Crypto VCs Split as Hype Around Decentralized Physical Infrastructure Networks (DePIN) Fades
Investors are moving from grand‑scale visions of a trillion‑dollar DePIN market to a hard look at cash‑flow, hardware costs and real‑world demand.
A sector under the microscope
A year after analysts forecast that decentralized physical‑infrastructure networks could be worth $3.5 trillion by 2028, venture capitalists are now questioning whether the model can deliver beyond the buzz. The conversation has shifted from lofty token‑centric narratives to the fundamentals that determine whether a network can scale profitably: capital intensity, operating margins, and the allocation of risk.
Diverging views from the venture community
- Meltem Demirors (Crucible Capital) took to X this week to declare that the DePIN wave is “dying” and unlikely to revive. She argued that token‑based incentive schemes ignore basic financial realities, especially as traditional, AI‑driven data‑center and networking spend continues to favor centralized, efficiency‑first solutions.
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Despite the bleak outlook, Demirors also hinted that crypto could still play a role, but more as a layer that embeds finance into private‑infrastructure deals rather than as a bottom‑up, community‑driven engine.
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David Choi (USDai) framed the problem as financial rather than technical. After evaluating dozens of hardware categories that underpin DePIN projects—GPUs, antennas, routers—he noted that many token models break down when the cost of the equipment collides with financing expenses. The push to cut hardware costs often degrades data quality, creating a feedback loop where lower‑quality devices are deployed simply to keep the economics viable.
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Dan Elitzer (Nascent) dismissed the sector as “thinly veiled” ICOs, arguing that most DePIN offerings are inefficient at deploying infrastructure. Nascent’s own exposure to the space came through USDai, which they backed for its broader ambition to reshape capital markets rather than for direct DePIN upside.
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Sami Kassab (Unsupervised Capital) warned that abandoning DePIN outright would ignore crypto’s core strength as a coordination layer. He countered Demirors’ claim by emphasizing that a truly decentralized system cannot allow a single entity to dominate more than half of the supply, otherwise it veers into a de‑facto dictatorship.
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Naman Kabra (NodeOps) described the current turbulence as a “necessary correction.” According to the NodeOps co‑founder, the sector is moving from hype‑driven growth to a phase where revenue‑generating products and sustainable tokenomics determine success.
- Lex Sokolin (Generative Ventures) framed the debate as a distribution challenge. He pointed out that, unlike large tech firms that can internally allocate capital across owned assets, DePIN projects rely on external investors to fund the network while struggling to capture end‑user demand directly.
Performance data adds weight to the scepticism
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Delphi Digital’s 2025 token‑performance report shows DePIN‑related assets shedding more than 80 % of their value on average, ranking the category fifth‑worst among all crypto sectors, trailing only modular, gaming, agent‑based, and framework tokens.
- Nevertheless, a handful of projects have managed to generate real‑world revenue. Aethir, a GPU‑sharing cloud network, reported $127 million in revenue within a year of launch, while Helium, which builds wireless coverage through community‑owned hotspots, posted over $18 million in annualized network fees, according to DefiLlama data.
These outliers suggest that the DePIN model can work when a clear product‑market fit and a viable cash‑flow structure are present, but they are the exception rather than the rule.
What the split means for the future of DePIN
The debate is shaping a crossroads for the ecosystem:
| Factor | Optimistic View | Pessimistic View |
|---|---|---|
| Economic Viability | Emerging projects that secure revenue first, then layer token incentives, can sustain growth. | Token‑centric financing remains misaligned with the high capex of physical hardware, leading to cash‑flow gaps. |
| Hardware Quality vs Cost | AI‑driven orchestration (e.g., NodeOps) could optimize the use of lower‑cost equipment without sacrificing data integrity. | Pressure to cut hardware spend inevitably reduces network performance, eroding the value proposition. |
| Governance & Decentralisation | Properly distributed token supply can enable genuine coordination across disparate asset owners. | Concentrated token holdings turn “decentralised” networks into single‑entity control structures, undermining the ideology. |
| Capital Allocation | Crypto can embed financing into private‑infrastructure deals, unlocking new sources of capital. | Traditional AI‑heavy infrastructure spending continues to gravitate toward centralized providers, sidelining DePIN. |
Key takeaways
- Hype is receding: The lofty $3.5 trillion projection is now being re‑examined against real‑world economics.
- Fundamentals are front‑stage: Investors are scrutinising capital costs, hardware depreciation, and sustainable revenue streams more than token design.
- The sector is bifurcated: While many VC firms view DePIN as a high‑risk, poorly structured experiment, a subset believes the technology can survive as a coordination layer or as embedded finance in private infrastructure projects.
- Performance metrics are sobering: Average token returns in 2025 were down >80 %, placing DePIN near the bottom of the crypto sector performance hierarchy.
- Success stories exist but are limited: Projects like Aethir and Helium demonstrate that revenue generation is possible, but they represent a minority of the market.
- Future outlook hinges on utility: The next wave of DePIN funding is likely to favor ventures that prove a clear product demand and a viable business model before layering on token incentives.
Bottom line: The DePIN narrative is undergoing a reality check. As venture capitalists re‑evaluate their exposure, the projects that survive will be those that can bridge the gap between decentralized coordination and the hard economics of physical infrastructure.
Source: https://thedefiant.io/news/infrastructure/crypto-vcs-debate-depin
