Why DePIN Fails

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|                     DEPIN FAILURE                          |
+-----------------------------------------------------------+
|                                                           |
|   Why North American VCs can't push DePIN                 |
|   Narrative logic vs Market acceptance                    |
|                                                           |
+-----------------------------------------------------------+

Narrative Packaging Case Study

In 2016, I took on a project packaging job in Australia - a sparkling water machine with water purification:

Narrative Design

Water H2O left standing long-term oxidizes to form H2O2 hydrogen peroxide. H2O2 is highly corrosive and even in trace amounts causes irreversible damage to the digestive system.

Using a purifying sparkling water machine, the carbonation reaction neutralizes water oxidation, preventing H2O2 formation.

Model Design

Mining machine model:
├── Sparkling water canisters as consumables (monthly electricity)
├── Agent commissions 15-50%
├── Drink water to mine "candy" points
├── Exchange for mall products or cash
└── Unlock up to 300%+ APY based on water usage + consumption + performance

Bubble absorption:
├── Consumables prepaid but delivered on cycle
└── Machine quality lasts about a year before needing repair

Result: Scheme survived 1 year 9 months, total deposits over 400M RMB, landed safely

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Three Things the Narrative Did Right

Strategy	Effect
Narrative elevation	Kitchen appliance becomes health device (200 → 2000 RMB)
Audience expansion	Young hipsters expanded to elderly, doubled spending power
Channel expansion	Can leverage Amway, Nu Skin, Perfect established MLM teams

In plain terms: Raise prices, expand demographics, replicate market

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North American VCs’ DePIN Problem

Their First-Principles Logic

From VC perspective, DePIN narrative:

• Satisfies Western-perceived digital infrastructure gap
• “Reduce overall costs” through decentralization logic works
• Mass adoption logic works
• Replacing BTC mining as North America-led crypto real estate logic works

Yet this round’s DePIN doesn’t compare to DeFi, GameFi

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Where’s the Problem

Industry insiders buying in ≠ Market buying in

Market buying in requires:
├── Concrete impressions
├── Executable, foreseeable, profitable path
└── Absolutely NOT abstract "narrative"

Compare My Sparkling Water Case

Logic completely doesn't work
        BUT
Perceivable, foreseeable, executable for audience
        +
Channel partners profit
        =
No matter how outrageous, enough people will round it out for you

North American VCs have abstract grand narratives but are too far from the concrete

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What DePIN Can Work First

First Logic: Scale Effects

Get the most people to spend the most money participating in the mining scheme fastest, get big enough and exchanges must list

This kills North American projects that need to self-manufacture and sell mining machines:

• Asia is the main mining machine market
• North American VCs’ market understanding is below regular users
• Can’t build distribution channels = can’t achieve scale effects

Permissionless Zero-Cost Type

Use zero-cost logic to bypass distribution channel needs, users satisfy hardware requirements themselves creating sunk cost:

Project	Model	Characteristics
io.net	Shared computing	Users rent lots of GPUs for points, upfront sunk cost
Sending Network	Shared CDN	Ultra-low barrier, narrative sounds like revolution
Grass	Shared bandwidth	Browser plugin, ultra-low barrier

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Summary

Reason DePIN narrative isn’t sexy:

Everyone globally who's played dividend schemes
        >
DePIN storytellers' market understanding

Logical coherence ≠ Understanding the market
        =
Hard to create freshness
        =
Narrative fatigue

Only Solution for DePIN Mining Schemes

Consider scale first
        ↓
Minimum cost, maximum replicability to get on the death truck
        ↓
Tell the story that the most high-spending-power demographic
        ↓
Most wants to hear, that fits their interests
        ↓
Regardless of whether it makes sense

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Core Formulas

Narrative success = Audience perceivability × Channel profitability

North American VC problem:
├── Logical correctness ≠ Market buying in
├── Abstract narratives too far from concrete
└── Don't understand mining machine distribution

DePIN only solution:
├── Scale effects first
├── Zero-cost bypasses channel needs
└── Ultra-low barrier + user self-created sunk cost

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Narrative changes fundamentals