Why Helium is a great project to learn the power of blockchain
I don't know whether Helium will ultimately succeed. I talk about some possible issues downstream.
But after literally months of digging into Helium, reading the white paper, asking people in the Discord and listening to podcasts, I really believe Helium has pioneered some fascinating approaches to building web3 and blockchain businesses.
I actually was reluctant to share this because I wanted to use the frameworks I derived from learinng about Helium for my own project. And I think that's hard-earned knowledge that most people are missing.
But that's okay. I'd rather help our projects get better. So here's the key things to learn about it.
Fiat drives the value to the token
Many crypto projects don't seem to answer the basic question: "How will fiat (real currency) drive the value of the underlying token?"
Too many are speculative. But the basic proposition should be: "The more people spend real money on our infrastructure, the higher the token will go in price."
Most have relied on speculative interest. And while there's definitely a play for that, at the end of the day, real value (which is still actual currency, but it could be other tokens if the volatility is considered) must be injected into the system.
With Helium, the real customers, those companies who want to use the IOT network for their devices (and potential for 5G if it works) pay real money for every request on the network.
This is a pretty clean and scalable model.
Some approaches can be a pure utility token: people pay for the tokens to access the underlying service, and the tokenomics inflate the price as demand grows.
Helium uses a Burn Mint Equilibrium which allows a flat price for utility token and the value token changes price to maintain the equilibrium between utility token usage and capped supply total supply and the minted amounts every epoch.
Decentralized ownership disrupts existing legacy businesses
The case is easier to understand in the case of 5G, but that model hasn't been proven out as it has for their IOT, but let's conflate this for the sake of discussion.
Legacy telecommunications companies are limited in their deployment of 5G, especially in urban center. 5G needs more direct line of sight cell-towers, and so density of cell coverage matters.
However, existing telecommunications companies aren't able to shell out the millions of dollars it would take to have thousands of small-ish radio stations throughout San Francisco to accomodate for all the hills and buildings.
However, by pushing the capital outlay to citizens, who can then place the stations in better positions that can provide that coverage (their roofs, windows), the underlying model disrupts (or augments) the legacy business.
To me, strong business cases of why there should be decentralized ownership is much better than basic commission sharing which seems to be the premise of so much. Things like "take rate is lower" or "it's fairer costs" can be important, but it's a margin battle.
Ecosystem competition to drive innovation
A great project leverages the open ecosystem. That's the reason for a blockchain: it should be permissionless, open, and most importantly, drive to some objective function in a diverse or even adversarial environment.
A good example is the open sourcing of the radio stations technology. This was already done by a standards body. But they provided additional software to run on the blockchain and work on the network.
This creates innovation competition amongst the hardware vendors who want to compete for the pent-up demand by the hosts of the hotspots. This competition can resut in better hardware, better UX, lower pricing -- whatever vector of innovation outside of the core open sourced specifications and software.
This makes the network better as hardware vendors compete with each other to capture more of the growing demand.
If the prices come down (as they should eventually in true competition), the initial capital expense goes down for hotspot owners, so that should drive more and more hotspot owners and more capital into the system.
Conclusion
There's more I could write about alot of elegant things they have done really well.
It's a great illustration of what blockchain can really do with orchestrating ecosystems to drive to a well-defined objective function.
The question that I have with the project is the objective function initially drove a bootstrap of the network size. They are immensely successful with this.
The business model, however, presumed that a larger network and better cover would unlock latent demand for IoT. This is critical because that's how fiat enters the system (back to key requirement #1).
I don't know if that's always true, whether in the case of Helium or any other two-sided market. Certainly it's a requirement. But once they have sufficient coverage, which is required just to have a credible conversation with customers, what's the demand? Does it just become regular marketing and sales development?
Or is there a GTM strategy that can leverage the same blockchain dynamics (I think there is, and that's what I am reserving as my secret sauce!)
But let me know if interested!
Content Updates
- Instantiate and publish 2023-02-03