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Decentralized infrastructure and applications

To start, we set up an Ethereum virtual machine-based blockchain network that included an EV end-user and a charging point. The charging point’s firmware was connected to a localized blockchain “node.”1 A localized version of a blockchain-based wallet application was also deployed for the EV end-user.

We believe that having locally accessible blockchain software, such as nodes and wallet applications, is key to solving internet access and connectivity issues. This setup allowed us to leverage a fundamental benefit and innovation of blockchain technology—a network’s nodes and its decentralized applications.

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1. A blockchain node generally is computer software that maintains a copy of the blockchain network, which can be used to verify, process and relay interactions on the network.
 
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Empowering networks with decentralized identity

An end-user’s identity today is typically managed on separate and centralized systems away from the user. This paradigm relies on third parties to securely handle users’ sensitive data for accessing digital services or making payments. This model can more easily lead to frequent data breaches, which can result in end-users losing trust and leaving entities at risk of reputational and financial loss.

For DePIN network participants to effectively interact with the infrastructure, decentralized identity is needed to support a secure and efficient way to manage end-user access and to offer additional features, such as identity-based loyalty discounts. Decentralized identity is fit for interacting in a decentralized network, allowing end-users to control their own identity information, while allowing for entities to leverage decentralized identity protocols to manage access to their end-users across a DePIN in a scalable and unified way.

We used verifiable credentials (VCs), specifically membership VCs, to authenticate an EV end-user’s identity and membership status to the charging point. As the EV end-user requested a recharge, they were prompted to present proof of their VC. Once the charging point verified the end-user’s VC and validated it on-chain, the charging point authorized a recharge. This unlocked a discount for the end-user by seamlessly using this membership VC.

Decentralized identity and VCs enable the authentication, authorization and payment processes in DePIN. We have long believed that decentralized identity would aid interoperability across a decentralized network, whether between end-users, infrastructure connected to the network, or among applications and services deployed on the network.

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Making blockchain wallets make sense

It’s common knowledge that if one loses their private keys, they lose control of their assets.

To be able to so easily lose your ability to access your assets and authenticate yourself is the ultimate deterrent to using any system. Today's Web2 users have grown accustomed to seamless technology and expect the same out of the Web3 future.

Innovations in the wallet space are signaling new potential solutions. One of these recent breakthroughs, account abstraction, enables blockchain-based wallets to be free from the limitations of private keys by using smart contract1 wallets. Smart contract wallets are programmable and enable flexibility in wallet design, including substituting private keys for biometrics or adding additional logic like recovery to the wallet.

In our trial, we successfully deployed a smart contract wallet to represent an end-user’s blockchain-based cash holdings. We also programmed the requirement of two “signatures” on the smart contract wallet, the first signature coming from the EV end-user and the other from the wallet application itself. To mitigate against fraudulent activities, we also applied an ability to hold funds when EV recharging sessions were initiated to prevent an end-user from recharging their EV without paying.

Smart contract wallets open the doors to creating highly customizable user journeys. End-users could choose to maintain control of their wallets, accounts, assets and even on-chain data. Alternatively, there’s the potential option to use a solution where third parties could take a larger role in helping end-users manage their blockchain account. What’s more, account abstraction could also provide the key features to enable transactions when no internet is available.

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1. Smart contracts are generally lines of code deployed on a blockchain network that can execute predefined and pre-programmed actions.
 
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Always-on: Offline interactions and payments

Most of the digital systems we interact with are predominantly built around a strong dependence on continuous internet access and centralized data systems. Such systems can be critically impacted by the loss of internet and connectivity to backend infrastructures, diminishing their effectiveness.

Compare this to blockchains, which inherently house both the data and the applications deployed onto its decentralized network within the nodes themselves. While blockchain networks do leverage the internet to synchronize, nodes can also connect peer-to-peer to enable users to interact with the applications, data and transactions even in offline scenarios. 

We linked the charging point’s firmware to an offline blockchain node maintaining a local copy of the network state as of the last sync, which included the EV end-user’s blockchain account balance. More powerfully, we retained the ability to query data and interact with applications on the network using the node, including querying balances and validating VCs.

For the EV end-user, because we deployed a localized version of their wallet application, they were able to interact with the charging point’s node peer-to-peer, share their VC and send transactions to the node, all without internet access. Using the node this way enabled a blockchain-based digital payment to behave like physical cash in digital form.

After completing the EV recharge and payment, the charging point’s node reconnected to the internet and synced with the main blockchain network to update the other network nodes about the offline transaction. Despite this resyncing step, the EV end-user had effectively completed their transaction to the charging point node offline. Think of this like inserting bills or coins into a vending machine to dispense a snack, and the vending machine owner collecting the bills or coins later.

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Unlocking the promise of DePIN

Explore how blockchain could unite disparate physical infrastructure and create new utility in evolving energy ecosystems.

15 minute read | September 30, 2024

Insight
Angelo Aratan
Angelo Aratan
Executive Director, Head of Research, Onyx by J.P. Morgan

Decentralized physical infrastructure networks (DePINs) are a growing Web3 concept that uses blockchains to link and help enhance physical infrastructures, such as energy grids, internet-mesh networks and cloud computing. DePIN proponents argue that real-world infrastructure can be better coordinated by using blockchain technology and decentralized applications, potentially leading to greater efficiency and unlocking new economies.

Blockchain's inherent security, transparency and decentralization make it ideal for facilitating a common data communication and payments protocol across various network participants. While blockchains could enable a consistent and reliable source of truth through a unified platform, we went further to consider what key minimum requirements would be needed to prove the concept, and potential value, of DePINs.

— 01

Focus area: Energy ecosystems

In evaluating the promise of DePIN, we chose to tackle a real-world microcosm with disparate systems at play: energy ecosystems and the electric vehicle (EV) recharging landscape.

Today, energy ecosystems, EV charging points (CPs) and mobile applications connect to various systems and do not always work well together. These systems leverage proprietary back-end infrastructure, while end-user access points, such as mobile applications, also use their own. These differing systems can lead to friction and disconnect with end-user authentication, ease of payments processing and data management.

There is a strong dependence today on continuous internet access and centralized data systems to keep the charging point ecosystem up and running. Without connectivity and internet, back-end infrastructure would be critically impacted—affecting EV users everywhere.

End users
Electric vehicles
Charging points
Charging point operators
E-mobility service providers

From a business-to-business perspective, such fragmentation can create operational inefficiencies between charging point operators (CPOs) and the e-mobility service providers (EMSPs), who provide connectivity between end-users and charging point networks. This complexity impacts the overall industry alongside customer experience.

We explored with Shell’s Web3 Innovation team what it would look like to use a blockchain-based network and orchestrate an EV end-user recharge and payment with real-life infrastructure at a Shell research facility.

DePIN is an emerging Web3 technology concept. We have been exploring how DePIN, when integrated with decentralized applications, could orchestrate and optimize interconnectivity between physical, real-world infrastructures within the energy system.

Karina Fernandez
GM Emerging Digital Technologies, Shell

Explore our findings

Decentralized infrastructure and applications
Learn more
Empowering networks with decentralized identity
Learn more
Making blockchain wallets make sense
Learn more
Always-on: Offline interactions and payments
Learn more
— 02

What we learned

Four key components are essential to making a DePIN useable at scale:

1.
Utilization of a blockchain network and its nodes
2.
Decentralized identity
3.
Smart contract wallets
4.
Capabilities for offline interactions and payments

With offline payments, double spend—the unauthorized production and spending of the same unit of money, whether digitally or physically, more than once—is top of mind. Account abstraction provided new insights into how to tackle this challenge from the private key level, including our decision to directly program the EV end-user’s smart contract wallet to require two specific “signatures” to execute a transaction.

Current wallet setups allow end-users to export their private keys to another wallet. A dishonest end-user could spend funds at the same time as they are interacting offline with a charging point’s node, resulting in a double spend. By using a smart contract wallet programmed with two signatures—one derived from the EV end-user and the other from the wallet application itself—even if the EV end-user were to know their private key and export it to a different wallet, the programming would look for the second signature that was uniquely derived from the original wallet application, thus preventing a double spend.

Another aspect of the double spend question included mitigating it at the blockchain protocol level. For this, we equipped the EV end-user’s wallet with a localized balance tracker to track transactions. This tracker prevented overspending by blocking transactions exceeding the EV end-user’s balance. The balance tracker was intended to emulate the balance tracking that a node would facilitate.

Further time and effort would be needed to outfit and enable everyday devices with the required DePIN capabilities. For example, in an ideal state the EV end-user would also be equipped with a fully functioning node. To further realize a true DePIN future, continued explorations into state synchronization, nonce management, node enhancements, network privacy and scalability are required.

— 03

What's next?

DePIN applications have the potential to enable future use cases involving machine-to-machine, autonomous entity-to-autonomous entity, and even AI-to-AI interactions. Additional work has been identified beyond the scope of this exploration, however the initial research addressing known challenges has been promising.   

Coupling DePIN principles with offline data exchange and payment methods further highlight the future possibilities at hand. According to the International Telecommunication Union (ITU), a United Nations agency, in 2023 a third of the world’s population—around 2.6 billion people—were not connected to the internet.1 However, in the same year, ITU estimated nearly 80% of the world’s population—around 6.2 billion people—owned a mobile phone.2

Given the increasing computational power of mobile phones, applications of the team’s learnings may not only benefit scenarios where data and value must be exchanged digitally, but also in situations where there is little, irregular or generally no internet connectivity.

Our work here highlighted some key components, along with areas to be refined, to enable a successful and scalable future for DePIN. Blockchain networks are uniquely positioned to create novel solutions for today’s fragmented ecosystems and unlock additional capabilities in the years to come.


Contributors: 
  • Alexandra Prager, Executive Director, Head of Blockchain Launch, Onyx by J.P.Morgan
  • Manmeet Ahluwalia, Executive Director, Head of ODA and Blockchain Launch Engineering, Onyx by J.P.Morgan
  • George Kassis, Vice President, Web3 Identity Lead, Onyx by J.P.Morgan
  • Jitu Bhurat, Vice President, Senior Lead Software Engineer, Onyx by J.P.Morgan
  • Angela Pratt, Vice President, Lead Software Engineer, Onyx by J.P.Morgan
  • Sophia Wasserman, Vice President, Lead Software Engineer, Onyx by J.P.Morgan
  • Shawn Roling, Vice President, Experience Design, Onyx by J.P.Morgan
  • Alexandros Mylonas, Associate, Software Engineer, Onyx by J.P.Morgan
  • Patricia Jaimez Gómez, Associate, Web3 Identity Product Manager, Onyx by J.P.Morgan
  • Aditya Taday, Associate, Technical Product Manager, Onyx by J.P.Morgan
  • Dylan Paul, Analyst, Product Manager, Onyx by J.P.Morgan
Footnotes: 
  1. https://www.itu.int/itu-d/reports/statistics/2023/10/10/ff23-internet-use/
  2. https://www.itu.int/itu-d/reports/statistics/2023/10/10/ff23-mobile-phone-ownership/
Contact us to learn more about the future of DePIN
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