Here’s an intriguing opportunity: A startup
called SkySafe is selling sensors you can put on your roof to help monitor drone activity. In return, you will get a cut of the revenue it collects from clients like stadiums and government agencies, while also enjoying access to a FlightAware-style display of drones. It’s a cool project, but there’s a catch: The sensors cost $949, and any payments will be made in a new type of cryptocurrency. Would you go for it?
To get a sense of what this is all about, it’s helpful to know that SkySafe is one of the newer entrants to a segment of the crypto market called Decentralized Physical Infrastructure Networks or DePIN. The concept has been around since 2021 and the most famous example is a project called Helium—whose ads have been all over the New York City subway system—which will pay you to be part of its wireless phone network. A mapping initiative called Hivemapper is another example.
In theory, these projects are a great idea. Distributed networks are typically far more robust than centralized ones, and it’s appealing to disburse ownership of key services to a broad section of the public. The question is whether the economics add up. And it’s not clear that they do.
The trouble is the token-based payout systems that underlie the DePIN model. Like other crypto projects, they provide healthy allotments for founders and investors (hey there, Andreessen Horowitz!) that can be dumped on the market before the average network participant gets to collect. In the case
of Helium, there is ample evidence that insiders took
long, greedy gulps of the token supply at the expense of others. This led to accusations that Helium was shilling over-priced hardware while paying out only a pittance.
It’s tempting to write off this whole sector as a scam, but that’s not the case. SkySafe, the drone startup, has dozens of paying customers and its CEO is an MIT grad and former Air Force officer. It’s a legit operation and expanding its network with citizen participants makes sense. And even Helium may be turning the corner with its launch of a nationwide, low-cost phone network and a tie-up with T-Mobile.
The issue is the tokens. Drone enthusiasts may jump at the chance to be part of SkySafe’s network, but do any of them really want to be paid in the startup’s spun-up currency called FLYTE? Helium, meanwhile, has issued not just one but three new types of crypto coins—adding a heap of confusion onto an already dubious economic arrangement. The case for any of this is even less convincing given the growing popularity of stablecoins, which offer the efficiency of blockchain networks without any need to wade into the world of “tokenomics”.
The late Charlie Munger liked to say, “Show me the incentives, and I’ll show you the behavior.” That’s good advice for many situations—including for anyone tempted to invest in the world of DePIN.
Jeff John Roberts jeff.roberts@fortune.com@jeffjohnroberts 
