Author | Colin Wu

In this episode, Colin Wu, founder of Wu Says, discusses the development of DePIN and its potential integration with the real world with EO Hao, CEO and founder of Future Money Group. The conversation covers the historical origins of DePIN, investment logic, and its integration with hardware, AI, and the real-world economy, the impact of ecosystems like Ethereum and Solana on DePIN, how different participants (including groups from right and left cultural backgrounds) shape the future of this field, changes in the U.S. regulatory environment and its potential driving force for Web3 and DePIN, opportunities for integrating real-world assets (RWA), AI computing markets, hardware mining, and how real-world economic value can be innovated through DePIN and blockchain technology.

Opening Introduction

Colin: EO, why don't you start by introducing your previous experiences and the current situation of your fund?

EO: Let me introduce myself. I am a loyal reader of Wu. In fact, I have been following you on Twitter, and it seems you have inadvertently followed me as well, but I haven't been very active on Twitter lately. I have always used the avatar of Milady. My name is EO, and I entered this space at the end of 2016 to the beginning of 2017. I have always identified as an entrepreneur. Before entering the cryptocurrency field, my background was in traditional finance, where I worked in investment banking focusing on asset securitization and distressed asset management. Later, I joined FinTech and started some companies in cash loans and big data-based lending services.

At that time, our products had 3 to 4 million mobile users in China and Indonesia, comparable to U.S. credit card lending platforms. Later, in cross-border business, we discovered that we could use Bitcoin payments to convert Indonesian income back to China. At that time, I came into contact with some OGs from Huobi, including the founder and early veterans in the crypto space, and that's how I accidentally entered this industry, and it has been seven or eight years now.

From the end of 2017 to 2018, we officially launched our current investment business called FMG (Future Money Group) because we believe Bitcoin and cryptocurrencies are the currency of the future. Currency is not only a measure of wealth but also an iteration of technology. It needs to digitize the concept of traditional currency and become part of a database. We are very fascinated by this technology and have always supported it.

As of this year, we have launched about three funds, including a direct investment fund, a primary market fund, and a secondary market fund. The areas we focus on are mainly some underappreciated directions, especially tracks that integrate with the real world, such as DePIN and RWA. We have been investing in this field for three to four years. We were also nominated as Asia's leading DePIN investor in Messari's DePIN report. This is my background and some current information about our fund.

Key Opportunities in Contacting the Solana Ecosystem and DePIN

Colin: I remember you mentioned your focus on DePIN, or rather, you emphasized your contact with Solana in your introduction. Is this an important opportunity for you to enter the crypto space, including a significant point for later entering DePIN?

EO: Yes, Solana was in 2018, I believe it was 2018 or 2019, when it was raising funds. An American friend introduced us to participate in Solana's early investment. But to be honest, during the last cycle, our understanding of Solana was not particularly comprehensive.

Colin: What was the valuation when you invested back then?

EO: The valuation was several hundred million dollars, not particularly early stage, but compared to now, it was indeed a very cheap valuation. At that time, our understanding of Solana had not reached the level of DePIN; we viewed it more as a substitute for Ethereum, the so-called "Ethereum killer." Especially in the last cycle, the support from the FTX system played a significant role in its promotion.

However, during that cycle, we could already see some signs, such as the Helium project supported by MultiCoin Capital. We came into contact with Helium relatively early, around the time its token price was one or two dollars, and we started building positions. We are familiar with many miners and have collaborated with many mining machine manufacturers, also supporting mining machine production companies within this ecosystem.

Later, this company developed seven or eight types of DePIN hardware products, and we participated in all of them. It can be said that this is one of the earlier and representative DePIN projects on Solana. In the current cycle, Solana is the most supportive ecosystem for DePIN and is also the most daring to promote innovation. It can be said that because of Solana, we began to pay attention to DePIN; at the same time, the development of DePIN further strengthened Solana's ecosystem. Therefore, I believe this is a complementary process and an effective path to seek Alpha (excess returns).

History and Development of the DePIN Concept

Colin: Actually, if we talk about DePIN, it cannot be completely said to be a new concept, as it has been around in the history of cryptocurrency for quite some time. If not strictly defined, Bitcoin can be considered the earliest DePIN, and its integration with hardware has always been one of the most important components in the crypto field. For example, in 2017, the PlayCloud launched by Thunder Fire was very popular. In the last cycle, Helium and Filecoin were among the most popular DePIN projects. In contrast, the hotspots in this cycle seem to be more in the AI field, such as IO.net and ATH. Although they had a good level of popularity at certain stages, it seems that there have not yet been any phenomenal DePIN products compared to previous cycles. This is my personal understanding of the history of DePIN; what do you think?

EO: You are absolutely right. When we first came into contact with DePIN, it actually didn't have this name. There were several related concepts at that time. I have lived in the U.S. for the past two to three years and am quite familiar with the Messari team. I basically witnessed them inventing the term DePIN.

Colin: When was this term proposed?

EO: It should be from the end of 2022 to the beginning of 2023. Before they proposed the DePIN concept, there were some other related concepts. For example, "EdgeFi," which is edge finance (integrating edge computing), emphasizes computing through end devices and rewarding these computing nodes for completing tasks. Additionally, MultiCoin Capital proposed "POPW" (Proof of Physical Work), which relies more on offline physical work, such as building 5G base stations to run networks, which is very practical and "blue-collar" work. In the future, this type of physical work proof may become the Web3 version of the Web2 sharing economy.

Later, the concept closer to DePIN was "TIPIN," which refers to utilizing token incentives for physical networks. Finally, two researchers from Messari, Sami and Stephanie, named it DePIN (Decentralized Physical Infrastructure Networks). Due to its popularity on Twitter, this name quickly spread widely and became a hot topic. This demonstrates the complete workflow of narrative word creation in Europe and the U.S. and how the community builds a concept. I feel that in Asia, we have relatively fewer phenomena of word creation like this, but there have been some in recent years, such as BRC and inscriptions.

Although the concept of DePIN has received a lot of attention, we also face some challenges. For example, some entrepreneurial teams label their projects as DePIN for fundraising, which does not completely align with the direction we value. What we hope to see are truly valuable projects, not just simple pursuits of buzzwords. We believe DePIN should create offline job opportunities, providing more people with the chance to join the blockchain network and earn income through labor. This network is more like a future work network.

My view of the current crypto industry is relatively complex. While I am generally optimistic, I hold a more pessimistic attitude towards the short-term and medium-term. Currently, too much energy is focused on gambling, Bitcoin, and ETFs, and this singular direction cannot attract new crowds. New entrants find it difficult to benefit or get rich through labor, which poses a huge challenge to the globalization and popularization of the crypto industry. We need to enable more people without initial capital to participate in the network through their labor, earn certain income, and thus bind themselves to the network.

A good example is Axie Infinity. Although it cannot be completely classified as DePIN, it successfully attracted public participation by allowing Filipinos to earn income by playing games (earning $50 to $300 a month). This way of binding users through labor is precisely the direction we hope to explore, rather than allowing DePIN to become a purely financialized system dominated by whales or capital-intensive networks.

Colin: Understood. From your description, DePIN projects that are more aligned with public participation may be the direction you desire. However, projects like Bitcoin and Filecoin, which require expensive hardware, seem not to fully align with this vision. In contrast, mobile mining or driving mining might be closer to your ideal?

EO: Yes. I believe a very important economic system in the network is its distribution mechanism. Taking Bitcoin as an example, its wealth distribution coefficient is very high, almost close to the wealth distribution level of North Korea. The current situation where whales, large miners, and equipment manufacturers hold a large amount of Bitcoin is difficult to change.

We hope to see a change in the token distribution mechanism through creative labor and innovative work, rather than just capital-intensive networks. Considering onboarding millions or even tens of millions of users, it is obviously unrealistic to have them mine. A better way is to design activities they can participate in daily, such as contributing data or behavior, to join the network and earn income. This model aligns more with our ideal vision.

Exploration of Solana Phones and Hardware Devices

Colin: The phone that Solana launched previously was very popular; do you think this is an interesting path?

EO: I think in the short term, this is a relatively interesting attempt. Regarding Solana's phone, I believe its reliability is relatively high. In contrast, it is very difficult for many small companies to make phones. There have been many failed cases in the Web2 era, such as Amazon's attempt to launch a phone, which ended in failure. Many software companies in China have also tried to make their own phones, such as Meitu, but ultimately did not succeed.

The main reason is that the supply chain for phone manufacturing is already extremely mature. Our research found that in Huaqiangbei, the cheapest phone molds can produce phones at a cost as low as $35, and these phones can even be sold to Africa. However, the real difficulty lies in the ecosystem and distribution channels. For example, in Africa, distribution channels are almost monopolized by four major Chinese companies. Additionally, establishing one's own application ecosystem is also a very challenging task.

Therefore, I am not optimistic about small companies or entrepreneurial teams doing mobile phone projects in the Web3 space. However, if I had to choose an exception, I believe Solana's phone is relatively more reliable. It has a complete ecosystem that supports many applications and tokens (such as Meme Coins), which can provide sufficient appeal and support for the phone's operation.

Secondly, the phone has a potential highlight feature. If Apple or Android opens up more support for cryptocurrencies in the future, I believe the development of offline DePIN will gain a better carrier. By then, we may not need to purchase specialized equipment; many functions could be accomplished simply through a crypto phone. If Solana's phone can be successfully launched, it might become an important connection point in the Solana DePIN ecosystem.

For example, this phone can achieve roaming through the Helium 5G network and can also verify Helium's network. Additionally, it can connect to Hive Mapper to upload road data and integrate with other applications in the Solana ecosystem, such as the ride-hailing service Teleport. Through these functions, it can become a connector for many DePIN devices. Therefore, I believe mobile phone projects launched by large ecosystems, especially those that can integrate with offline scenarios of DePIN projects, including some payment scenarios, are relatively more promising.

Colin: What do you think about hardware devices like rings, bracelets, and game consoles?

EO: I believe these devices usually rely on the support of a larger ecosystem. It is challenging for them to form a strong closed loop or network effect on their own; they are more suitable as part of an ecosystem to attract users to join. However, expecting them to develop independently and achieve significant economic value is quite difficult.

At the Ethereum Paris conference in 2021, I shared a study in the Filecoin sub-forum that explored the usage frequency of DePIN devices. Frequency, device cost, and labor intensity are the three key factors. Devices with high frequency, such as mobile phones or e-cigarettes used daily, often have lower economic value. In contrast, devices with high economic value struggle to increase usage frequency. If we overly emphasize purchasing a large number of devices to generate income without involving user labor participation, it will lead to capital concentration, where only wealthy individuals or those who understand the rules can benefit.

Therefore, we need to introduce user labor participation to create "sweat equity" for them. This user investment can deeply bind them to the network. Considering this, the economic value and network value of some small hardware projects often have an upper limit, making them more suitable as entry points for ecosystem traffic rather than developing independently into large ecosystems.

Colin: Are there examples of health-related devices?

EO: Yes, for example, Fred from Paradigm is developing an infrared brainwave device to help users improve sleep and regulate endocrine functions. With the development of biomedical technology and the increasing demand for data, such devices may unlock more economic value. This is a direction currently being explored in the U.S.

Colin: So, devices like e-cigarettes or Berachain are more likely a marketing tool?

EO: Indeed, that's the case. These devices may gain attention in the short term, but in the long run, it is challenging to truly empower their token economy or develop into large projects. They may only be highly popular at a certain stage, after which interest quickly declines.

Moreover, if DePIN projects can introduce more labor participation, they also need to create real-world income sources. Currently, most revenue in the crypto protocol comes from on-chain financial activities, such as transaction fees and lending. This revenue model is closely related to the crypto market cycle, significantly declining during bear markets and only recovering in bull markets.

If we want to attract more funds to remain in the crypto market and further grow TVL (Total Value Locked), we need to introduce more stable external income sources that do not rely on crypto market fluctuations. For example, generating external protocol revenue through DePIN devices or bringing more value to the network through market scaling. This is a point we pay close attention to when evaluating DePIN projects.

Development Prospects of RWA (Real-World Assets)

Colin: If we generalize the DePIN concept, would Worldcoin be considered a project that aligns with your ideal DePIN project? It indeed provides a path for the general public to participate.

EO: I believe it is a high-quality cryptocurrency project overall. Its fundamentals, investor lineup, and resources are all excellent. As a project, its airdrop mechanism is of very high quality. However, whether it can develop into a valuable economic network still needs time to verify. We are also unclear about how the team will develop next, but it is certainly one of the projects we will continue to monitor.

Colin: Understood. What do you think is the difference between a good Coin and a good network?

EO: A good Coin is an excellent speculative item or MEME project; a solid network requires more time to verify its value.

Colin: In the last cycle, storage projects like Filecoin were very popular. Did you participate as well? Later, it seems that the popularity of these projects has weakened.

EO: The fundamentals of Filecoin are indeed very good. We have been following this project closely. Its ecosystem, including AI-related projects like IO and Akash, also requires the underlying storage and computing support of Filecoin. Filecoin itself is also building a computing network aimed at achieving a truly decentralized platform.

Filecoin's vision is very grand; it is not just a DePIN project but aims to turn the entire computer into a distributed ecosystem. Similar projects include ICP and Ethereum, each taking different paths. Ethereum prioritized breakthroughs at the software level, focusing on smart contracts, while Filecoin approached it from the hardware side, such as solid-state drives and storage.

It has been proven that Ethereum's path is lighter and easier to achieve quick guidance. However, Filecoin's direction faces challenges due to hardware, making it difficult to attract users in the early stages. However, if given enough time and cycles, Filecoin may ultimately complement Ethereum by enriching the content layer.

Another noteworthy point is that Ethereum is promoting the decentralization of its hardware layer. Currently, Ethereum's POS system heavily relies on centralized hardware resources, such as AWS and data centers in Europe and the U.S. In other regions (like Africa), the costs of cloud services and offline servers are very high. Therefore, Ethereum is developing lighter nodes that allow households to run nodes and even develop hardware devices. These devices can store block data while running Ethereum nodes, promoting decentralization at the hardware level.

In the long run, various projects may ultimately head in similar directions, but the paths and timelines for entry differ. For investment, we need to assess which paths are more likely to achieve "revolutionary victories."

Colin: Besides DePIN, you also pay special attention to RWA. What background or logic is behind this focus?

EO: I studied real estate and finance at Columbia University and conducted in-depth research on the history of real estate financial instruments in the U.S. Most of the causes of the subprime mortgage crisis stemmed from the collapse of real estate derivatives. However, looking back, the largest asset class in the U.S., aside from government bonds, is corporate bonds and real estate.

Currently, the crypto field is beginning to break through government bonds (for example, MakerDAO purchasing government bond yield stablecoins). The next possible direction may be corporate bonds, B-rated bonds, REITs (Real Estate Investment Trusts), or mortgage-backed securities. These asset classes are large in scale, have good liquidity, and offer stable yields. By combining blockchain technology, these transactions can be completed in a more digital manner, reducing trust issues and improving efficiency.

I believe the emergence of RWA is very necessary. Currently, most assets in the crypto field are highly volatile and rely on cyclical trends. If we want funds to settle long-term and remain in this field, we need a richer asset structure. By introducing stable assets (like RWA), we can fill the gaps in the existing capital structure.

The development of RWA requires teams that understand both traditional finance (TradeFi) and are proficient in on-chain technology. These teams need to move traditional asset classes onto the chain and create a banking ecosystem that can settle funds. This is one of the directions we are currently focusing on.

New Directions for AI and Blockchain Integration

Colin: You just mentioned some combinations of AI and DePIN. Although the current hotspots may be more in AI Agents and token distribution, you should have researched projects like IO and ATH quite a bit. What do you think about the direction of AI and hardware integration in this cycle?

EO: Blockchain serves as a secondary market for the computing power market. In fact, we do not produce hardware in the crypto field, nor do we directly manage computing power; instead, we move this high-quality computing power onto the chain to enable it to be traded. In the context of last year's geopolitical situation, some computing power could not be opened to developers in specific countries, while projects like Akash and IO proposed a concept of "computing power freedom." One of their narratives is to allow computing power to flow freely like the spice in "Dune," unrestricted by nationality or country. Developers should be able to procure computing power freely at reasonable prices, and blockchain is entirely a permissionless network. I believe this concept will hold true for a long time.

By using blockchain, computing power can be turned into a commodity for developers to procure, while also innovatively tokenizing computing power. For example, computing power can be staked in the protocol, and the generated income can be distributed to computing power holders and token holders. This model provides a pricing mechanism for the computing power market, allowing for better management of market liquidity. I think this is a very interesting direction, and both Akash and IO are performing excellently in this field.

Colin: Are there any particularly interesting AI projects in the U.S.? For example, in the areas of autonomous driving or the Internet of Vehicles, how are these directions currently?

EO: The Internet of Vehicles is indeed a great scenario, especially in the U.S. Almost every household has a car, and there are no power banks because everyone charges in their cars, even eating and spending a lot of time in them. Cars serve as a mobile "indoor scene," containing a lot of private data and user habits, making it a very promising application scenario.

Dimo and Hive Mapper are doing related work. For example, the founder of Dimo shared an interesting idea with me at a conference in Hong Kong: transforming on-chain vehicle data (such as mileage, safety levels, and behavioral trajectories) into on-chain credit scores. These credit scores can be directly used on MakerDAO for collateralizing car loans or personal loans. This model can track vehicle and personal data, combined with offline loan service companies to ensure loan recovery, which is a very good direction. Through this approach, blockchain can deeply integrate with DeFi, and vehicle data can also provide more support for AI.

Additionally, AI development requires more data. Scale AI is a popular case; they employ tens of thousands of people across dozens of countries to train AI and provide data. Similarly, data collection can be incentivized in marginalized areas through DePIN. For example, a company in India once distributed phones to women in a vegetable market, allowing them to record vegetable prices. This data not only helps predict the CPI (Consumer Price Index) but is also faster and more accurate than data from the statistics bureau. If this data collection and monetization loop can be combined with AI and blockchain, it is a direction worth exploring.

Colin: Besides the computing power market and data, what other AI-related directions do you think are worth paying attention to?

EO: I believe that future Agents themselves will become a form of asset. Agents may represent a type of knowledge asset that can be stored on the blockchain. Agents can engage in games, negotiations, and settlements through smart contracts, forming a decentralized protocol. This model also has significant potential. I think the combination of computing power, data, and intelligent Agents is a few areas that are very worthy of in-depth exploration.

The Future of DePIN and Market Correction Mechanisms

Colin: Yes, but I have a question. One of the difficulties in the crypto space right now is its "casino attribute." To put it bluntly, it's a casino; to put it nicely, it can be called a trading attribute. This attribute seems to overshadow all other directions. For instance, trading tools like PumpFun or some Meme Coins can easily achieve daily profits of hundreds of thousands or even millions of dollars.

In such an environment, it is challenging for people to focus on projects that truly integrate with real society. Especially for hardware-related projects, the costs are higher. Ultimately, many DePIN or similar projects seem to turn into some form of "scheme." Whether it's the project parties or users, the focus often lies on the token economic model rather than the actual value of the project. What do you think about this dilemma?

EO: I completely agree with your point. First of all, I often read your tweets, and I think you are a breath of fresh air in the crypto space. The issue you mentioned is something many people are aware of but reluctant to discuss openly. I believe this is indeed a crisis we face: the crypto space often has to cater to quick money and speculative attributes for survival. This situation is indeed regrettable.

However, I still believe in the power of the free market. The market has a self-regulating ability, sometimes faster than we imagine. For example, over the past two years, we have seen the market correcting itself regarding VC coins and Ethereum.

A few years ago, I attended the Ethereum DevCon conference. At that time, Ethereum was still dominant, but I could already sense the bureaucracy within the ecosystem. To work on Ethereum-related projects, you might need to "know someone" or have someone help you retweet. This bureaucratic system felt off to me. However, the market corrected this issue faster than I expected. Attention gradually shifted from Ethereum to Solana and other applications that could directly generate profits.

Similarly, the market's correction regarding VC coins has also been very swift. Retail investors have gradually reduced their participation in VC coins, and many VCs have realized the problem, starting to launch more fair launch projects. This has shown me the efficiency of the free market in correcting itself. Although it takes time, that time may be shorter than we think. What we need to do is to stick to the direction we believe in and wait for the market to correct itself.

As for the "casino" attribute you mentioned, I believe that casinos themselves are also a business model. In traditional finance, there are also stocks related to casinos, such as Las Vegas Sands or certain online gambling companies in the UK. Although they are regulated, they are essentially still a business and can be fairly valued by the capital market. The blockchain field is no different. If certain casino-like projects can withstand the test of time, obtain compliance licenses, and operate stably, they may also achieve reasonable market valuations.

However, we also see that the blockchain field is not limited to casino attributes. In addition to gambling, many great projects and companies are emerging. These projects provide diversity and future development opportunities for the blockchain industry. I believe that the casino attribute will only be a part of the entire industry, not the sole direction dominating the entire industry.

The U.S. Regulatory Environment and Opportunities for DePIN

Colin: We all hope to see this industry become more diverse rather than concentrated in a single direction. Although the current situation is not entirely ideal, I still hope for change in the future. What do you think of the current entrepreneurial atmosphere in the U.S. combining AI and Crypto? Especially with the possibility of Trump returning to office, could this create significant support?

EO: I think this is actually quite clear. The regulatory approach in the U.S. has gradually become clearer over the years. They are not going to take a "one-size-fits-all" approach but are more inclined to set a framework. As long as you pay taxes and follow legal processes within this framework, you can operate. For example, Binance has paid a considerable amount in fines but has managed to establish a relatively stable foothold in the U.S. by adjusting its shareholder structure.

Within this framework, coupled with the need to further solidify the dollar's position through Bitcoin and other means, the U.S. regulatory system is becoming clearer and more stable. I believe the key areas in the future will include AI, Crypto, and DePIN. These areas all have significant opportunities.

Interestingly, the people engaged in DePIN in the U.S. have a very different profile from traditional Crypto participants. They are mostly men in their 30s to 40s, wearing plaid shirts and trucker hats, with a somewhat right-leaning style. This contrasts sharply with the white-left culture of the Ethereum community. At Ethereum conferences, you see many young people in rainbow clothing and with dreadlocks. But in the DePIN and Solana ecosystems, participants are more from a right-wing cultural background.

These new players will have a significant impact on the future of Crypto. Their value propositions are more practical, focusing on whether industries can benefit, whether the public can easily participate, and whether projects are beneficial to the U.S. This pragmatic value perspective is driving Crypto from "far left" to "center" or even "right-leaning."

Especially under the influence of the new government in the U.S., this shift is becoming more apparent. For example, David Sacks' Craft Ventures has invested in many Crypto projects, including Solana and Hive Mapper, among other DePIN projects. JD Vance has also mentioned some Crypto applications in his speeches, particularly the potential in communication fields, such as real-world applications like Helium.

This government and this wave of new players clearly have different preferences and focus points. They are more inclined to support projects that can integrate with the real world rather than purely pursuing decentralization. This is a trend worth studying in depth and reflects the direction the U.S. government may pursue in the future.

Colin: Understood, very interesting observations. Let's stop here for today, and we can delve into some related hot topics or interesting discussions next time.

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