🌵 The Intersection of Crypto & AI 🌵

Big Brain Breakdown

Market Metrics

Total Crypto Market Cap: down 4.8% to $2.507T
Total AI Sector Market Cap: up 8% to $32.2B

Top Movers (24hrs):

📈 AIT Protocol (AIT): up 29.4% to $0.2954
📈 enqAI (ENQAI): up 26.4% to $0.0558
📈 Commune AI (COMAI): up 23.7% to $1.18

Daily News

🟠 Ora Protocol deprecates the Llama 2 model in favor of integrating Llama 3 8B into the ORA Onchain AI Oracle.

🟠 Morpheus dropped a thread on the first project to launch within the Morpheus ecosystem, Venice. Venice will leverage decentralized service providers on Morpheus to process inference requests.

🟠 Rivalz Network’s Incentivized Intel Testnet is set to go live soon. Incentivized testnets tend to reward early users and developers with a future airdrop.

🟠 AITECH released a roadmap update on its GPU marketplace, demonstrating that it has completed the crucial setup components required for building out more features and functionality.

🟠 Virtuals Protocol issued a v2 upgrade proposal, aiming to mitigate co-ownership, asset rewards liquidation, and emissions issues, resulting in broader co-ownership, better incentives, and more impactful emissions.

🟠 TheoriqAI’s CEO @Tjido appeared in a Forbes panel, highlighting TheoriqAI’s unique value proposition: a single ecosytsem for the best agents.

🧠 Big Brain Breakdown

Welcome back to another Big Brain Breakdown, where we help you understand the fundamentals of blockchain AI projects so you can stay ahead of the herd and invest in projects poised for outperformance.

This week we are diving into Decentralized Physical Infrastructure Networks, or DePINs, breaking down what they are, why they are important (especially for AI) and our take on where the opportunities lie.

What is DePIN?

An infrastructure network is not a novel idea. Amazon AWS, Verizon, and Uber are all examples of infrastructure networks that you likely interact with, knowingly or unknowingly, every day. In the past, infrastructure networks have been developed and owned by centralized businesses, requiring the investment of significant capital over a long timeframe to create. Due to this, infrastructure networks are typically dominated and controlled by 1-2 companies in each particular domain or region, effectively forming oligopolies across industries.

Instead, DePINs utilize blockchains to coordinate the pooling of resources, such as physical hardware, virtual infrastructure or even just goods and services, incentivizing participation through tokens and rewards.

DePINs create efficient marketplaces where suppliers and buyers can interact directly, eliminating the need for rent-seeking centralized intermediaries, cutting costs and increasing profits for participants. On top of this, they democratize the ownership and control of critical infrastructure, which would otherwise be in the hands of tech giants that steal your data and sell it for a profit.

The rise of DePINs is particularly relevant in the context of the growing demand for computing power driven by AI. As AI models become increasingly complex and data-hungry, the need for scalable and cost-effective infrastructure solutions becomes more pressing. DePINs could eventually offer a compelling alternative to centralized cloud providers, enabling AI researchers and developers to access vast pools of computing resources at lower costs and with greater flexibility.

Moreover, DePINs promote greater resilience and security compared to centralized networks. By distributing resources across a wide range of nodes, DePINs reduce the risk of single points of failure and make it more difficult for bad actors to disrupt the network. This is particularly important in the context of AI, where the integrity and availability of computing resources can have significant implications for the accuracy and reliability of AI models.

What’s the Opportunity?

DePIN represents one of the most compelling use cases for crypto beyond financial markets, as the value of their centralized counterparts is in the trillions of dollars, which are ripe to be disrupted. In 2023, AWS generated over $90 Bil in revenue alone. Akash, a decentralized compute network, is currently on track to generate less than $1 Mil. That is a 90,000x difference—we are still early.

When it comes to picking a winner in the DePIN space, it's essential to recognize that, at this early stage, most DePIN protocols trade primarily on narratives and market sentiment rather than fundamental valuations. In the short term, positioning yourself for narratives could be a good strategy.

For example, there is a narrative around the emergence of DePINs launching on new chains with a growing user base. Nosana, a decentralized cloud computing platform built on Solana, has been gaining traction recently. As new chains attract new capital and mindshare, projects in these ecosystems can outperform.

Investing in DePIN long-term requires looking for solid projects with real users, a sustainable growth model, and revenue. depin.ninja is a good resource for checking 30-day revenue for DePIN projects and spotting which projects are actually being used. At this early stage, the majority of DePIN projects generate very little revenue, and trade at crazily high valuation multiples when compared with their revenue.

For example, Filecoin is the generating the most revenue of any DePIN project, yet still only has a 30-day revenue of $2mil and trades at a $3.3 billion market cap, a multiple of over 150x. However, there is no doubt that the space has significant potential as these projects mature and capture market share from centralized competitors. Investing in DePIN protocols today could be seen as similar to having the opportunity to invest in major infrastructure networks like Amazon, Google, or Verizon in their early days.

As an investor interested in the DePIN space, it is important to be clear about which strategy you are going to take with DePIN projects. You may decide your edge is in trading short term narratives, determining long-term plays or something else entirely. Whatever you decide, just make sure you are clear on what it is, otherwise you’ll find yourself underperforming like the rest of the herd.

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