know I I think there needs to be kind of like some major shift and how how the market operates but um it's going to be difficult yeah I'll I'll cover more on that point I think I do agree on both of you side that's why when we started building speron the one thing which we kept in mind is like build first uh and build not just first supply side build both demand and supply and it's also chicken and egg problem a lot of times in D also is like what you want to go first I'll take you a very classic example and you can go on my Twitter and check it out also few weeks back I tweeted that we are out of Supply because we were running out of the gpus in our Network literally it happened um and then we realized okay so now we if we come back again roll back on the same question is that do we really solve the supply problem first or demand problem first um it depends like how we are kind of looking at now now I think what Chris has also mentioned that uh understanding the business model is very important here and how you are going to drive that uh Demand on those Compu which you're are aggregating um and that's what we kind of stood forward and we said like we we challenge that uh entire um the status around the DPN concept around GP utilization that build and because a lot of these DPN which you see today are foundationally flawed in a lot of ways uh the reason because if I ask you simply just go and Lee out a GPU today I can bet like you will struggle a lot uh and that's what we soled right the first thing which we solved was like allow users to seamlessly easily access the gpus without even any question asked and being a web3 like native uh transaction enabled systems the second thing which we soled was was that is how we can connect these systems to the uh upcoming demand which is going to be a agentic demand and that's when we started building is like talking to a lot of these agentic Frameworks started supplying them for example we recently onboarded a team which is building flame they're building the agenting infrastructure we just onboarded a team called Excel uh s he s them they are building this D5 strategy structures they are utilizing our infrastructure to basically power their side so that's where uh I kind of look at um I think incentive I don't really believe in incentive in crypto honestly I believe in is that you should not sell an incentive and that's that's one of the thing which we have done at spon very um from Day Zero we have never ever went ahead and and and even today um most of the people who have been farming spons like uh stuff they were like they all the points and all of those things went to zero the reason because if they are not performing the jobs they they don't get anything from us so that's and the other thing is like yes incentive is there we want to give them an ownership but we want to give them ownership to the people like who are very active performing the job doing the task and then being active in the in the entire community that makes sense so now I want to actually ask a question to Lacy so you've been vocal about the rise of dii um and like what do you see what role do see it especially in the overlap between dii and deepin especially with the decentralized infrastructure and like how that overlap and what it will do for decentralized science obviously yeah I think um so what I've noticed with some deepen projects is that like not all of them actually need specialized Hardware but specialized Hardware is like a really easy way to boost revenues but I feel like in dii many more projects do have this requirement for specialized Hardware to collect the scientific data and so an example is we're investors in a company called weather XM um that's collecting weather data and so they need something that's like very specialized to collect that um I talked to a company recently in our Network called causality Network that's working on building these bioreactors that are basically helping to solve a lot of the fraud that exists in scientific data today where you can basically have onchain verifications proving that this data hasn't been doctored which I also think is super exciting um so yeah I think there's a really natural fit for deepin and dii and obviously DSi is a very kind of new sector kind of becoming a little bit of a buzzword but I do think that there is some utility there that makes sense so obviously the goal is mainstream adoption So currently as we move towards this ownership model and kind of decentralizing all of this what do you see as a major hurdle or what do you see as the accelerant to get to this mainstream adoption whether it's technological more regulatory or is it more of like an economical thing yeah I think so in many ways there could be two different kind of streams um in terms of adoption for D size so one is like I think we're still pretty far from like actually getting like Pharma as an example is like a heavily regulated industry so we're pretty far from actually getting to that level adoption but I think that often as we've seen with like other apps like even outside of web 3 if enough people actually adopt the technology and start using it then like regulators have to pay attention to you and then have to come down and actually determine some sort of ruling so um I think the natural kind of first step for Dei adoption is just having more people participate in like different kind of biod dows that are occurring so like you know I've talked to people working on like diabetes da or like rare rare disease Dows and I think these are a lot of people that are left out on the fringes of society um and who like aren't necessarily getting catered to by big Pharma whose incentives are more kind of aligned with you know just creating the most high Roi drug for something um so I think that's the first step is just kind of like Grassroots engagement and then there's something else that's going to come after that which is more um adoption from probably like independent you know like hospitals and like scientific research centers and then it will kind of spiral from there Chris prant do you have any input on kind of the mainstream adoptions and kind of Pall or currently what hurdles they're dealing with I mean for for deepen uh specifically um I think we just need a lot more Founders from web 2 um coming into the space um you know that already have a lot of like distribution um that are able to like really that will see okay we need to abstract crypto like completely away from like the Enterprise customer or like the end user um and that way right you know like we can just kind of like offer them you know like the major economics like the major uh like improved um usability and they don't even know they're using crypto that's a little bit I think what we are like mostly lacking regulatory I can't really speak I think you know like legitimacy was definitely like um a problem um over the past couple of years um I hope that's changing now with like you know some some uh some new uh people in charge but let's see I think so far like really ux has been like another are a really big issue right yeah I think Chris just talked about ux think the last uh that was I was supposed to be like speaking about so so essentially is like the biggest challenge in dep is two again um the one is ux of course and the ux is basically is a is a problem of foundational issues it's it's never a problem of like how the things are designed ux is always the foundation thing if Foundation is good ux is always going to be good and clean so um that's we are that we are already solving at ensuring that that happens and also there are a lot of other projects who are are like working around around the same to solve that foundational issue to make the ux better the second is um and I go a little bit uh opposite in the direction of like Enterprise adoption and all of those things the reason because I've been talking to like before when we started jumping into the building into this space the first thing which I did was like got on a call with Intel folks got on a call with Sony folks got on a call with a couple of more service industry like who are the main stream ad option for all of these things uh one thing they have asked me that do you guys like are you guys planning to get a GDP license or S SO2 compliant or Hippa compliant for these I said like we can but the moment you go into that direction you are essentially building a web2 product it's not a web3 anymore um I do love abstraction I do love all of those things but for me it's like the the way I'm looking at is like what is the biggest Mo at web 3 the biggest MO is the full autonomy around the transaction execution and the full autonomy on the payment rails um and that's where I'm looking at is like and and and agent IC framework which we see today has the biggest mod which with three uh deepin space can leverage up to because those things are just like open for uh and and and one of the best use case which we have ever seen so I have ever seen so far so I'm I'm looking forward for those kind of like uh adoption bottleneck to be kind of kicked out and once that happens then we'll see like our our focus is like let's adopt first in web 3 and then we'll think Web Two next got it and I mean we have members from two prolific deepend investors and Al also a founder of a deepend so I want to take the conversation a little bit on the investment side quickly um um when you're looking or from this is for U Chris and Lacy more um if you're looking at a deepend project like what what kind of metrics or what do you see very quickly that would kind of excite you about the project very high level and then obviously um pan congrats on the recent strategic round but like what what what are you working towards that you feel that has given you the most positive feedback from these conversations from the investment side so you guys want to take okay yeah I I can uh I mean I think I've alluded to it um like in my previous responses I think what we are mainly looking for is um a web two founder that already has traction in what they're doing um they might not be like the number one in the market they might also not be like the number two or three in the market right but there are like in in the market you know and they're having customers you know like and you know they're like able to retain their customers but in order for them to win that market um they just don't have enough Capital to kind of you know like um incentivize you know like more Supply and so on um and so for these types of Founders right you know like if they start embracing deep in uh like this new business model basically like what I'm calling it right um then they're like able to kind of like massively like you know cut uh their capital expenditure uh and their operational expenditure and therefore you know like they're able to like really like undercut the competitors in the market um that is like something that I'm looking for um because yeah then that way we can bring just a lot of a lot of new value on chain um that is currently yeah captured elsewhere yeah I think echoing what Chris said to a certain extent we're kind of looking for the founders right to win in the deepend market and we're kind of looking for the fact that they have a go to market plan um and have some kind of inroads into the right kind of industry leaders for the industry that they're trying to disrupt but I think another thing that we like really kind of focus on and like really hone in on is like does this project by existing in the deepin space does it actually help it scale faster and better than a web 2 counterpart might um and I think that is something that's also kind of you know led us invest in some things that might seem like oh you know there's some like other web 2 companies but we believe that now because this is decentralized it can scale with like less Capital um than its web two cart no that's great for that Insight so and I see we're kind of closing in on time so I wanted to take this conversation kind of zoom out imagine if we were having this conversation in let's say four or 5 years um what would it what would you want to see in this space and particularly like what kind of Milestones would you wish was achieved to kind of see the mass adoption of deepen across the industry I mean for me I think it's just number one is like utilization right if we look looking across all of the networks right now utilization rates of like all of the hardware are like extremely low um and yeah that is kind of like a function of right massive over Supply in the beginning but also you know like a lack of you know like really like paying attention um towards demand um and so yeah I would want that we are we're seeing a lot more utilization really like close to like 100% that we are like able to utilize resources on the same machine like let's say you know like a storage Network plus you know like a compute or GPU Network running like on the same machine right and we are like utilizing all of these resources to um like a maximum effect um if you ask me like what I wish fall is that you know we're capturing like 20 30% of like the global Cloud Market that's that's what I would be hoping for yeah I think not to sound super bearish but dpin right now is actually really small when you put it in the context of like all the devices in the world I think I saw something like there's maybe like 10 million devices that are like running deep in nodes right now but in the world there's like 50 billion devices right so that means that we currently have less than like 0.1% market share um so like in the next 5 years I definitely want to see like that number increase like maybe to the hundreds of millions maybe to a billion right um and then I think the other thing that would be really great is like kind of piggybacking off what Chris said is like seeing not just like higher utilization but also just seeing that um like the incentives have changed so that like people aren't incentivized to just like offer supplies that's not being used which I think is a really huge problem today for me um on the compu side what I'm looking at is like I look as a word as entire data center so I want everyone to contribute their computing power so that we can capture that and just fun fact is like one% of this entire computing power which we have in our houses um if we contribute that we'll like we'll we'll we'll ought to beat AWS in terms of the numbers uh around the computer capacity so not 5 years of course but at least there should be some part of it that Supply which I want to capture which is free and and want and easy to kind of Bring It uh forward the second thing is again uh the ux and the utilization angle um ux because that's very very important and I want to go into the place where I want to see like most of the B3 companies utilizing the web3 infrastructure and the uh ux is like it has to be just smooth and Sleek got it no so I want to thank you each and one of you for your time um it was definitely great for insightful panel P so um do we we have about one minute does anyone have any questions they would like to ask guess no question okay we have one question go ahead what do you think uh which what Hardware types I mean like GPU um storage devices Etc like I mean these are like really easy to get access to and therefore like I I doubt that there's like a lot of like you know that you're able to really like differentiate yourself but we're seeing a lot of you know like more exotic networks right um solar panels um or drone networks um or you know like what she said right with weather data you know there's a lot of you know like really specialized networks being built um that may sound you know like a little bit more Niche right now but if I would be going in there um then I would maybe like look into to those category because everything else is already pretty crowded okay I think time's up but than thank you guys for uh your time for the panel thank you [Applause]