If broadband adds thousands of dollars to a home’s value, then why not unlock that value to help pay for the last-mile network? A form of this question was first posed in this Viodi View article, Property Assessed Broadband – A Bottoms Up Way to Build Community & Broadband. As shown in that article, this approach could leverage limited government funding to bring broadband to unserved areas.
Some of the biggest challenges in creating such a grassroots network are organizing one’s neighbors, obtaining rights-of-way, and managing the network. At least two initiatives, the Helium Network and Althea, may have found a way to overcome these obstacles.
They both take a bottom’s ups approach that uses blockchain as their foundation. Blockchain effectively removes much of the management overhead required to operate an ISP.
[Note: This article examines how blockchain forms the basis for a grassroots IoT network that threatens to disrupt approaches from traditional service providers. It is part one of a three-part series.]
Helium & LoRaWAN – The Foundation of The Peoples Network #
Founded in 2013 by Shawn Fanning of Napster fame, Amir Haleem, and Sean Carey, the building block of the open-source Helium Network is their blockchain, Helium, and the associated Helium tokens (HNT). Governed by the non-profit, Decentralized Wireless Alliance, Helium serves as a distributed ledger providing accounting, payments, and routing for a communications network.
In a nutshell, Helium’s token economic model of max supply, burn-and-mint, and net emissions provide an incentive to build out the network and then to pay for its operation.¹ Helium has an impressive list of investors that include Google Ventures, Munich RE (the insurer of insurers), Marc Benioff, and, more recently, Multicoin Capital.
Their first foray into the telecom market is through LoRaWAN, the unlicensed, low-data rate, low-power wireless network protocol. LongFi is the network that results from the combination of LoRaWAN and Helium. LongFi is essentially a last-mile(s), Internet of Things (IoT) connection. Helium claims they have the largest, public LoRaWAN network in the U.S. (78K+ Hotspots as of 7/5/21) with lower pricing than IoT networks from traditional carriers.
The Helium network works with any of the 200+ LoRaWAN-certified devices. According to the Helium website, companies that are using the network include Agulus (connected agriculture), Barnacle (package tracking), Careband (patient tracking), Lime (micromobility), Nobel Systems (parking space management), and Salesforce (connecting their employees).
To be clear, these corporate applications pay for the use of LongFi. Helium touts the advantages of its approach over Verizon, A&T, and T-Mobile as²:
- Pay for only the data that is needed
- A sim card and its associated expense is not required
- Pooling of data across devices
- No caps – unlimited data with no overages
Pricing is based on a 24-byte unit called a data credit (DC) and is $0.00001 per data credit, regardless of location. This translates to about 2.4 Mb/s per dollar. As Stacy Higginbotham calculated, this means the cost for a device to transmit a 24-byte message (e.g. location, temperature, weight, etc.) every 5 minutes would be $1.05 for an entire year.
Data credits represent real money injected into the Helium ecosystem to pay the network owners and operators.
Decentralized Network Ownership #
By now you are probably asking
Who are the network owners and the operators of Helium’s 78k+ Hotspots (25k added in June 2021 alone)?
The short answer is anyone who purchases a Hotspot could be considered an owner and operator. From a provisioning standpoint, it is as simple as finding a good location, plugging into an AC outlet, and connecting to the Internet. Helium’s Mark Phillips recommends a minimum distance between hotspots of 300 to 500 meters, depending on whether the hotspots are in rural or urban locations.
The Hotspots earn HNT by providing data transfer, proof of coverage, and Consensus Group participation.* For its part, Helium, Inc and its investors, initially receive 35% of the revenues with a declining percent allocated to them over time. Again, it is the decentralized approach, enabled by blockchain, that sets Helium apart.
“Our goal is to grow and maintain our global wireless network without requiring Helium to be a middleman or central authority.”
To encourage network buildout, a declining percentage of revenue is allocated for coverage, while the majority of the revenue will go to providing data transfer and Consensus Group participation.
Hotspot Economics #
From an expense perspective, Helium’s Mark Phillips writes in a blog post that the peak power consumption of a typical Hotspot is about 5 Watts or $.05 per day of electricity. There is an ecosystem of Hotspot manufacturers with indoor and outdoor units ranging in price from $400 to $650.
Unfortunately for anyone wanting to become a Hotspot provider, the backlog is measured in quarters with some suppliers not accepting new orders. Helium’s COO Frank Mong suggests that there would be 220,000 Hotspots deployed, if not for this backlog. Mong believes the network could grow to 600,000 by the end of 2021, assuming adequate Hotspot production.
Higginbotham reports that her Hotspot earned 1,100 HNT in about a year or almost $15,000 at current exchange rates (like all cryptocurrencies, the price of HNT fluctuates). The amount a particular Hotspot earns depends upon several factors, including location, antenna, and the number of nearby Hotspots. The biggest factor may be when you install your Hotspot, with the advantage going to those who deploy early.
Like Bitcoin, the amount of HNT is fixed (233M total). It has a two-year halving schedule based on a 50-year mining lifetime. What this means is that on August 21st, 2021, Hotspot owners and Consensus Group participants will collectively share in a monthly pool of 2.5M HNT, which is half of Helium’s initial 5M HNT monthly pool.
In an April 9th, 2021 Coinbureau post, Steve Walters wonders how halving will impact Hotspot owner’s returns. He points out that halving might “create enough upside in the value of HNT to offset that loss of token income.” The question is whether this value is already accounted for in the 10x meteoric rise of HNT in the first half of 20214.
Stay tuned for the 2nd part of this article, which will examine how Helium’s decentralized approach applies to 5G.
[Note: At the time of publication, this author does not own HNT, a Helium Hotspot nor an HNT staking position. However, that may change as participating in the Helium economy seems like it could be a good educational experience.]
1 As the Helium website explains,
“The distribution of HNT changes over time to align incentives with the needs of the network. In the early days, a higher proportion of HNT is allocated to Hotspot owners for building and securing coverage. As the network grows, Hotspots earn more for transferring device data on the network while Helium Inc. and investors earn less. After 20 years, distributions no longer adjust and remain fixed.”
Coinbureau provides a good overview of what max supply, burn-and-mint, and net emissions mean in this post. Further, this post provides an overview of the burn-and-mint equilibrium. Frank Mong provides a simple explanation of how the balance between buildout and operation changes over time in this Jimmy is Promo interview.
³Most of the suppliers seem to include the onboarding ($40) and assert location ($10) fees as part of their hardware cost. The assert location fee is required every time a hotspot is moved. Accurate Hotspot location information is important in determining Proof of Coverage.
4This document describes Helium’s Consensus Protocol. It is based on the HoneyBadgerBFT protocol from the University of Illinois, Urbana-Champaign. The design goals are
- for it to be permissionless
- truly decentralized by design
- Byzantine Fault Tolerant
- Based on useful work
- High rate of confirmed transactions
- Censorship-resistant transactions.
5According to CoinMarketCap, HNT’s price rose from $1.29 on January 1st, 2021 to $12.85 on July 1st, 2021. The Helium market cap is approximately $1.15B with a fully diluted market cap of $2.88B at the time of publication of this article.