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This is a chapter from the book Token Economy (Third Edition) by Shermin Voshmgir. Paper & audio formats are available on Amazon and other bookstores. Find copyright information at the end of the page.
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Helium is a decentralized physical infrastructure network. It started as a collectively maintained low-power wide-area network designed to provide data transmissions for internet-connected devices, where anyone could invest in specific hardware devices to relay network data from their home and earn network tokens in exchange. Helium later expanded to embrace other network types, such as decentralized 5G networks or decentralized virtual private networks. This chapter focuses primarily on the original IoT network, as it is the only use case within Helium that has long-term data and sufficient documentation for analyzing the sustainability of its token design.
Helium was founded in 2013 by a company initially named Skynet Phase 1, later rebranded as Helium Inc., and more recently as Nova Labs. The name changes reflected shifts in the company’s business model, ownership, and management over the years. Initially, Helium had no Web3 connection at all, focusing solely on the production of industrial hardware. The company later pivoted to developing internet connected devices, anticipating a growing need for cost-effective alternatives to traditional cellular networks of that time. The network aimed to support the transmission of sensor data, addressing the anticipated growth of these devices.
To address this need, the founders created a relatively affordable, router-sized device that served as a telecommunication gateway for sensor data. Operating within a low-power wide-area network in the free ISM frequency spectrum, the device was optimized for low-bandwidth, energy-efficient communication. The network’s premise was to enable the transmission of sensor data, supporting the anticipated growth of internet-connected devices. Despite securing 50 million USD in venture capital, early product launches and business pivots failed to achieve market success, leaving the company struggling to sustain its operations.
By 2017, just as IoT devices were becoming more widely deployed across various industries, Helium Inc. faced financial difficulties and decided to transition to a Web3-based economic model. This shift leveraged blockchain infrastructure and tokenized incentives to create a community-operated low-power wide-area network. With venture capital for crypto projects readily available at that time, Helium resolved its funding challenges and launched the first version of this Web3-enabled network in 2019.
Branded as the People’s Network, this version integrated the power of Web3 protocols with telecommunication infrastructure. The protocol created a two-sided marketplace: (i) On one side, private hotspot operators invest in mini cell towers (Hotspots), which they install in their homes to provide network coverage in exchange for Helium Network Tokens (HNT). (i) On the other side, companies owning internet-connected devices, which need to transmit data, pay for data transmission using Data Credits (DC).
Helium gained significant attention as one of the first real-world applications of Web3. Early hotspot operators reported substantial earnings, sometimes reaching thousands of EUR per month, which drove high demand for hotspots. This led to production delays and waitlists of up to eight months. During the 2021 adoption surge, individuals purchased hotspots in bulk, further extending these waitlists. However, by the time they received the devices, network rewards had decreased due to market saturation and declining token prices. Many operators had paid for the hardware around or slightly after the peak of the crypto bull market but only received the hotspots as the price of HNT declined alongside the rest of the crypto market. HNT lost value—falling from 50 USD per token in 2021 to less than 3 USD per token a few months later. Operating a hotspot was no longer profitable.
A significant issue was that the initial token distributions and early hardware availability heavily favored early adopters, enabling them to capture most of the economic benefits. This concentrated market power in the hands of a few, and reports revealed that insiders amassed a significant share of early HNT rewards, further amplifying inequities. The rapid growth also exposed vulnerabilities in the network’s Proof-of-Coverage system, which proved susceptible to manipulation. These issues led to frequent updates to maintain network integrity.
In 2022, Helium announced a major reorganization, transitioning from a single-purpose network for internet-connected devices to a network-of-networks model. This structure aimed to govern multiple telecommunication networks: (i) A network for IoT (Internet of Things). (ii) A 5G network. (iii) A content delivery network (CDN). (iv) A decentralized virtual private network (VPN). The idea was that each network should operate as a separate sub-DAO with its own stakeholders, tokens, and governance mechanisms. During this transition, Helium Inc. rebranded as Nova Labs and raised another 200 million USD. The company also migrated its blockchain infrastructure to Solana, a third-party blockchain network, instead of maintaining proprietary blockchain operations. This reorganization faced significant backlash.
Around the same time, investigations revealed that many of Helium’s claimed partnerships with IoT service providers were fabricated or inactive, exposing a critical weakness: the demand side of the marketplace was nearly non-existent. Furthermore, it was disclosed that the founding team, early investors, and their associates disproportionately benefited from the initial token distribution, rendering the network unprofitable for later participants and undermining trust in the project.
Despite its setbacks, Helium's development underscores both the potential and challenges of building decentralized telecommunication infrastructure. While its vision of community-driven network maintenance was groundbreaking, the project's execution revealed critical flaws in governance, economic design, and scalability that seem to have hindered long term mass adoption.
The founders envisioned a people-operated network, composed of millions of network nodes (Hotspots), to serve as a decentralized communication network for the internet connected devices.
Collective operations & maintenance: The aim was to decentralize infrastructure investment and maintenance so that anyone could become a fractional telecom operator by installing a Hotspot in their home or office and earning network tokens in exchange for relaying network data.
Inclusivity, low cost & fair rewards: The founders claimed Hotspots were easy to set up and operate, requiring only a small investment and a stable Internet connection. They also asserted that operating costs would be low and network rewards would be distributed fairly.
The challenge of Helium was to design, provision, and govern a permissionless telecommunication infrastructure for relaying data from Internet-connected devices, which could be maintained by a network of anonymous individuals who could opt in and out of the network with their mini-cell towers at any time. The question was how to reliably replace the functions of a centrally operated telecommunication provider that could maintain all network infrastructure under more controllable conditions.