By Oliver Bruce

If you like the idea of a cheap, permissionless, global wireless network owned and operated by the people, you’ll like Helium.

Helium has set itself an ambitious goal: to build a reliable, ubiquitous, global wireless network that’s owned and operated by the people – aka ‘the People’s Network.’ So far, progress is good. In just 18 months, Helium has built a functional network of more than 46,000 wireless ‘Hotspots’ in over 3800 cities around the world (here’s a global coverage map). That makes Helium the world’s largest LoRaWan network already, and it’s just getting started. There are 200,000 more Hotspots on back order and according to Helium CEO Amir Haleem, there’s a “strong forecast” for a network of 600,000 by late 2022. And all this has been achieved with virtually no advertising spend. At this rate, it’s plausible Helium could achieve its goal of ubiquitous, global LoRaWAN coverage in the next few years.

Thanks to crypto-economics and an energy-efficient blockchain design, Helium enables permissionless, low-bandwidth connectivity for Internet-of-Things (IoT) devices up to 100x cheaper than legacy networks. And in April 2021, the community voted to begin 5G integration, so Helium’s now in the race to be the world’s first consumer-owned 5G network. At time of writing, the Helium market cap stands at US $1.3b, and the Helium Network Token (HNT) is trading at ~$15.

The (broken) legacy model of wireless infrastructure

The core innovation driving Helium’s rapid growth is its network business model. To see what I mean, first consider the legacy telco model that Helium is disrupting, which is centralised and proprietary.

For traditional telcos, building a large wireless network is extremely complex and expensive. Before you have any customers or revenue, you have enormous outgoings. First, you have to buy exclusive rights to broadcast spectrum to protect your future business. Next you have to develop and deploy a widespread network of proprietary hardware to operate only in that spectrum, including buying or leasing real estate to host the hardware. In parallel, you have to develop proprietary software to run the system. Throughout, you need to ensure regulatory compliance, potentially across multiple local jurisdictions with overlapping or inconsistent requirements.

The vast capital needed to build a wireless network this way is often financed through debt. That means traditional telcos have to charge a premium for wireless services and lock customers into long contracts to guarantee revenue. So attracting new customers can be slow, as well as incurring additional costs from advertising and offering incentives to get users to switch providers. Overall, building a centralised, proprietary wireless network is slow, inefficient, and very capital intensive.

Once the network’s up and running, the high costs continue, with large operational outgoings for staffing, maintenance, and regulatory compliance. In 2021, the estimated capex for AT&T and Verizon, key players in the US wireless market, is US $21bn and $18bn respectively. And according to US census data for 2008-17, the ‘information’ industry saw the largest increase in capex of any sector, in both absolute and percentage terms (53.5%).

An example of how this inefficiency negatively affects other businesses is IoT. Despite years of hype from IoT developers, we still don’t have the cheap, reliable wireless coverage needed to build large-scale IoT networks. WiFi requires custom device configurations and offers limited range, and cellular is prohibitively expensive and energy intensive. Connecting a single IoT device via cellular can cost up to $10 a month, and high energy use means an impractically short battery life for small IoT devices.

As a result, only a small niche of businesses – those with a lot of capital and a mission-critical need for real-time communications – have built reliable IoT networks, and those who have built them aren’t inclined to open them up to others. In fact, existing IoT networks tend to use proprietary software and/or hardware that prevent interoperability. The result is the fragmentation of IoT protocols, standards, and infrastructure that we have today, which means that many so-called smart devices end up staying dumb.

That’s what led me to Helium.

Why Helium matters

Helium is not a meme-coin. It uses blockchain to offer practical, real-world solutions for end-users, offering value to both crypto-natives and legacy businesses. As Mozilla CEO Mitchell Baker observed, this kind of offering is crucial for the mainstreaming of blockchain.

I found Helium when was looking for low-cost connectivity solutions for personal micromobility (eg. privately-owned e-bikes and scooters). As an industry, micromobility is critical in helping fight climate change and making cities more liveable. E-bike sales have gone through the roof during the COVID-19 pandemic - but the primary issues with them are still theft and maintenance. This is where Helium can really help.

A cheap IoT connection would make it possible to reliably track the location of an e-bike and perform remote shutdowns, making insurance much cheaper and deterring theft. Among other things, connectivity would also enable ‘smart repairs’, where an e-bike manufacturer would be able to automatically alert an owner about a fault and order the necessary parts for a repair. Both applications would make micromobility more attractive to private users, helping reduce urban traffic and pollution.

Helium makes this possible by delivering on the promise of cheap, reliable IoT connectivity. In fact, at up to 100x cheaper than legacy connections for low-power IoT devices, Helium makes it possible for manufacturers to build the cost of lifetime data use into the purchase price. (For a per-device cost estimate, check out the Helium data calculator.) That means devices will be ‘born smart’ and the owners never have to think about it – they just work.

With demand surging for wireless connectivity across all sectors, Helium has a ton of real-world applications beyond micromobility. During the COVID-19 pandemic, Helium has been used to enable cheap, reliable contact tracing. It can help to remotely monitor the health of beehives, an essential part of healthy ecosystems. And research suggests the type of wireless infrastructure Helium is developing could even help to verify the dismantlement of nuclear weapons in a future disarmament process (albeit with an upgrade in protocol security!).

The network business model: Helium’s true innovation

As we mentioned above, the core innovation of the People’s Network is not the use of blockchain, but the decentralised business model. By distributing the costs and revenues of building and operating wireless infrastructure, Helium overcomes the barriers to building large-scale wireless networks that hamper centralised, proprietary businesses. Let’s break that down.

Open-source software, non-proprietary hardware

The adoption of ‘open’ hardware and software standards on the People’s Network has helped to radically reduce development and deployment costs. Helium has chosen an existing, open-source wireless protocol, LoRaWAN, for its first network. It is a relatively mature wireless technology that offers long-range coverage (measured in miles) with minimal power use, allowing long battery lifes in low-power IoT devices.

Choosing an open-source wireless protocol means there’s already a worldwide community of software and hardware developers building solutions that are adaptable to the Helium network. More than 40 companies are already working on Helium-compatible devices and solutions, with more added every day. The People’s Network is permissionless, so any LoRaWAN-enabled device can connect, and anyone can build and deploy on the network without having to consult the Helium core team.

Helium also uses a non-proprietary standard for hardware production. Multiple third-party manufacturers are now building Helium-certified Hotspots (the nodes of the Helium blockchain), leaving the Helium core team to focus on defining the required specs and ensuring device compliance. Hotspots are privately owned and operated by network participants and cost around US $350-500 depending on the region, brand, and model, with Hotspot owners using their own broadband connections to provide backhaul connectivity. All this means the Helium team has extremely low costs related to hardware development and deployment, while the non-proprietary hardware standard drives competition and cross-pollination of ideas among third-party providers.

Finally, the distributed business model of the People’s Network will become more and more compelling with each new generation of mobile wireless (5G, 6G etc.). For technical reasons, each new generation requires more physical base stations to provide the same geographical coverage. That means that for centralised, proprietary operators, up-front capital requirements and operational costs will get higher, not lower, over time. Seen in this light, the Helium rollout of 5G – the current battleground in the high-value mobile business – will be an important test of whether we stick to the centralised infrastructure of old, or opt for a more efficient, reliable, decentralised design.

Strong tokenomics and network effects

While open hardware and software standards keep costs very low, tokenomics and network effects create strong financial incentives to actually build and use the People’s Network. In combination, these factors have driven Helium’s rapid, organic growth without needing to market itself.

The Helium network uses a custom consensus mechanism called ‘proof-of-coverage’ to verify that Hotspots are operating correctly. This allows a Hotspot host to ‘claim’ an area and then ‘challenge’ the nodes around it to prove that both are providing quality coverage. Since proof-of-coverage is needed before users will pay to use the network, the Helium protocol rewards Hotspot owners with the Helium Network Token (HNT) for participating in proof-of-coverage challenges, as well as for actually transmitting data for end users.

These two HNT-earning mechanisms create a positive feedback loop between immediate financial gains and strong network effects, helping drive rapid network buildout. As more hotspots are deployed on the network, its geographical coverage grows, requiring more regular proof-of-coverage challenges that earn HNT for Hotspot owners. Meanwhile, expanding coverage and reliability, combined with extremely cheap data costs, are driving rapid adoption by end users. As user numbers increase, Hotspot revenues from data services also grow, further incentivising network buildout.

Source: The Helium Flywheel by Tushar Jain

Tokenomics again drive growth here. To send data on the Helium network, you pay with data credits at a flat rate per kb, and to get data credits, you need HNT. So as more devices enter the network, they create additional demand for HNT, helping sustain the token price. This also gives customers an incentive not just to use the network, but to help build it by deploying Hotspots of their own, thus earning the HNT they need to transact. As the practical value and operations of the network grow, so does the HNT price, so there’s a strong incentive to be an early adopter.

This all leads to a very compelling economic case for Hotspot and HNT owners. In mid-February 2021, with HNT trading at ±$4, James Fayal considered these dynamics and suggested HNT was “either going to be a 3 to 4 digit token or worth zero.” A month later, HNT was trading at $6.92, and Tushar Jain at Multicoin Capital – an early Helium investor – estimated the average time to full ROI on a $350 Hotspot to be about 10 days. Today, HNT is trading at ~$15. As Jain noted, the flywheel is spinning.

A new model for the network age?

The rapid, organic growth of the People’s Network shows that its model of user-owned infrastructure and blockchain integration has great potential in the wireless industry. For cryptonatives, it’s a no-brainer that resonates with the philosophy of decentralisation that helped create the crypto industry and makes sound economic sense. But for all the reasons above, it also has strong appeal for people in the legacy business world, who can see that it offers a cheaper, more robust, and more efficient way to build hardware and software networks. For end-users, it’s a form of financial empowerment that more evenly distributes the income generated through everyday interactions – income that previously accrued to giant, centralised corporations. With that in mind, it seems likely that as we build new businesses for the network age, others will explore how Helium’s user-owned model could provide these benefits in other areas.

Thanks to Dr Lyndon Burford, Horace Dediu, Moira-Clare Donovan, Sam Bool, Winston Lazar, Raj Vaswani, Amir Haleem and others for their help, comments and suggestions.