Conversing with Investors and Builders: Building a Decentralized Physical Layer — What Is DePIN's Core Competitiveness?
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Conversing with Investors and Builders: Building a Decentralized Physical Layer — What Is DePIN's Core Competitiveness?
DePIN advocates building these infrastructures in a decentralized manner, fostering a more democratic and participatory approach.
Navigating Web3 tides with focused insightsText & Interview: TechFlow
Guests Invited
Jing Sun, COO of IoTeX, former Silicon Valley frontier tech investor, successfully established two Silicon Valley frontier tech venture funds and invested in over 30 high-profile projects including Rippling and Theta Labs. She was also an LP investor in Polychain. Joined IoTeX as a co-founder in 2017.
EO, Founding Partner of Future Money Group, a serial entrepreneur and investor. Fully committed to crypto investments since 2017, with his fund primarily focused on DePIN.
Introduction
DePIN (Decentralized Physical Infrastructure Networks) has recently drawn significant attention due to its rising conceptual momentum. Wanxiang Blockchain Lab has launched a series of salon discussions this year centered around DePIN. In fact, even before the market recovery, IoTeX had been hosting global ecosystem events gathering DePIN builders for brainstorming sessions. Discussions have included artificial intelligence, data availability layers, IoT devices, cross-chain blockchain infrastructure, and leading Web3 VCs—highlighting the vast and deep range of applications involved in this sector.
Since 2017, IoTeX has been dedicated to building a middleware layer between blockchain and the real world, attracting various DePIN ecosystem builders to participate in its development. In contrast, Future Money Group is a staunch investor in DePIN, guided by the belief that "future money will become a powerful database capable of transforming how humans work"—a perspective that invites deep reflection.
TechFlow has participated in multiple editions of IoTeX's R3al World events. Today, we are honored to invite two distinct yet similarly experienced industry builders and investors to discuss their transitions and explore why they chose to bet on the DePIN赛道 despite holding prominent positions.
Three Open Questions
1.Why did you transition from being a Silicon Valley frontier investor to becoming a builder at the forefront of DePIN?
Jing:
Between 2013 and 2014, I invested heavily in sectors involving artificial intelligence (AI) and Internet of Things (IoT), including service code and software-as-a-service (SaaS). At the time, I backed many traditional AI companies focused primarily on algorithms and machine learning, rather than today’s generative AI. Machine learning was extremely popular then, and we invested in outstanding AI scientists and engineers. However, most of these startups were limited in scope, often acquired by large corporations within one or two years.
Later, I realized the core issue wasn't technical capability but lack of access to data. AI companies require data for machine learning and domain-specific applications, but I observed that data was largely controlled by major enterprises. As a result, AI startups couldn’t obtain sufficient data, constraining their growth. They could only operate in niche areas, and their algorithms were easily replicated or replaced by big tech firms, ultimately leading to acquisition.
This led me to recognize that algorithmic innovation itself had become monopolized and centralized. Nearly all advancements in innovation eventually benefited only tech giants. Secondly, as a first- or second-generation internet user, while enjoying convenient and free services, users weren’t fully aware of the sacrifices made regarding data ownership. All user data is held by large tech companies, serving as a key source of profit and growth.
At this point, I realized that during the entire Web 2.0 era, users were essentially commodities—powerless and stripped of data ownership. Startups also lacked access to such data, leaving them equally disadvantaged.
Society underwent a cycle—from the open-source, open nature of early internet days, evolving into the monopolistic and centralized Web 2.0 era. This centralization became a critical problem. When Bitcoin emerged in 2015, I didn’t immediately grasp its significance—it seemed just another digital currency. But when Ethereum appeared, especially with smart contracts creating a programmable platform and open-source developer space, I saw a potential solution. It was vague but inspiring—a path toward true innovation and empowerment of ordinary users.
As an investor, my perspective was macro-level—assessing opportunities and potential across entire sectors based on fundamental principles. However, at the project level, control is minimal because development paths are unpredictable. Investors focus on selecting strong founders, but once investment is made, they shift to a supportive role, providing resources rather than making decisions.
From 2015 to 2017, I continued learning and investing, interacting closely with founders and early-stage investors. Eventually, I decided to dive deeply into the crypto space by becoming a co-founder of IoTeX. As an investor, I found myself in a relatively passive position, lacking insight into internal operations of companies or understanding why certain projects failed.
Investors want to judge whether a direction is correct, but sometimes it's hard to tell if the idea is flawed or execution is poor. When I’m passionate about a sector, I feel compelled to go deeper—to become a builder or operator. I had the chance to invest early in my career, but never truly experienced entrepreneurship. Running a company from scratch and watching it grow offers a completely new experience that deeply appeals to me.
Why transition from being a serial fintech entrepreneur in Zhongguancun to a DePIN investor?
EO:
I was probably one of the earliest members of the Helium China community, having encountered the Helium concept in 2019. Prior to that, I had explored blockchain projects in hardware, storage, and computing. As a serial entrepreneur, I pay close attention to emerging technologies and trends. Since entering the crypto industry in 2017, I’ve found that engaging with new narratives—whether through investment or entrepreneurship—offers excellent returns via traffic and liquidity dividends. I believe seeking previously non-existent sectors is key to discovering new alpha opportunities.
My thinking evolved through continuous exposure, practice, and feedback within the industry. Fintech initially represented strong innovation, promoting decentralization and peer-to-peer finance as alternatives to centralized systems. However, with increasing regulation and the evolution of the fintech industry, I believe it drifted from its original mission, becoming too entrenched in existing financial game rules.
From perspectives of return on investment, team compensation, and overall ROI, fintech may not be optimal. Its valuations are ultimately constrained by financial system rules, reverting to PB ratios—more akin to pawnshop logic than tech company valuation. This is something capital markets and discerning investors have gradually recognized.
In terms of exits, only a few top-tier funds achieved solid returns from fintech, mostly limited to tools like Stripe or P2P lending platforms leveraging technology and networks. The outcomes overall were underwhelming.
Therefore, I believe Web3 should avoid following fintech’s path—shouldn’t over-financialize—but instead integrate external real-world impacts during financialization. This offers two benefits: first, reducing reliance on finance itself, using financial mechanisms to bootstrap a network while generating positive cash flow.
Secondly, any business model or movement should carry positive social meaning, giving it stronger negotiating power with regulators. If it remains purely a financial game, global financial oversight will remain strict, potentially hindering Web3’s development. This coherent line of reasoning shaped my current view on Web3 positioning.
2. Despite your elevated positions, what are your respective arguments for choosing the DePIN赛道?
Jing:
The original vision behind IoTeX, founded five years ago, was to build a decentralized physical layer—using blockchain to create infrastructure enabling effective connectivity between machines and economies in the physical world.
Secondly, technological development went through stages. The first three years focused on building blockchain infrastructure. By 2021, the foundation was largely complete, and applications began to emerge—DeFi, GameFi, NFTs. During this period, IoTeX increasingly recognized blockchain’s greatest value: not just creating trustless financial systems, but more importantly, providing an efficient value exchange layer for value generated by machines in the physical world.
Based on this vision, at the end of 2021, we released a whitepaper introducing “MachineFi”—a concept predating terms like “DePIN.” The paper argued that in the coming decades, machines might perform the majority of societal productivity, possibly exceeding 60%.
Our early 2021 forecast didn’t account for the rapid advancement of AI by late 2022, which accelerated our understanding of machine-driven transformation in the physical world.
Current trends indicate growing dependence on physical-world machines for productivity, raising questions about how machines establish rules, generate resources, and collaborate. This involves massive infrastructure accounting for over 65% of global GDP, though construction methods vary significantly. Overall, this includes physical infrastructure such as transportation, energy, and wireless communications, configured differently across nations.
Within this context, “DePIN” represents a subset—focusing on building the foundational layer of this vast infrastructure, emphasizing bottom-up construction powered by blockchain as the underlying logic.
Unlike current nation- or capital-led models, DePIN advocates decentralized, democratic, participatory approaches to infrastructure development. It suggests infrastructure should be driven more by grassroots communities and individuals, not solely by capital interests.
Overall, DePIN aligns conceptually with our earlier “MachineFi” vision—both rooted in crypto philosophy but targeting different verticals. This vision is broader and larger in scale compared to current verticals like GameFi or DeFi.
EO:
I believe future work will be transformed by Web3 and artificial intelligence. In a volatile and changing world, resource distribution across regions—education, healthcare, capital—is highly uneven. Crypto and Web3 offer an open platform that levels the playing field, creating more equitable opportunities. Future work will become increasingly virtual, blending work, entertainment, browsing, and crypto engagement, drawing many newcomers into virtual ecosystems.
Over recent years, the rise of DeFi and GameFi enabled individual participation—for example, DeFi farmers and gamers earning income through online play. I’ve noticed that even in low-income countries, people now have access to Web3. These new forms of work allow individuals to earn more through Web3 and AI technologies.
Future opportunities may include a creator economy fueled by Web3 and AI integration, where creators unlock greater potential on Web3 platforms, earning more via NFTs and communities. Another opportunity lies in integrating offline life scenarios with blockchain—using hardware to monitor and manage real-life activities, bridging online and offline worlds. DePIN serves as an entry point here, transmitting hardware-collected data onto blockchains to form trusted, computable units. In the future, boundaries between online and offline may dissolve, allowing on-chain contracts to schedule off-chain resources—including human labor and new types of real-world miners completing physical tasks.
Recently, I’ve observed a trend: under the influence of Web3 and AI, new job categories will emerge. These include the growth of the creator economy and the fusion of offline scenarios with blockchain, breaking down barriers between real and virtual lives. This will provide more opportunities, especially in low-income regions, enabling people to access more resources and income through Web3 and AI.
However, I’ve observed that in the development of blockchain and Ethereum communities, a conflict arises when capital meets technology, leading to monopolies. MEV is a prime example. Those with superior algorithms can exploit arbitrage or front-run trades across multiple exchanges and DEXs. Node and oracle operators can reorder transactions for personal gain. This fusion of capital and tech dominates the ecosystem—even in GameFi and DeFi, large players make mining less attractive, reducing retail participation. Without sufficient capital or advanced tech, retail investors gradually exit, turning it into a power game. True mass adoption in crypto remains difficult partly because massive whales already hold huge amounts of Bitcoin and Ethereum. Newcomers seem restricted to early ICO participants who possess more capital, making entry difficult. This perpetuates unfair hereditary capitalism and inequality.
Some point out Bitcoin’s Gini coefficient is higher than North Korea’s—0.88 vs. 0.84. Such high inequality makes external participation difficult, as internal power dominates, leaving outsiders vulnerable to manipulation. To solve this, I believe we need a third production factor beyond capital and technology: labor. Labor comes from individuals—especially retail investors and small holders—and should be diverse and creative. Only by incorporating labor can networks generate real external value; otherwise, it remains a financial game where later participants merely inherit debt. Labor creates externality, generates revenue, and enables fair distribution via Web3 financial mechanisms—making the system sustainable.
Moreover, introducing labor helps counterbalance dominant capital, mining pools, mining cartels, and entities with AI compute power. The future of work must focus on integrating labor. DePIN is a starting point—enabling monitoring of offline labor. For instance, joining a Helium network requires self-deployed devices, with placement, distance, and location requiring deliberate effort. This introduces a balancing mechanism, demanding real labor, skills, and commitment to maintain the network. Such models foster long-term stickiness and better align with human nature—because games based purely on money resemble gambling, whereas genuine labor and investment create emotional bonds and sunk costs, encouraging sustained engagement.
3.What core competencies does DePIN currently possess—or lack?
Jing:
Let me address DePIN’s core competitiveness from IoTeX’s business model perspective.
Currently, IoTeX consists of two main components: Layer 1 and Layer 2 (or middleware). The ideal future is merging both into one unified network. From our standpoint, the essence of a protocol isn’t whether it’s L1 or L2, but whether the network can capture value. We believe value capture matters most—regardless of which chain a project launches on.
Regarding transaction models, we envision a transaction-based model—for instance, our computation and verification services. Regardless of which chain initiates the activity, users pay fees, which are captured by our network. Token holders participating in the tokenomics can share in this value.
Additionally, we may evolve into a central hub for physical asset exchange. Each physical asset project issues its own token, and tokenization requires liquidity. We can provide gateway liquidity, enhancing the role of our Layer 1.
For other computational projects like storage, we treat them as service providers. We don’t need to build every technology ourselves—the crypto stack is modular. As a hub, we integrate all these providers into a modular solution. By consolidating diverse service providers, we offer a go-to-market package where each benefits, forming a shared-revenue relationship. This allows independent development with joint sales—every provider gains when customers use the integrated solution.
EO:
There is much negativity within the DePIN space—not all negative, but valuable reflections and critiques. The key is focusing on core issues, particularly product fundamentals. For example, decentralized compute may need to seek opportunities in different markets rather than directly competing with centralized data centers. This is a crucial governance and strategic question.
Furthermore, are DePIN networks and similar infrastructures worth large-scale investment? For instance, monitoring air humidity or crowd density can yield valuable data—but what is its actual value? This needs deeper exploration.
More importantly, once you possess valuable hardware or data, how do you design better business models to monetize it? Every valuable asset requires clever productization and marketing. Not everything needs to become a platform-level product like Ethereum—many may thrive as small, beautiful solutions serving long-tail demands. As long as value can be productized through sound business models and embedded into protocols, latent potential can be unlocked.
References:
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