Author: Aaron Basi, IoTeX Product Lead, CoinTelegraph; Compiled by: Wu Baht, Golden Finance

Looking forward to 2025, Trump’s attitude towards cryptocurrency will tend to be more friendly, and the two major U.S. Political parties have pledged to provide clear regulation. While this shift is great news for Web3, there is one area that needs special attention: Decentralized Physical Infrastructure Networks (DePIN).

DePIN represents an emerging industry worth $38.4 billion. They are not your typical crypto projects. The DePIN project connects blockchain incentives with real-world infrastructure, enabling everyday users to monetize their electronic devices at will. Many crypto veterans tend to shy away from regulation, believing it stifles innovation or inhibits everyday freedoms. DePIN’s unique hybrid nature requires a strong framework to protect and guide trust in order to realize its full transformative potential.

DePIN creates a self-sufficient economy where participants are directly compensated for their contributions to the network. This makes DePIN particularly well-suited to solving problems in industries that rely on digital innovation and physical presence, such as geolocation, distributed storage, and IoT connectivity. This hybrid nature also poses challenges as it defies the logic of existing regulatory structures and requires new rules.

The DePIN project has created real economic value from the beginning. Geodnet is a relatively new project that has already achieved approximately $1 million in annual recurring revenue (ARR) through satellite miners. The broader DePIN ecosystem has reported over $15 million in ARR. This tangible success highlights the economic viability of the industry, but with it comes the urgent need for visible oversight.

DePIN networks often require access to data from user devices to operate effectively, whether that’s geolocation data for precise mapping or storage capacity for distributed cloud solutions. Without clear guidelines, neither users nor operators can determine the boundaries of data collection. How much data can the DePIN protocol access? What protections are in place to ensure privacy and prevent abuse? Without answers, users may be hesitant to participate, limiting network growth.

The DePIN network relies on tokens to reward users for contributing their devices or data. Likewise, without clear regulation, questions arise about fair compensation. How should users' contributions be assessed, especially when their devices are critical to the network? A lack of standardization can lead to predatory behavior, eroding trust in the ecosystem.

The DePIN network promised decentralization, but early projects often relied on centralized leadership for decision-making, creating transparency gaps in governance and revenue distribution. SomeThe DePIN project failed to disclose its governance structure or decentralization roadmap, leaving stakeholders unsure of who controls the network and how the project shares revenue with users. This opacity undermines the industry’s fundamental principles and may prevent users seeking a truly decentralized system from participating. Tailored regulatory frameworks can address these issues by incentivizing transparency.

Traditional regulations often treat physical infrastructure and digital currency as separate areas, with little regard for the hybrid nature of DePIN. For example, publicly traded Web2 companies must disclose revenue, while Web3 transactions are typically visible on-chain. But what if a theoretical DePIN project generates millions in revenue, but keeps this information secret and only rewards users with a few thousand dollars on-chain? What if a user has contributed significantly with their physical device, but the tokenomics of the project change significantly? These unanswered questions create operational and compliance risks for everyday users.

Developing a strong regulatory framework for DePIN is critical to unlocking its potential as a transformative force in technology and infrastructure. Regulators must take a nuanced approach to address the complexities of DePIN’s hybrid nature.

The United States has a tradition of embracing innovation, and it has the opportunity to lead the industry by developing tailored regulations that will set the benchmark globally and ensure accountability and innovation thrive in the DePIN ecosystem. develop. By acting decisively, regulators can position DePIN as the foundation for a hybrid and decentralized future. The benefits extend far beyond the technical aspects. This is a regulatory challenge and a golden opportunity to redefine how economies and societies work. Let’s seize this moment and develop a framework for DePIN to thrive, ensuring decentralization, inclusion, and prosperity in the IoT space.