While RWA tokenization is the biggest narrative in 2024, DePIN will write the next chapter in crypto adoption.
RWA and DePIN technologies are changing how digital and physical assets are managed and monetized.
They link real-world assets/ infrastructure and blockchain ecosystems to bring efficiency, accessibility, and transparency.
It wouldn’t be wrong to call DePin and RWAs yin and yang of the digital revolution. Though each is a distinct sector, they are related to each other. Before we digress into the relationship between the two, let’s discuss the similarities and differences between the two.
How are DePIN and RWA distinct from each other?
DePIN stands for Decentralized Physical Infrastructure.
DePIN can be understood as a decentralized network that can be used to manage, operate, and monetize physical infrastructure such as Internet of Thing (IoT) devices, WiFi routers, mobility and energy networks, CPU storage, and much more.
Filecoin is one of the earliest and most popular DePIN projects still going strong. Filecoin is a decentralized network that connects all computers with additional storage space that they can monetize by selling to other users.
Think of Filecoin as a big digital warehouse spread across many computers. Anyone needing cloud data storage can access this warehouse and rent storage space.
Individuals are incentivized to contribute to the network and help it grow without relying on external sources or centralized operators. Incentivization comes from tokens that individuals receive to contribute to the network. These tokens have monetary value, can be traded or swapped on monetary exchanges, and carry other rights (such as member-only excess or governance rights). FIL is the native token of the Filecoin platform. Anyone contributing storage on Filecoin would receive FIL tokens in return.
But how is DePIN different from RWAs?
As we know, RWAs are tokens representing physical or digital assets on the blockchain. Assets like real estate, art collectibles, securities, copyrights, etc., are converted into tokens on a blockchain. Tokenization helps remove market entry barriers, bring operational efficiency, and monetize assets on-chain.
Some of the largest institutions in the world, such as BlackRock, VanEck, Bitwise, Grayscale, UBS, and even many state governments, have set up their own tokenized funds on public and permissioned blockchains.
What tokenization is to assets, DePIN is to infrastructure.
Both have different use cases and operate in different ways. RWAs and DePINs can be differentiated by the markets they operate in and the regulations involved.
RWAs largely operate in the financial sector and require greater vigilance. Their protocols need to be more compliant and follow regulations. In contrast, DePIN involves digitizing physical infrastructure and handling its maintenance on-chain without a central authority. There are fewer regulatory challenges involved here, as no assets are involved.
One important differentiation between the two sectors is the use case. RWA tokenization involves digitizing traditional assets and securities like gold, real estate, art, bonds, and equity. It democratizes ownership. Fractional ownership is another use case for RWAs.
The use case for DePINs is contributions. Members contribute physical resources like data collection, energy storage, and server hosting to democratize building infrastructures.
How are DePINs and RWAs bridging the gap between digital and physical?
DePIN infrastructure is all about community ownership and contributions such that individuals can come together and build large-scale networks. This same infrastructure can be used for asset management. Members can collaborate and vote on the maintenance, sales, and upgrades needed for the collectively owned tokenized assets.
Fluence Co-Founder Tom Trowbridge says, “DePIN is set to drive the next wave of crypto adoption. Its services are easy to understand, allowing millions of people to get involved, and several prominent DePIN projects are on the verge of securing major customers and substantial revenue, marking a significant milestone for the crypto industry. As this revenue grows, global attention will inevitably turn towards this sector.”
DePINs for IoTs are essentially large networks collecting valuable data. RWA investors can use that data to measure the occupancy rates of real estate properties and make informed decisions accordingly. Smart contracts enable the automation of processes like rent collection, real-time tracking, profit distribution among the community, etc.
DePINs also ensure security by moving all asset-related data and transactions on the blockchain. This helps minimize trust and brings users worldwide together to contribute to a decentralized platform.
Supply chain management solutions already use DePIN and RWA to track and authenticate cargo during transit.
Conversely, RWAs also greatly benefit DePIN infrastructures by helping fractionalize assets and enabling retail investors to contribute to the network. Tokenization helps to represent parts of the infrastructure as tokens on a blockchain. Individual investors can buy these tokens and fractionally own part of the project. Reciprocally, the DePIN network gets the capital needed to grow the project.
When the DePIN network is represented as tokens, they can be traded in the open market, attracting more liquidity and participants to the DePIN ecosystem. Solar farms allow individuals to participate by selling energy credits as tokens.
Intersection of DePIN and RWAs
Let’s look at how tokenization and DePIN could merge.
For instance, a neighborhood where individual homeowners have installed solar panels, producing excess energy daily.
Traditionally, this surplus energy would either go to waste or be bought back by utility companies at low rates. With DePIN and tokenization, each homeowner’s excess energy production is measured in real-time by smart meters connected to a blockchain network. Every kilowatt-hour (kWh) of energy they produce is instantly converted into a digital token, represented as a tradable asset on the blockchain.
Here’s how it works — say, John, a homeowner with solar panels, produces 10 extra kWh of energy today. His smart meter automatically records this and mints 10 energy tokens, credited directly to John’s digital wallet. These tokens aren’t just records, they represent real, transferable value. John can now sell these tokens to anyone in the world.
For instance, a nearby coffee shop, struggling with high utility bills, purchases John’s energy tokens via a decentralized marketplace. The transaction is settled instantly using smart contracts, ensuring John is paid fairly and the coffee shop gains access to cheaper, sustainable energy.
But the possibilities go even further. Let’s say a larger group of investors funds a community solar farm. Instead of the traditional lengthy investment process, each investor receives fractional ownership in the form of tokens proportional to their contribution. These tokens entitle them to a share of the farm’s energy production and future profits. Investors can trade these tokens anytime on a decentralized exchange, giving them liquidity and flexibility unheard of in traditional energy markets.
Now, scale this globally. John in California could sell his energy tokens to a business in Germany, bypassing intermediaries, reducing costs, and promoting a global marketplace for green energy. Payments are made instantly in stablecoins or cryptocurrencies, and all transactions are transparently recorded on the blockchain.
This integration of DePIN and tokenization will bring fairness, efficiency, and accessibility to distribution systems.
TokenFi is easing the tokenization process from start to finish and helping users tokenize any asset except securities from scratch. Our RWA Tokenization Module will help users streamline their tokenization journey and bring assets on-chain without writing a single line of code.
