The need for more robust regulation of infrastructure and DP
Comment by: Aaron Bassey, IoTeX Product Manager
Looking ahead to the rest of 2025, the political climate points to a crypto-friendly stance with promises of regulatory transparency from both major parties in the United States. While this change is exciting news for Web3, one area that stands out as requiring special attention is Decentralized Physical Infrastructure (DePIN).
DP's projects represent a $38.4-billion sector. Not your typical crypto projects. Deepin projects connect blockchain incentives with real-world infrastructure, allowing everyday users to monetize their own electronic devices whenever they want. Many crypto veterans argue that it stifles innovation or stifles everyday freedoms. Deep's unique hybrid nature requires a strong channel of protection and trust to fully realize its transformative potential.
What sets DP apart?
DePINs create a self-sustaining economy where participants are paid directly for their contributions to the network. That makes DePIN unique in addressing industries that rely on digital innovation and physical presence, such as geolocation, decentralized storage and Internet of Things connectivity. Such hybrid nature presents challenges as it violates the logic of existing regulatory structures and requires new rules.
Challenges faced by DePIN
DP's projects generate real economic value right from the start. Geodnet, a relatively recent project, has achieved annual recurring revenue (ARR) of nearly $1 million through satellite miners. The broader Deepin ecosystem reported more than $15 million in ARR. This tangible success highlights the economic viability of the sector, but with it comes an urgent need for monitoring.
DPin networks often require access to data from user devices for accurate mapping of geolocation data or to leverage the storage capabilities of decentralized cloud solutions. Without clear guidelines, users and operators are uncertain about the boundaries of data collection. How much data can DePIN protocols access? What safeguards are in place to ensure privacy and prevent abuse? Without an answer, users may be reluctant to participate, thereby limiting network growth.
DePIN networks rely on tokens to reward users for donating their devices or data. Again, without regulatory transparency, questions arise around fair compensation. How should user contributions be valued, especially when their devices are critical to the network? A lack of standardization can lead to predatory practices that erode trust in ecosystems.
DPin networks promise decentralization, but early-stage projects often rely on centralized leadership and decision-making, creating gaps in transparency in governance and revenue sharing. Some DPin projects do not disclose their governance structures or decentralization roadmaps, leaving stakeholders unsure of who will control the network and how the project will share revenues with its users. This lack of transparency undermines the fundamental principles of the sector and may discourage participation from users who want a truly decentralized system. A tailored regulatory framework can address these issues by promoting transparency.
Traditional regulations often treat physical infrastructure and digital currencies as separate domains, with little regard for the hybrid nature of DePIN. For example, publicly traded Web2 companies must report earnings, while Web3 transactions are typically onchain. But what if a theoretical DP project made millions in revenue, kept its data private, and only rewarded users with a few thousand dollars on-chain? What if users already contributed significantly with their physical devices so that Project Tokinomics could change dramatically? Unanswered questions like these create operational and compliance risks for everyday users.
The importance of control
Developing a strong regulatory framework for DEP is essential to unlocking the potential of transformative power in technology and infrastructure. Regulators should adopt a systematic approach that addresses the complexity of DePIN's hybrid nature.
Latest: Why users should keep data on DePIN devices instead of cloud services
With its culture of embracing innovation, the US has an opportunity to lead this sector by developing tailored regulations that set global standards, ensuring both accountability and innovation thrive in the DePIN ecosystem. Taking decisive action, regulators are positioning DePIN as the foundation of a hybrid and decentralized future. The benefits go far beyond the technology. It is a regulatory challenge and a once-in-a-generation opportunity to redefine how economies and societies work. Let's use this time to design a framework to ensure a decentralized, inclusive and rich Internet of Things that will enable DePIN to thrive.
Aaron Bassi is Head of Product at IoTeX. Aaron holds a Bachelor of Business Administration from SFU's Beedie School of Business, completed UBC's Blockchain Summer Institute Program, and is certified as a professional scrum product owner.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
