Tokenomics Considerations for DePIN Projects

Tokenomics Considerations for DePIN Projects

Tokenomics Considerations for DePIN Projects

Explore essential tokenomics strategies for DePIN projects, focusing on governance, rewards, and supply management for sustainable growth.

Explore essential tokenomics strategies for DePIN projects, focusing on governance, rewards, and supply management for sustainable growth.

Written by the Tokenomics.net team

Mar 8, 2025

Decentralized Physical Infrastructure Networks (DePIN) combine physical infrastructure with blockchain, enabling communities to manage services while earning token rewards. Popular examples like Helium and Filecoin show how tokenomics drive participation and growth. However, challenges like price volatility, reward sustainability, and market competition persist.

Key takeaways for building successful DePIN projects:

  • Tokenomics: Design models to motivate participation, align stakeholders, and ensure long-term growth.

  • Rewards: Use performance-based incentives, geographic bonuses, and reliability multipliers.

  • Supply Management: Implement token burns, dynamic minting, and vesting schedules to control inflation.

  • Governance: Adopt voting mechanisms like quadratic voting and delegated voting for balanced decision-making.

  • Revenue Models: Shift toward service-driven income to complement token-based rewards.

Quick Comparison of DePIN Examples

Project

Key Feature

Token Use Case

Challenges Addressed

Helium

Decentralized IoT network

Proof of Coverage rewards

Price volatility

Filecoin

Decentralized storage

Storage/retrieval incentives

Controlled token supply

NATIX

Location-based services

Burn mechanisms

Value accrual for holders

Hivemapper

Mapping the world's roads

Performance-based rewards

Dynamic reward adjustments

Tokenomics is critical for DePIN success. Addressing supply, governance, and rewards ensures sustainable growth while avoiding common pitfalls like over-reliance on tokens or poor distribution strategies.

Related video from YouTube

Network Participation Rewards

Reward systems play a key role in attracting and keeping participants in DePIN networks. These systems use a mix of strategies, starting with fair compensation for infrastructure contributions.

Infrastructure Provider Payments

Infrastructure providers bring physical resources to the table and need rewards that match their efforts. Successful DePIN projects often use the following payment strategies:

Payment Feature

Purpose

Impact

Performance-Based Rewards

Encourage high-quality service

Boosts network reliability

Geographic Bonuses

Promote coverage in underserved areas

Expands network reach

Reliability Multipliers

Reward consistent uptime

Strengthens network stability

Data Transfer Incentives

Pay for actual network usage

Increases practical utility

Token Release Schedule

A well-planned token distribution is key to maintaining economic stability. For example, the OORT Foundation extended its token release timeline from four to six years, locking 800 million tokens for five years. Different token distribution models are used based on project goals:

Schedule Type

Best Use Case

Risk Level

Linear Stream

Predictable, steady growth

Medium

Cliff Stream

Encourages long-term commitment

High

Dynamic Release

Adjusts to market conditions

Variable

Backweighted

Rewards later-stage contributions

Medium-High

These planned schedules support effective reward systems, as seen in Helium's approach.

Helium Network Analysis

Helium

Helium stands out as a prime example of a well-structured reward and token distribution system. As of July 2021, the network had over 88,000 Hotspots in more than 8,000 cities worldwide. Its Proof of Coverage (PoC) system rewards participants for tasks like verifying hotspot locations, creating wireless coverage, monitoring peer performance, and facilitating data transfers.

Helium started with no HNT in circulation and avoided pre-mining. Its reward structure focuses on network usage, allocating most HNT to data transfers rather than simple deployment. This approach has fueled the network's rapid growth while ensuring long-term stability.

Token Supply Management

Managing token supply effectively is essential for maintaining value in DePIN projects over time. Recent trends highlight an increase in advanced supply control strategies, with 62% of DePIN projects adopting burn mechanisms after 2022, compared to just 24% prior.

Token Burn Methods

Token burning is a process that permanently removes tokens from circulation, reducing supply to create scarcity. DePIN projects commonly use four main burn mechanisms:

Burn Method

Implementation

Impact

Transaction Fee Burns

A portion of network fees is permanently removed

Gradual supply reduction

Protocol Revenue Burns

Revenue is used to buy and burn tokens

Returns value directly to holders

Performance-Based Burns

Burns are tied to network performance metrics

Aligns with network growth

User-Initiated Burns

Users voluntarily burn tokens

Strengthens community involvement

One example is the NATIX Network, which burned over 8.5 million $NATIX tokens between July and August 2024. These tokens came from instant withdrawal fees and marketplace revenue. NATIX allocates 40% of its revenue to buyback and burn, 35% to staking rewards, and 25% to research and development.

"The NATIX tokenomics model is crafted to ensure value and sustainability for $NATIX token holders. Through our design, the value of the $NATIX token is designed to increase over time as the supply decreases. We use every opportunity to accrue value to the token, with the main mechanism being token burning, via buyback or directly from fees, along with keeping a maximum fixed supply, which ensures our economic model is fully deflationary." - NATIX Team

Supply Release Controls

In addition to burning tokens, controlling how tokens are released is essential for balancing growth and maintaining value. Many DePIN projects are moving away from fixed minting schedules, which can lead to early front-loaded rewards and fewer incentives later on. Key strategies include:

  • Dynamic Minting: Adjusts token release based on network activity.

  • Vesting Schedules: Locks tokens for team members and early investors.

  • Progress-Based Distribution: Rewards are tied to specific network milestones.

Hivemapper provides a great example of this approach with its Map Progress metric, which links weekly rewards to real mapping activity across the network.

Filecoin's Storage-Based Model

Filecoin

Filecoin offers a strong example of controlled token minting and distribution. Its system incorporates several unique features:

Component

Description

Impact

Dual Minting

Combines baseline and simple minting for rewards

Ensures balanced distribution

Performance-Based Release

Up to 770M FIL tokens minted based on performance

Encourages network growth

Vesting Schedule

75% of mining rewards vest over 180 days

Promotes long-term alignment

Mining Reserve

300M FIL tokens set aside for future mining needs

Supports ongoing development

By September 2022, about 70% of the 520 million FIL tokens minted or vested were in circulation, showcasing the effectiveness of Filecoin's approach. Additionally, the FIL+ program has successfully incentivized meaningful storage deals while maintaining supply control.

"Filecoin's cryptoeconomic constructions help ensure that value accrual for participants aligns with the long-term utility of the protocol." - Vik Kalghatgi, Cryptoeconomics @ Protocol Labs

DePIN Governance Systems

Governance systems play an important role in DePIN projects, ensuring decisions are made fairly and growth remains steady. However, participation in governance is often low - data shows that less than 1% of eligible token holders typically take part, with fewer than 100 addresses controlling over 50% of voting power. Let’s break down the current voting methods, the path to decentralization, and an example of governance in action.

Voting and Decision Making

DePIN projects aim to balance community involvement with operational efficiency by using various voting systems. Active DAOs generally see a voter turnout of 10–15%, with 60–70% of community proposals successfully reaching consensus.

Voting Mechanism

Purpose

Implementation Example

Quadratic Voting

Reduces dominance by large holders

MakerDAO's interest rate adjustments

Time-Locked Voting

Prevents flash governance attacks

Compound's protocol upgrades

Delegated Voting

Allows representatives to vote

Aave's risk parameter modifications

Direct Token Voting

Encourages direct participation

Uniswap's treasury management

Steps to Decentralization

Once voting systems are in place, projects move toward decentralization through a series of structured phases:

Phase

Focus Area

Key Actions

Initial Setup

Foundation Setup

Create governance contracts and voting mechanisms

Development

Community Building

Launch education programs and gather feedback

Transition

Power Distribution

Introduce time-locked voting and delegation

Mature

Full Decentralization

Enable community-led treasury management

A good example is Hivemapper, which uses its HONEY token to reward contributors and empower the community to make decisions on mapping priorities.

Render Network Case Study

Render Network

The Render Network offers a strong example of balanced governance. It combines on-chain voting with off-chain discussions, ensuring fair representation through tools like time-locked and quadratic voting. This hybrid approach not only protects the system but also keeps token holders aligned with the network's growth goals.

Governance systems need regular updates to maintain the right balance between decentralization and efficiency. The Render Network shows how flexible governance models can align a project’s growth with its community's interests.

Long-Term Token Model Success

A well-designed long-term token model prioritizes stability and growth over time. DePIN projects achieve this by balancing token circulation, price stability, and sustainable revenue streams. This is done through flexible token mechanics and diversified income sources.

Token Circulation and Price Management

Managing how tokens move within the network and their price is crucial for maintaining value. Top DePIN projects use several methods to achieve this:

Mechanism

Purpose

Example Implementation

Token Burning

Lowers circulating supply to maintain value

Binance Coin's quarterly burns based on trading volume

Staking Rewards

Encourages users to hold tokens longer

Helium's staking rewards

Dynamic Emissions

Adjusts supply according to demand

Geodnet's location-based reward adjustments

These strategies not only control token circulation but also complement evolving revenue models to ensure long-term network stability.

Network Fee Systems

Once token management stabilizes value, adding diverse revenue sources strengthens the model further. DePIN projects are increasingly moving from token-based rewards to service-driven income. A great example is Akash Network, which earned $2.5 million in 2024 through a mix of revenue streams, including marketplace transaction fees, resource leasing, developer tools, and enterprise partnerships.

Hivemapper's Approach to Revenue

Hivemapper

Hivemapper provides a compelling example of how reward adjustments can support sustained growth. In 2023, the platform managed to map 10% of the world's roads in less than a year. By offering performance-based rewards, Hivemapper keeps contributors engaged while delivering impactful results.

Key Points for DePIN Projects

Building on earlier discussions about rewards, supply control, and governance, these strategies highlight effective token design approaches.

Core Token Design Rules

DePIN projects that succeed often follow key principles to ensure their tokens serve a purpose and remain viable.

Design Principle

Implementation Strategy

Impact

Token Utility

Define clear use cases within the ecosystem

Creates organic demand

Distribution Model

Reward active participants and contributors

Promotes network growth

Supply Management

Use burns and buybacks strategically

Helps manage inflation

Governance Structure

Allow community input while keeping decision-making efficient

Balances control and inclusivity

Common Token Design Errors

The rapid rise in DePIN funding and market caps has exposed some major missteps. For example, the Helium Network's journey - despite deploying $1 billion in hardware - highlights the need for sustainable demand.

Here are common mistakes to avoid:

  • Relying too heavily on native tokens, which can tie network value to volatile market conditions.

  • Creating overly complex token models that discourage user adoption.

  • Poor distribution strategies that lead to centralization.

  • Failing to establish clear, practical use cases for the token.

Learning from these errors is key to achieving the kind of success seen with projects like Helium and Filecoin.

Regular Token Model Reviews

Frequent reviews using mathematical models help maintain sound token economics. Projects should evaluate factors like network participation, token velocity, circulation, user feedback, and market trends. It's also essential to monitor the sustainability of smart contracts and liquidity needs. Leveraging market demand and stablecoin-based revenue distribution can provide infrastructure providers with a steady income.

Consistent reviews ensure token models stay aligned with the project’s evolving needs and market dynamics.

Related posts

Related Posts

Free Strategy Call

In just 30 minutes, we'll understand your goals and recommend the best path 

forward. No pressure. Pure value.

© 2025 TOKENOMICS.NET

Free Strategy Call

In just 30 minutes, we'll understand your goals and recommend the best path 

forward. No pressure. Pure value.

© 2025 TOKENOMICS.NET

Free Strategy Call

In just 30 minutes, we'll understand your goals and recommend the best path 

forward. No pressure. Pure value.

© 2025 TOKENOMICS.NET