Even with stomach-churning volatility, sky-high fraud losses, and regulatory drama of Kardashianesque proportions, crypto enthusiasts have managed to build an asset class out of thin air with a bear market valuation of $1.2T.
So it’s no surprise that entrepreneurs continue to experiment with new crypto models. One such case is Helium Systems. Helium is an innovative startup allowing miners to earn cryptocurrency using wifi nodes supporting networks for IOT access and eventually 5G mobile access. Helium then sells low-cost network services to customers.
Let’s take a closer look at how Helium works, its business model, progress, and critical responses to this new crypto-mining approach.
What is Helium Mining?
Traditional cryptocurrency miners (or validators) earn cryptocurrency by using computing power to reach consensus, verify transactions, store the blockchain, and maintain the integrity of the network. In the early days of crypto mining, miners could use regular off-the-shelf computers and hardware.
As Bitcoin and Ethereum’s popularity spread, mining competition grew. Corporate groups formed mining companies to purchase arrays of expensive computers purpose-built for mining cryptocurrency. While this increased the efficiency of crypto mining, it crowded out smaller miners. Corporate mining goes against the decentralized ethos of cryptocurrency.
At the same time, entrepreneurs began looking at ways to apply crypto’s validation model to decentralize different sorts of networks and services.
Enter Helium Systems. Helium’s founding team, led by Amir Haleem, a gaming industry executive, and Shawn Fanning of Napster, launched the service in 2013.
The Helium network is the world’s first peer-to-peer, low-power, wide area networking protocol (LoRaWAN) wireless IoT network. It provides public, long-range, low-power wireless coverage for LoRaWAN-enabled IoT sensors and devices.
Helium creates a decentralized wireless internet network by rewarding WiFi hotspot owners (miners) in cryptocurrency. Helium refers to its network as The People’s Network. Network users can track low-powered IoT devices, such as pet trackers, environmental sensors, and other connected devices.
Helium originally rewarded miners with the HNT token. In 2023, they replaced HNT with the IOT protocol token for Helium’s internet-of-things network. Helium’s hotspots – the hardware infrastructure behind the IOT network – now earn IOT for maintaining the network.
The company changed its name to Nova Labs and is expanding the Helium model into mobile services via 5G hotspots that provide coverage to the Helium mobile network. The hotspots earn the MOBILE token.
Helium Hotspot Network May 2023
As of this post, 461,000 nodes are operating on the IOT network and 3800 on the 5G network. You can check the location, status, and other data on the Helium Explorer page.
How does Helium Mining work?
To participate in helium mining, miners purchase and set up Helium hotspots in their area. These hotspots provide coverage for the Helium network and, in turn, earn either IOT or MOBILE tokens depending upon the network. The process is relatively simple, making it accessible to almost anyone with little technical knowledge.
Different kinds of hotspots
There are three types of Helium network hotspots:
- Full Hotspots can participate in all activities and earn rewards, including proof-of-coverage activities.
- Light Hotspots, an evolution of Full Hotspots, are software-based rather than physical hardware.
- Data-Only Hotspots focus on moving data and are compensated only for transferring data.
Proof-of-Coverage Consensus
The Proof-of-Coverage (PoC) is the consensus mechanism to verify that hotspots provide coverage. As part of this mechanism, automated tests are randomly conducted on hotspots to ensure they are providing coverage. Passing this test earns the hotspot operator a specified number of tokens.
The PoC challenge mechanism involves three categories of participants: challengers, transmitters, and witnesses. A hotspot that challenges another hotspot is called a challenger. The transmitter is the target of the challenge. Witness hotspots, which are physically close to the transmitter, send and confirm that the target has completed the proof-of-concept challenge.
By offering blockchain-based tokens to miners, the network can scale faster and at lower costs than if a single company tried to build out infrastructure.
To use the network, customers buy fiat data credits with a fixed value. As shown above, miners receive cryptocurrency tokens, which can and do fluctuate in value.
Advantages of the Helium Network Model
Helium offers several potential advantages over existing solutions for manufacturers and users of IOT-connected devices:
- Helium’s network costs a few pennies per month to connect a sensor, compared to a few dollars monthly for a cellular network. These savings add up for companies and industries with millions of sensors.
- While Bluetooth sensors have a limited range, the Helium network can provide connectivity several miles from the nearest hotspot.
- All communications over the Helium network are encrypted end-to-end, making it suitable for sensitive data.
- Unlike traditional centralized telecoms (TradTelcom?), the Helium decentralized network grows organically as more Hotspots are added, driving costs down rather than up as more users join.
Critical Response to Helium
From the start, Helium mining received mixed reviews from the crypto community. On the positive side, some (not all) miners report earning a steady, if small, income, making it an attractive, low-risk passive income stream. The Helium network also has low power consumption, especially compared to some other mining methods.
On the negative side, some early adopter miners paid top dollar for wifi nodes and then had to wait months for the units, missing the early high-earnings window. Meanwhile, the founders, family, and friends raked in millions.
Critics have also pointed out that the Helium network’s coverage is dependent on reliable electricity so most of the hotspots are concentrated in urban areas of developed countries. The People’s Network is not exactly solving any urgent problems for most of the world.
Finally, early adopters were not pleased with the decision to replace HNT with IOT and MOBILE tokens.
Crytpo miner and YouTuber Mining Stacker does an excellent job of tracking Helium’s trajectory. A buzzy media start and Austin-based pilot soon turned rocky. The company banked some decent returns for a few early adopters and then fizzled.
The wifi units were backlogged, and Helium apparently did not vet the suppliers. Interested miners paid top prices for units they never received or had to wait months for. The Helium blockchain had significant bugs and issues. Some creative miners (reportedly including some Helium employees) fraudulently manipulated node location settings to create fake networks of multiple units in closets and other small areas.
Then FTX happened, and the HNT token went down with the rest of the crypto Titanic. Helium survived by grabbing onto a Solana life raft. In September of 2022, the Helium community voted 81% in favor of a proposal to move to the Solana blockchain.
Developer teams completed the merge in April 2023. Helium’s IOT token rose by over 370% in the 24 hours after successful migration to the Solana blockchain. For complete details on the merger, check out this video.
With the migration to Solana, Helium also announced they would begin issuing the IOT token to the LoWan miners instead of HNT. The hotspots became NFTs on Solana stored in the Helium wallet. Hotspot rewards are issued in IOT, and miners have to claim their rewards. The HNT that miners had earned previous to the merge was not changed.
Helium is also launching the MOBILE crypto token. This token rewards the people who run a 5G node and provides coverage to the latest 5G Helium mobile network. Miners can swap out MOBILE and IOT tokens for HNT according to the holders’ preferences.
Is Helium a Viable Alternative to Crypto Hot Air?
So is the Helium network just another crypto scam wrapped in “we the people, decentralize everything” rhetoric? The initial token distribution that led to insider windfalls and Haleem’s LinkedIn profile as “Master of Disaster” do little to tell a different story or dispel the crypto-bro stereotype.
However, a significant difference is that unlike other tokens such as meme coins, HNT, IOT, and MOBILE represent real-world utility that is already disrupting the IOT network space, and stands a decent chance of doing the same for 5G mobile.
Helium is in its ninth round of venture funding with some of the biggest VCs in the mix. The most recent round was $200M Series D in February 2022 for a grand total of $364.8M. They have paying enterprise customers and are pursuing and executing partnerships with large, established mainstream brands.
Moving Ahead
If the Helium network can smooth out the rockiness of its original expansion, it will likely become an increasingly popular method of earning passive income. As with any investment, you must do your due diligence and thoroughly research the potential risks and rewards before jumping in.
Whatever your crypto strategy, ZenLedger can help aggregate transactions across wallets and exchanges, compute your capital gain or loss, and generate the tax forms you need.
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The above is for general info purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax or other advice specific to your particular situation.
