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The road to decentralization: Optimal coverage on Decentralized Physical Infrastructure Networks (DePIN)

Author

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  • Soria Ruiz-Ogarrio, Jorge
  • Moya Velasco, Jorge
  • Estévez-Mendoza, Carlos

Abstract

Decentralized Physical Infrastructure Networks (DePIN) represent an emerging organizational form for operating physical infrastructure through blockchain-based coordination. DePIN through decentralized protocols and token-based payment mechanisms incentivize independent agents to deploy, maintain, and monetize real-world infrastructure, such as wireless networks, storage units, or sensors. This article presents a first formal economic analysis of DePIN architectures, modelling investment decisions under network effects in a blockchain-native Decentralized Autonomous Organization (DAO), with protocol-defined reward schemes. It establishes the equilibrium conditions that support decentralized provision, where token prices internalize participation, service reliability, and network coverage. Furthermore, it identifies a minimum viable coverage threshold determined by costs and network effects. Through a multi-agent machine learning simulation, we confirm that decentralized provision improves efficiency compared to centralized models. The results support the economic viability of DePIN and provide design guidelines for future decentralized infrastructure protocols. Finally, we propose a DAO incentive mechanism to implement First Best provision in Decentralized Physical Infrastructure Networks.

Suggested Citation

  • Soria Ruiz-Ogarrio, Jorge & Moya Velasco, Jorge & Estévez-Mendoza, Carlos, 2026. "The road to decentralization: Optimal coverage on Decentralized Physical Infrastructure Networks (DePIN)," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325023645
    DOI: 10.1016/j.frl.2025.109115
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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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