By Himani Verma
Moody‘s Ratings released its first-ever report on the decentralised physical infrastructure (DePIN) sector, highlighting its potential to help existing networks scale and innovate. The report addresses key challenges, including regulatory uncertainties and cybersecurity risks that could block growth.
Moody’s Ratings, a leading Wall Street credit ratings agency, has released its first-ever report on the decentralised physical infrastructure (DePIN) sector. The report emphasises DePIN’s potential to support existing network growth and innovation highlighting several obstacles that could impede its adoption.
Decentralised physical infrastructure networks utilise blockchain technology to support real-world systems such as telecommunications, data storage, and computing. The model aims to decentralise these infrastructures, promoting flexibility and scalability through the use of digital tokens as incentives. This approach could reduce the capital-intensive demands faced by traditional network operators in telecommunications, utilities, and transportation.
However, Moody’s report underscores that regulatory uncertainty and cybersecurity risks pose significant challenges to the widespread adoption of this technology.
Regulatory concerns and cybersecurity risks could hinder growth
The DePIN industry is quite concerned about the current state of international regulations. The uncertainty and complexity of existing restrictions could slow innovation and keep many DePIN projects from realising their full potential. Moody’s highlights that integrating blockchain with traditional infrastructure could expose new vulnerabilities, increasing the risk of cyberattacks.
Despite these challenges, the report also suggests that DePIN could become a valuable tool for existing network operators. By using a decentralised model, companies can reduce costs and enhance operational efficiency. This adaptability is especially critical as artificial intelligence (AI) and the Internet of Things (IoT) continue to transform traditional business models.
Rising interest and funding in DePIN projects
The attention from Moody’s Ratings reflects the growing interest in DePIN from both investors and the broader financial community. According to data from digital asset market maker Wintermute, venture capital funding for DePIN projects has reached $583 million this year, already surpassing the total investment in 2022.
One example of a successful DePIN project is Helium (HNT), a decentralised wireless network that rewards users with tokens for deploying and maintaining internet hotspots. The network has attracted over 350,000 participants and gained more than 100,000 subscribers, demonstrating the sector’s potential for rapid growth.
Tim Kravchunovsky, founder and CEO of the decentralised telecommunications network Chirp, commented on the significance of the Moody’s report:
“The publication of the Moody’s report on DePIN is a significant milestone for our industry. Not only because of Moody’s name but also what this report signals to the traditional banking industry. In my opinion, such research can act as a blueprint for banks to determine the creditworthiness of the players in this industry, endorsing the credibility of the DePIN sector and providing support to projects that may wish to seek traditional lines of credit or loans. This increased interest in DePIN could ultimately bolster financing in the blockchain space.”
He further added that the report could drive interest in DePIN from public funding initiatives, particularly in areas like green energy. He noted:
“I could even see this kind of endorsement driving interest in the DePIN sector in terms of public funding, for example in sectors like green energy. DePIN and blockchain could be a promising proposition for certain nationally recognised lending and borrowing programs. It’s my hope that this opens up options for traditional financing and drives interest in overcoming regulatory hurdles.
However, I do want the crypto industry to take what Moody’s has said with caution because there is a tinge of pessimism here about the magnitude of the challenges we’re facing. But, we’re ready and willing to address these challenges and we shouldn’t be discouraged.
DePIN projects, including ours and many others that I’ve spoken with, are very open to having conversations with legacy players that are needed to drive progress. This spotlight helps open the door to working together to improve current infrastructure while also enabling an increased level of flexibility, resilience, ownership, and decentralisation that comes from the models we are actively building.”
As the sector continues to attract attention from major financial institutions like Moody’s, the potential for new funding and partnerships could help overcome existing barriers and drive further innovation in decentralised physical infrastructure.
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