Market Positioning
InfraFi: Financing the Infrastructure Golden Age
Last updated
InfraFi: Financing the Infrastructure Golden Age
Last updated
The primary trade in the emerging AI economy centers on financing the development of infrastructure and the enormous capital expenditures required over the next few years. Currently, this financing is dominated by tradfi yield-based products such as loans, bonds, and convertible preferred equity.
Elon Musk has underscored the critical gap in financing for these projects, estimating a $490 billion shortfall in capital vs the announced $500bn for Stargate. This gap represents a monumental opportunity for new players to emerge, including crypto participants. USD.AI is uniquely positioned to address this challenge by providing a financial layer tailored to the AI supercycle. Much like how Tether leveraged its role in stablecoin markets to become one of the largest holders of U.S. Treasury securities or how Bitcoin mining debt scaled to $20-50bn with niche hardware collateral, USD.AI may evolve into a dominant participant in the Golden Age of AI infrastructure by bridging the intersection of crypto, DeFi structuring, and hardware.
RWAs have largely failed as a category for nearly a decade outside of riskless T-bill adoption. Most attempts at tokenizing real-world assets have focused on assets that are already well-collateralized and have access to robust capital markets. These tokenization efforts lack a compelling reason to move on-chain, except for adverse selection: projects or borrowers that struggle to secure traditional financing often turn to these platforms. One can view the challenges faced by many established web3 protocols, but even web2 platforms such as YieldStreet and Lending Club - these platforms have faced tremendous adverse selection when competing with traditional debt capital markets.
Contrast this with crypto-native assets, underpinned by crypto-native revenue. These assets borrow on-chain for a clear reason: traditional banks would never issue loans based on on-chain cash flows. This creates the opposite dynamic. On-chain private credit, properly designed, serves strong on-chain cash flows that lack off-chain financing options, flipping the adverse selection critique. The challenge lies in structuring the market to ensure robust collateralization and risk management while avoiding the pitfalls seen in other RWA initiatives.
Crypto-Native Cash Flows: DePIN generates on-chain cash flows tied directly to decentralized services, unlike RWAs, which tokenize pre-existing off-chain assets like real estate or bonds.
New Markets, Not Tokenized Assets: DePIN scales physical infrastructure for blockchain-specific demand (e.g., decentralized compute), creating entirely new markets rather than competing with or tokenizing traditional ones.
No Adverse Selection: DePIN borrowers are crypto-native and finance infrastructure that traditional markets can’t serve, avoiding the adverse selection issues common in RWA lending.
Ecosystem vs. Asset: DePIN builds interconnected economies with staking, token rewards, and on-chain governance, aligning incentives in ways traditional RWAs cannot.
Asymmetric Growth Potential: DePIN targets emerging crypto sectors with high growth potential, unlike RWAs’ focus on stable, low-yield assets.
The evolution of cryptocurrency is deeply tied to the story of hardware. By 2010, miners turned to GPUs for greater processing power amid competition. The real shift came in 2013 with the introduction of ASICs—hardware built specifically for mining—which transformed Bitcoin mining into a large-scale, capital-driven industry. This period saw the rise of industrial mining operations and significant investments from institutions, setting the stage for Bitcoin’s growth into a network worth trillions today.
Bitcoin’s success shows how hardware and access to capital fuel each other. Before DeFi existed, Bitcoin relied on international debt markets to expand its infrastructure, stunting its expediency due to sluggish traditional processes. The network’s value grew because it could secure the physical resources—the chips—needed to operate and scale.
Now consider the rise of AGI. If it happens, AGI will depend on its infrastructure to survive and grow. It will also need a currency tied to that infrastructure, much like the U.S. dollar and the petrodollar linked oil to economic dominance in the 1970s. Such a currency wouldn’t be human-made in the traditional sense. It would arise out of necessity, built to secure the systems that AGI relies on. That currency is USD.AI.
DePIN—Decentralized Physical Infrastructure Networks—can follow a similar path. These projects need hardware and liquidity to scale, but they’re constrained by access to resources. USD.AI makes it possible to unlock growth by letting infrastructure owners borrow against their assets to invest in more infrastructure, stacking yield on yield. This is the same financial loop that powered Bitcoin’s rise, adapted for physical networks.
The question isn’t whether a currency like USD.AI will emerge. It’s whether it will arrive in time to meet the demands of AI, crypto, and the next generation of decentralized infrastructure. USD.AI isn’t a speculative idea. It’s the next step.
To address the core challenges at the edge of the DePIN frontier, we must understand the trade-offs between PRICE (cost per hardware), SCALE (network size), and DATA (quality/fidelity/resolution).
As seen below, the common belief is Price, Scale and Data are “triametrically” opposed with each other. If you lower price, you can increase scale, but you lower data resolution. If you lower data resolution, you can scale by lowering price. Even with DePIN token incentivization, protocols must still rely on the speed of hardware technology to potentially overcome these cost barriers.
USD.AI’s two-step strategy directly addresses the DePIN trilemma by balancing hardware value, token emissions, and borrower accessibility:
Goal: Lower the cost of entry for higher-fidelity, resellable assets like GPUs or solar panels.
Enable larger-scale participants through legal and financial structures, such as bailment contracts and debt mechanisms tied to hardware value.
Borrowers gain access to productive assets with strong resale potential, improving capital efficiency and network fidelity.
Goal: Establish economically defensible structures for financing assets with lower hardware value but consistent cash flow potential.
Leverage cash flow-based financing to wrap and securitize the underlying income streams of productive assets.
Include scarce slots (e.g., NFT licenses with strong land history) that behave like land in pricing, ensuring long-term defensibility and borrower utility. This is done through contracts such as ERC6551 when the entirety of the cash flows are with-holdable.
There are many other mitigants for long-tail lenders will be lower LTVs, whitelisted partners, and other “economically combustable” structures with the DePIN protocol itself.
DePIN isn’t retrofitting old assets—it’s creating entirely new blockchain-native economies. DePIN is also not based on the asset, but rather the cash flows, therefore the forefront product of DePIN will be the use cases of it’s cash flows, and that will be to pay down its scalability through debt. This is the basis of I.
Bitcoin’s rapid acceleration was underpinned by its ability to tap into global debt markets, often overlooked but critical to scaling the hardware ecosystem. ASIC manufacturers and large mining operators needed substantial upfront capital to produce and deploy cutting-edge machines. Companies like attempted to capitalize on this demand early on but struggled due to poor structuring (Permian Labs’ CTO, Ivan Sergeev, saw this happen live.) Their challenges highlighted the complexity of aligning hardware financing with operational scalability, eventually leading to the company’s pivot under Balaji Srinivasan and Lily Liu. His experience with Bitcoin fueled his concept for the Network State, where the unit of a “node” is the original economically productive unit. Physical nodes are hardware, and hardware scales with capital markets.
