Project Deepdive: Helium, the peer to peer wireless network
What it is, how it works, tokenomics and more...
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Did you know that just in 2021, there were almost 200 documented Internet shutdowns?
Governments typically descent into this digital authoritarianism to silent disent. This type of censorship, information regulation, and isolation from the outside world are more common than you think.
How are these power hungry politicians able to do so? Well, you guessed it. Our current networks are centralized.
Lucky for us, crypto presents a wide range of applications and is here to disrupt many traditional industries. And today we’ll talk about how Helium is driving a wireless network revolution.
Helium is building open, affordable, and secure global wireless networks that are owned and operated by the people.
A bit of background story…
Helium was founded in 2013 by Shawn Fanning, Sean Carey, and Amir Haleem (current CEO of Helium).
If the name Shawn Fanning sounds familiar, is because he is the co-founder of Napster, a peer to peer music streaming platform launched in 1999.
Helium is built by Helium Software Inc, a for profit software company based in the US.
Helium’s development is coordinated by the Helium Foundation, a non-profit based in the US as well.
Initially, Helium was not a crypto company: it was not until 2018 that it became a crypto project (It is worth highlighting that its mission has always remain the same though, which is to build peer to peer wireless networks).
The reason why this happened is that, with the rise of cryptocurrency, Helium’s cofounding team had the realization that crypto can provide the right incentives to attract people to join the Helium network.
Therefore, in June 2019, Helium revealed its first physical hotspot device that powers its peer to peer IoT infrastructure (more on this later).
Helium runs on a Proof of Stake blockchain. Its mainnet went live in July 2019, alongside its native coin HNT (more on this later).
Helium has a total funding of around 364.8M, with the latest round finalized this last February at 200M. Lead investors include prestigious a16z.
Let’s understand a little bit more what Helium does…
Which decentralized networks does Helium provide?
Helium is building decentralized wireless network infrastructure.
Currently, it provides 2 type of networks:
IoT: Up until the beginning of 2021, Helium has been known for providing peer to peer IoT network, aka the Internet of Things, which allows electronic devices to connect and interact with the Internet.
5G: The second decentralized network Helium has started to provide towards the end of 2021 is 5G.
How does it work?
There are three main components to how Helium decentralized network works:
Hotspot devices
Helium Console
Helium Blockchain
1. Hotspots
What are these?
Think of it like the routers you use for WiFi in your house.
In the case of Helium’s IoT network, instead of WiFi signal, it uses longfi signal (similar to radios), which means it can provide hundreds of kilometers of coverage. It is easy to transmit a small amount of data to, from, and between any supported devices that fall within the range of each Helium hotspot. The low signal also means it consumes almost no energy.
In the case of 5G, it would be a high frequency signal that is used for standard internet stuff.
Why would you own a Hotspot device?
If you own a device, then you’ll be able to provide connectivity coverage. In exchange, you will earn HNT as a reward (more on HNT tokenomics later).
Currently, there are close to 1M Helium IoT Hotspot devices deployed around the world.
Where can you get a Helium Hotspot device?
The instructions to make a Helium hotspot are open source meaning you can build your own from scratch if you want to.
As of December 2020, manufacturers can also apply to mass produce Helium hotspots and you can choose which you prefer to buy from should you want to be part of the network.
2. Helium Console
Because Helium hotspots are connected to the Internet, developers can request data from any compatible devices which fall within the range of a Helium network, and use the Helium Console to fetch and manage real-time data.
For example, if you are an e-scooter company and your scooters are connected to the Helium network, then you can use the Console to access and manage data of the status of your fleet.
Of course, this will cost cryptocurrency, and we will deep dive in the tokenomics section.
3. Helium Blockchain
The third component is of course the technology behind Helium.
Honey Badget BST
Helium runs on a Proof of Stake blockchain, and uses a consensus mechanism called HoneyBadget BST.
Without going too technical, the takeaway here is that transactions are encrypted using a shared public key, and are only decryptable when the elected consensus group works together to decrypt them.
The usage of threshold encryption enables the Helium Consensus Protocol to achieve censorship-resistant transactions.
Proof of Coverage
Additionally, there is a sort of secondary consensus mechanism - Proof of Coverage.
It is basically a random check that a hotspot is indeed transmitting longfi signal in the case of IoT.
This is done by another hotspot within the range, and if the result is “yes”, then both the challenger as well as the challengee will earn a portion of block rewards in Helium’s native coin, HNT.
Validators
You can become a validator in the Helium blockchain by staking exactly 10,000 HNT. There is no delegation allowed, and it has a 5 months unlocking period.
It is important to note that few days back, towards the end of September 2022, the Helium community approved the HIP 70 (Helium Improvement Proposal) which includes the migration of Helium’s blockchain to Solana.
Now, let’s talk Tokenomics
Key facts about HNT
HNT has a maximum supply of 223 million.
There was no premine or ICO, so HNT supply started from 0, and in the first year around 120million HNT were minted.
The emission of HNT comes from mining with Helium hotspot. It started at a rate of 5M HNT/month, and then halving every 2 years - the 1st just happened in August 2021 so current issuance has been reduced to 2.5M HNT/month.
This halving will continue until the maximum supply is reached, which based on the current emission rate should take about 50 years.
The distribution of newly minted HNT is across 3 network participants:
Hotspot Owners,
Proof of Coverage participators,
Helium Inc and Investors.
Even though there was no ICO, Helium did sell security tokens to investors, and the reward amount that goes to investors is depending on how many security tokens they hold.
HNT <> Data Credits - Burnt & Mint Equilibrium.
It is important to highlight that HNT is not used to pay transaction fees. Instead, all transactions in Helium are paid with Data Credits (DCs), which are minted when HNT is burnt.
To summarize:
HNT is earned when Hotspots provide and validate wireless coverage and transfer device data over the network.
Data Credits are used by devices to send data on the network and for transaction fees.
DC is pegged to the USD by a ratio of 100,000:1. This means that burning 1 USD worth of HNT will create 100,000 DCs.
It is none transferrable and cannot be created back to HNT. However, to ensure network participants are sufficiently incentivized after the last HNT coin is mined, HIP20 was approved towards the end of 2020 to enable net emissions, which involves taking a small portion of DCs and convert them back to HNT currently 1% per year and will rise when demand for DC is low, and vice versa.
New Token - Mobile
With the expansion of Helium into providing 5G network, a new token called “Mobile” has been created that will be paid out as rewards to Helium’s 5G Hotspot owners.
Final Comments
Some of Helium’s Latest Developments
Helium 5G - As mentioned above, in April 2021 the Helium community voted for 5G infrastructure, and the first 5G Hotspot was develired in September 2021 by FeedomFi.
Migration to Solana blockchain: as Helium scales, it’s been experiencing few network disruptions. With over 80% of the votes, Helium will transition to Solana blockchain instead of continuing to use its own blockchain, claiming that their focus is on building decentralized wireless network, and should leave the business of building blockchain to those focused on it, in this case, Solana.
Data only hotspot: Helium launched a new type of Hotspot which are essentially the same than their regular devices, with the exception that this new kind of hotspot will not participate in Proof of Coverage reward and do not require elaborate hardware to operate.
Any concerns?
There is always the concern of competitors from legacy Telco companies or other tech companies such as Tesla with its Starlink which is trying to provide similar kind of network coverage.
With the US SEC cracking down on cryptocurrencies, Helium clearly issued security tokens to its investors so might face regulatory challenges. This might be the reason why HNT is currently only enlisted in Binance in the US.
My Final Thoughts
Helium is definitely one of the key projects to watch. It is one of a kind in the crypto space, and has have multiple updates and development in the last 1 year.
Yes, there are concerns, and we are yet to see how things unfold.
But the way I see it is that Helium has a solid use case in the real world, and from a longer term standpoint, even if it manages to capture just a fraction of the market, it would be a very big deal.
That’s it for today. Helium is going through a lot of changes nad updates, so if you enjoyed this article and would like a part 2 on Helium, make sure to like or comment!
Lastly, here is a list of topics in my idea bank coming up next, in no particular order:
Projects Deep-dive:
Filecoin
The Graph
Gala
What is technical analysis
An overview of “The Network State” by Balaji Srinivasan.
Social Tokens
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