Helium Blockchain Hits the Gas

The global blockchain-based LoRaWAN network known as Helium recently hit 134k deployed Hotspots. This is a remarkable feat for a startup with a live network that is barely two years old and leaning on individuals to buy and deploy the gateways that make up the infrastructure. More impressive still are the 40,000 Hotspots added in the last month alone. That’s an average of 1,300 new Hotspots connecting to the network each day.

In addition to network growth, Helium recently announced an influx of US$111 million through a token transaction. Individuals were not the only buyers; among those involved were a number of high-profile venture funds, notably Ribbit Capital, 10T Holdings, Alameda Research, Multicoin Capital, and A16z. 

Despite little to no marketing efforts undertaken by the company since inception, both events have catapulted Helium into the limelight; first, as a successful application of blockchain technology and second, as an increasingly viable alternative to traditional network operators in the IoT space. The question is, what is Helium doing right and can it keep up the momentum?

Part of Helium’s success has been down to a few well-timed decisions which have paid off. The firm switched from its proprietary WHIP Protocol to LoRaWAN before it gained too much traction. Instead, Helium’s LongFi now combines the LoRaWAN wireless protocol with the Helium blockchain. Helium can now leverage an existing installed base of sensors, chipsets, and microcontrollers developed for LoRaWAN. The decision not to reinvent the wheel but to leverage existing network protocols has played in Helium’s favor as LoRaWAN continues to grow in popularity. In particular, its long range is well suited to a fledgling network where gateways may be few and scattered initially.

Another successful bet was to build their network on open-source software and crowd-source input from actual users. Effectively named The People’s Network, the technology is governed by individuals through an open alliance, in symbiosis with the company developers. This has had two significant impacts on network growth.

The first is the creation of a community focused on building out a network that works for them. The Proof of Coverage, Consensus Protocol, and Helium Tokens enable the decentralized operation of a trustless and permissionless network; as such, the company itself plays little to no role in managing the People’s Network. Individuals with Hotspots are rewarded with tokens for participating in these blockchain-centric activities (e.g., witnessing a Proof-Of-Coverage, transferring device data, or service as a consensus group member, etc.). The token incentivizes individuals not only to deploy Hotspots (thus expanding the Network), but also to participate in improving the Network itself. Through GitHub, individuals can participate in core network development with the company. Through Discord (and other social media channels), the community provides support for device and network management.

The second beneficial impact of open sourcing the technology has been the facility with which third parties (module manufacturers and application developers) have been able to create products and solutions for the Network. The proposed gateways and applications are subject to community approval, which means there is oversight that ensures the solutions are fit for purpose and function accordingly. The breadth of community tools and documentation available online to third parties simplifies development and lowers the relative costs of incorporating the Helium Blockchain Protocol and configuring to the LongFi network. For the community, more offerings and more competition mean better pricing, diverse features, and enhanced functionalities, so there is a positive feedback loop between users and makers that works to Helium’s advantage.

In short, the company founders have managed to create a network that is essentially self-sustaining and self-improving, all the while playing a mainly executive function in implementing community decisions on network expansion and upgrades.

While most of the proceeds of the token sale went back into the community, part of it went to the company itself. Helium is planning to use its share to realize two primary strategies: enhancing LongFi to work with 5G networks and growing its base in China.

With regards to the former, the expansion into 5G was voted on in April by the Helium community. Helium is partnering with OEM FreedomFi, a connectivity company that manufactures open source 5G devices. The aim is for the FreedomFi Gateway to be compatible with the Helium Network. The strategy is already paying off. Pre-orders are sold out and FreedomFi has had to block the waitlist due to overwhelming demand. First shipments are expected to go out in September 2021. With 5G network roll-out advancing at a snail-like pace from telecom operators with licensed spectrum, a consumer-powered private network might actually stand a decent chance. Private network providers have already reached out to the company and are testing 5G deployment using the Helium blockchain. The only issue for Helium and its OEM partners is the current chipset shortage which will affect module availability in the coming year, amid high demand for the new 5G gateway. In fact, Helium users are already feeling the crunch, with many Helium compatible LoRaWAN modules out of stock. But that is an issue that all network providers and telecom operators are going to face, not just Helium.

The expansion into China is a different gamble. The Helium Network went live in China in April of this year and the potential market opportunity in IoT (especially in asset tracking and inventory management) is huge. In terms of 5G, China is the farthest along in network rollout and presents itself as a lucrative opportunity ripe for exploitation. But China has always been wary of collective movements powered by the individual and is vigilant of anything that develops outside the remit of government control, especially if it becomes too popular. Further, China’s relationship with cryptocurrencies is fraught at best. Wildly popular in the country, the government cracks down on the ecosystem as soon as it starts becoming too profitable (which is frequently). Most recently, it put the brakes on Bitcoin and Ethereum mining under the pretense of wasteful energy consumption. In reality, it is just the latest maneuver to cut down on the power being wielded by miners and curtail the success of cryptocurrencies in order to better position its own (government controlled) digital Yuan.

Currently, Helium poses no threat to either Chinese telecom incumbents or the digital Yuan. But if the Helium token and the consumer backed IoT and 5G networks continue taking off in the way that they have recently, Helium will need to find a way to placate the government and show that its network deserves a place on the mainland. This could be by partnering with local OEMs for module manufacturing or giving a percentage of token transactions to the government, or perhaps even allowing payments for data transactions to use the digital Yuan. The caveat is that these decisions will likely have to be approved by the community before being implemented, so anything that may affect the integrity of the Network may find little support. Finally, while there are many ways to navigate these issues, the fact remains that China is a notoriously difficult market for foreign firms to penetrate. It remains to be seen how the company maneuvers this tricky market, but so far, it has been adroit in the advancement of its technology so if it steps deftly, a lucrative opportunity may well open itself up to Helium.