DePIN & Digital Commodities
There has been significant growth in the Real-World-Assets category, driven primarily by tokenisation of US Bonds and Treasuries. There are many benefits to tokenisation real-world-assets, which will see the category and use cases continue to grow exponentially. Included in this will be contracts for commodities. Yet, the more interesting class will be the digitally-native commodities created by projects such as Helium, Geodnet, and Hivemapper. These projects are pioneering digital commodities, enabling individuals to participate in networks that offer global access, scalability, and transparency. This emerging category of introduce us to a definition of commodities not limited by physical resources or geography.
What are commodities
At their core, commodities are basic goods that are interchangeable with other goods of the same type. They are often the building blocks of more complex products and are traded on a global scale, with their prices driven by supply and demand dynamics. Traditional commodities are characterised by the following:
Fungible - each unit of the commodity is identical and can be exchanged with another.
Consumable - commodities are consumed in the process of creating value, whether through energy, manufacturing, or other means.
Liquid - ****Commodities are traded in well-established markets, with futures contracts allowing participants to hedge risks or speculate on price movements.
Digital commodities
Digital commodities are a concept that has been brought to life by projects like Helium, Geodnet and Hivemapper to name a few. These networks represent a new breed of decentralised infrastructure, where value is created and exchanged in a purely digital form.
Helium - a decentralised wireless network that rewards users for providing network coverage. The "commodity" here is the bandwidth or wireless coverage provided by individuals across the globe.
Geodnet - a decentralised network for geospatial data, where users contribute positioning data in exchange for rewards. The digital commodity is the accurate, real-time geospatial data that is critical for various applications, including autonomous vehicles.
Hivemapper - a decentralised mapping network where participants contribute to building a global map and are rewarded in digital tokens. The commodity is the map data itself, constantly updated and enhanced by users.
The digital nature of these commodities offers several advantages:
Global Access - Anyone with the necessary resources can participate in the creation and consumption of digital commodities, breaking down geographical barriers.
Scalable - Digital commodities can scale rapidly as networks grow, without the physical limitations of traditional commodities.
Transparent - Blockchain technology ensures transparency in transactions, with a clear record of how digital commodities are created, exchanged, and consumed.
Creating Digital Commodities.
Geodnet’s goal is to have 100,000 highly specific nodes, distributed appropriately across the globe within 3 years of genesis. The units have a delivered cost of approximately $1000 each. The capital required to scale the network to target levels is therefore ~$100,000,000. There are ongoing on-site maintenance requirements, meaning the responsible party is required to service these globally. Barriers such as up front capital and a globally distributed workforce have resulted in lack of privatisation - leading to subpar performance and innovation.
Through incentivising a global network of participants to set-up and maintain nodes, Geodnet can overcome capital and workforce limitations. The demand for real-time-kinematic data is such that Geodnet already have paying customers at 20% their global network target. This drives value to their token which is paid to the network of operators. It is estimated that node operators are in the black within 6 months of setting up a node.
The rise of digital commodities marks the beginning of a new chapter in the global economy. The introduction of new capital and workforce formation mechanisms could see and explosion in new industries, innovations and classes of commodities. As these DePIN networks grow and mature, they will redefine how we think about value creation and exchange.
