Designing for Profligate Perfection

One useful way to think about DePINs is what you might learn by considering an example from Nature. The growth structure of a well formed DePIN reflects a common pattern in Nature; profligate seeding. One seahorse will give birth to 2,000 babies, a common octopus will lay 100,000 to 200,000 eggs at one time, and an African driver ant queen will lay 3-4 million eggs every 25 days.

Profligacy as a strategy has deep evolutionary roots. Profligacy is one way to allow for the greatest chance for survival. It’s no wonder it’s surfaced as a primary feature in the new business mode of DePINs, or Decentralized Physical Infrastructure Networks.

Of course, profligacy in a regular business quickly leads to ruin. How is a DePIN different?

The main differentiator for the DePIN business model vs other business models is, in fancy terms, “distributed capital expenditure.” For the rest of us, that means that rather than the business itself buying and deploying its products in order to provide a service, thousands of people will do that for them in return for a token reward.

In practical terms, this means a business has access to unconstrained capital (UC) when it comes to building their physical infrastructure network. It’s important to note that this unconstrained capital only gets you through the first stage of the business. More on this later.

For now, let’s focus on two potential missteps DePIN founders should avoid.

First, thinking that UC is a baked-in feature of DePIN.

Second, thinking UC is easy to direct.

Neither are true.

Let’s deal with each of them in turn so that whether you are a founder, investor, or deployer, you can clearly see one of the less obvious obstacles in building a successful DePIN

Myth 1: Unconstrained Capital Is Baked In

First, unconstrained capital is NOT a baked-in feature of DePIN. The ability to get complete strangers to buy a product and provide a service by deploying that product relies entirely on the incentives you build.

This seems like it should be obvious, but it’s worth noting as a number of DePIN projects have ignored it and are still stuck with far less nodes than they need. You don’t automatically get a giant network just because you have a DePIN. You need the right incentives.

Building great incentives demonstrates the power of the “push/pull” rule of business. Briefly, if the project always has to be out hustling and pushing their products, the project will only be successful for as long as they push. Once they stop pushing, the business stops growing.

On the pull side, if your customers are pulling product from you because you designed incentives correctly, you can focus your efforts on consistently building better and better product rather than on constantly building a sales machine to push.

“Pull” businesses are better for growth, sustainability, and sticking power. A well-formed DePIN incentive structure creates an extraordinary “pull” business.

Myth 2: Unconstrained Capital Is Easy To Direct

The second common mistake that founders make is thinking that everyone who participates wants a healthy network and knows how to build it.

What is actually true is incentives that are powerful enough to build a global network quickly are very difficult to manage.

There isn’t an “easy” button for this. Even if you hire the best in the world, you still have to be incredibly nimble. You’re working in the Wild West and have to be ready to constantly improve your system. DePINs are not (by a long shot!) a “set and forget” business.

This takes us back to Nature and profligate seeding as our model. Fundamentally, a DePIN relies on profligate seeding. The incentives you build cannot be half-measures; they have to be so powerful that your community deploys as many nodes as fast as possible.

A DePIN cannot rely on the perfect number of nodes to be deployed in the correct places just because people like the technology. If that were true, the project would already be built.

The crux of a successful DePIN is knowing how to broadly direct the incentive energy harnessed to get a result useful enough to the world to stick around. Think of it this way: A DePIN allows you to move towards a known business objective while simultaneously developing unknown opportunities that are a function of getting lots of input (from your community.)

Dipping into military strategy here, let’s talk about Coup d’Oeil as defined by Clausewitz: “The rapid discovery of a truth which to the ordinary mind is either not visible at all or only become so after long examination and reflection.” (J.J. Graham translation of On War.)

Once you get that, recognize that you’ve only passed stage 1. Getting through stage 1 only buys you enough time to enter stage 2, where you continually improve the incentive structure until you reach stage 3, a sustainable system.

So, what can you learn from Nature and the idea of profligate seeding? We think there are a few useful takeaways from using this model.

First, start with imagining what a perfectly deployed networks looks like, and share that picture with your community. You’re unlikely to achieve it off the bat, but if everyone knows exactly what you’re going for, you can engage the enormous engine of community brainpower to help you get there.

Second, recognize the fundamental power of your strategy is in large numbers. Profligacy is a feature, not a bug. Don’t stress about getting deployments that are too dense to be optimal. Know your network goals and relentless design incentives to over-achieve those.

One of the hidden powers of profligacy is that you may find new opportunities you never otherwise would have known about had you not been able to over-deploy. If you’re thinking in terms of natural selection, remember that profligate offspring make genetic diversity more like, which can deliver the ability to fill new niches. Be ready for opportunities!

Third, remember that in Nature, large fluctuations in the population in any species that relies on a profligate strategy is normal. Be prepared for overgrowth to be cut back as the map of nodes gets dense.

Fourth and finally, build flexibility into your project structure. It is critical that you retain the ability to change as you grow, explore, and develop new areas. We are still in the Wild West, and the first attempt at what you do is very likely to open up opportunities that are not to be missed but could not have been planned for.

As Field Marshall Helmut von Moltke famously said, “No plan survives first contact with the enemy.” Be prepared!

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