$HNT Thesis – The First Crypto Application Touching 100 Million Users.
Key Takeaways
Helium's Leadership in Decentralized Wireless: Helium is the leading decentralized wireless provider, having inverted the supply-side cost structure of legacy telecom providers. Through its innovative Proof-of-Coverage algorithm and token incentive structure, Helium has mobilized a large community of deployers who built the world's largest low-power IoT network in under two years. This demonstrates that publicly owned wireless infrastructure can be deployed more rapidly and at a fraction of the cost of traditional providers. While the IoT market still waits for user adoption and stronger applications to catch up, its buildout proves the model and incentive structure for community-build infrastructure. This set the stage for Helium to pursue networks with much larger addressable markets and revenue potential such as mobile cellular. I believe this cellular network will be the first crypto-native application to reach 100 million users.
$HNT Token Mispricing: The $HNT token ($3.28 at the time of writing) is now one of the most undervalued assets in the crypto economy, following Helium's expansion into mobile cellular coverage. Unlike IoT, the vast majority of people globally have smartphones, making the total addressable market (TAM) for data transfer over these networks worth hundreds of billions of dollars today. Helium's mobile radio infrastructure buildout is well underway, and the protocol is on the cusp of a significant increase in protocol fees from data transfer by millions of users. This should drive increasing demand for the $HNT token, which is independent of macroeconomic conditions and not tied to the value of other crypto assets.
Market Underestimation of Helium's Potential: The market is not fully recognizing the potential for Helium to generate near-term protocol revenue from mobile cellular networks. While many in the crypto community know about Nova Labs' consumer carrier offering, "Helium Mobile," which has attracted over 91,000 subscribers and generates approximately $2k-$3k in daily protocol revenue within months of its launch, there is less awareness of Helium's advanced testing to provide offload coverage for over 10 million Telefonica users in Mexico. Helium is also in early testing with the largest telecom operators in the US, representing an additional potential TAM of 300 million users.
Executive Summary
The crypto industry has long sought products and infrastructure that make a significant impact on the “real physical world.” It is rare to see a combination of circumstances that presents a clear solution capable of challenging the long-standing oligopoly in the telecom market.
Decentralized mobile infrastructure offers structural cost advantages over traditional telco operators, enabling new business models that capture revenue at various layers of the stack. For instance, “Helium Mobile” is a mobile virtual network operator (MVNO) that uses T-Mobile’s nationwide coverage but routes its customers' data transfer through lower-cost Helium radios where available. This hybrid network allows Helium to offer customers an ultra-low-cost cell phone plan by passing on the savings from routing data through Helium radios.
Further down the stack, the Helium protocol can drastically reduce data transfer costs for existing MNOs and MVNOs by providing coverage in highly congested areas or areas where it is not economically viable for incumbents to deploy infrastructure. Token incentives for deployers and users make this possible for the first time and the massive players are starting to engage earlier than expected.
Helium faced challenges after immense success during the 2020 bull run. Nearly 1 million IoT hotspot units were sold, but the nascent IoT sensor market left hotspots with low data transfer revenue. The token price exceeded its utility at the time, leading to unwarranted criticism during the bear market. However, Helium persevered, and there are strong reasons to believe that $HNT is poised for growth out of its current downtrend.
With that said, let’s dive into some background and reasoning below.
Helium’s Vision and Genesis
Helium’s mission is to "rapidly build open, affordable, and secure global wireless networks that are owned and operated by the people."
The telecom industry has remained stagnant for decades due to the enormous capital expenditure required to compete. The three largest MNOs in the US collectively employ over 400,000 people, hold over $400 billion in debt, generate over $300 billion in annual revenues, and have established government and real estate relationships.
Helium's blockchain-based approach was born out of necessity. Founded in 2013 by Amir Haleem, Sean Carey, and Shawn Fanning, the project aimed to create a decentralized wireless network to support the growing demand for IoT devices. A global, low-cost IoT network did not exist at the time.
Over the next few years, the Helium team developed and tested the technology behind the network. They experimented with various hardware prototypes and software solutions to create a scalable and secure wireless network. They realized that the capital expenditure required to deploy enough supply-side hotspots worldwide was too burdensome for a centralized startup budget. Inspired by the Ethereum and Filecoin whitepapers, Helium introduced its whitepaper, realizing that a blockchain protocol could incentivize early community participants to take on the capital expenditure risk of purchasing and deploying IoT hotspots. In this model, the network and the landlord became the same actor.
In July 2019, the Helium network officially launched, allowing individuals and businesses to deploy Helium IoT Hotspots and participate in the network. These hotspots act as wireless access points for IoT devices and earn cryptocurrency rewards in the form of $HNT (Helium Network Token) for providing network coverage and verifying transactions. The novel proof-of-coverage algorithm verified that hotspots accurately represent their location, configuration, and the wireless coverage they create.
Helium's rapid buildout resulted in the world's most ubiquitous global IoT wireless network, with over 900,000 hotspots deployed and over two-thirds active within two years. This success inspired Helium to expand its protocol to a "network of networks" in 2022, targeting the far more lucrative mobile cellular industry.
Helium Architecture and Tokenomics Overview
The Helium protocol migrated to the Solana blockchain in April 2023, seeking to reduce development efforts, minimize outages, and leverage Solana's ecosystem tools such as DeFi and compressed NFTs. Helium's data transfer between users and hotspot infrastructure is not dependent on Solana's uptime; Solana is primarily used to settle changes in token balances and transfers between Solana-based wallets and manage NFT hotspot ownership.
The transition from an IoT network to a "network of networks," including Mobile, introduced the concept of SubDAOs. The Mobile SubDAO relies on token incentives in the form of $MOBILE rewards for deployers who set up authenticated Helium Mobile Hotspots to provide cellular coverage.
(Source: Helium HIP-51)
These hotspots earn tokens by providing useful coverage, determined by the Mobile specific proof-of-coverage algorithm. Rewards vary based on data points like foot traffic, backhaul tests, uptime, the number of hotspots in a given area, and other location data. Two types of hotspots (WiFi hotspots and CBRS radios) provide coverage, but cellular handsets and potential offload partners are not yet ready to offload real-world data on CBRS radios, so CBRS has been temporarily downgraded to "experimental" via HIP-113. Deployments are informed and managed by the state-of-the-art Helium coverage explorer.
To generate demand for strategically positioned hotspots, service providers like "Helium Mobile" can join the network and connect their subscribers to these hotspots at a lower cost per GB than legacy rates, thanks to Helium's lower overhead.
(Source: Reaching Escape Velocity blog)
As service providers join the network and their customers roam onto Helium hotspots, they must pay in Data Credit tokens, priced at a stable $0.00001 to avoid volatility. The only way to access the Helium Network is by burning $HNT for Data Credits. $HNT is the economic lifeblood of the network, and its 223M max supply should become deflationary as network activity increases, following the burn and mint equilibrium model. Although $MOBILE is the governance token for network SubDAOs, it can be redeemed for a corresponding amount of $HNT from a treasury for a guaranteed price at any time. For the Mobile SubDAO, the Helium network currently charges $.50/GB (50,000 DC), a price that is subject to change as more input comes in from the community an hotspot operators. This same general token model applies to the IoT network, though it’s priced differently, as well as any future incremental SubDAOs.
Helium Thesis
Now that we’ve outlined the structural advantages of decentralized wireless, the network’s architecture, and novel token incentives, why is “now” the time for Helium and $HNT?
Bootstrapping the Mobile Network with the “Helium Mobile” service provider has proven consumer demand and de-risked the technology.
Nova Labs, the core operating entity behind the Helium protocol, realized they needed to take a new approach with the Mobile SubDAO to generate demand. While neutral host agreements with the largest MNOs will likely drive the most protocol revenue, they decided to build a proof of concept with their in-house Helium Mobile carrier. The reception has been remarkable, with over 90,000 lifetime subscriptions in under a year. This alone has increased Data Credit burn from effectively zero to approximately $15,000 a week during that period. These protocol fees are also being generated very early in the buildout of Helium Mobile Hotspots, with roughly 11,000 WiFi units deployed. Most importantly, it has de-risked the technical value proposition of Helium as an offload mechanism for other potential service providers, which could significantly increase protocol fees (more on that in the next section).
(Source: Helium Data Credit Dune Dashboard)
Nova Labs’ GTM for their cell phone plan has predominantly been predicated on D2C advertising and referrals targeted at crypto natives and younger populations. They have also recently leaned into an enterprise plan that offers businesses far more affordable employee benefit packages.
Helium Mobile has used MOBILE token incentives to reward each of those 90,000 subscribers for sharing their location data with Nova Labs. This data allows Nova Labs to determine exactly where Hotspot deployers should provide coverage in the future based on subscriber location patterns. Nova Labs has also introduced “Boosted Locations” that offer multipliers for deploying hotspots in these high-value areas.
This strategy has been incredibly effective, creating a first-of-its-kind supply and demand-based flywheel to reduce future costs for the carrier. More coverage in areas with the most subscribers leads to more cost savings for Helium Mobile, resulting in a cheaper Helium Mobile service, attracting more subscribers, and generating even more location data. This flywheel will continue to feed off of itself with increasing force.
(Source: Helium Coverage Planner)
Massive commercial offload opportunities have arrived unexpectedly early which will drive protocol revenue orders of magnitude higher.
While Helium Mobile has been a huge success from the start, the real goal for generating billions of dollars in protocol revenue lies in Helium's ability to onboard more service providers who offload onto compatible Helium Mobile hotspots. Even a highly successful MVNO like Mint Mobile only has around 3 million subscribers, which is nothing in comparison to the likes of AT&T, T-Mobile, Verizon, and others internationally.
These discussions are progressing much faster than anticipated. A few months ago, Nova Labs announced a partnership with the international conglomerate Telefonica to pilot deploying Helium Mobile hotspots in Mexico City and Oaxaca in areas with poor coverage. This means a near-term TAM of approximately 10 million Telefonica customers under the Movistar brand will roam onto these hotspots when available without even realizing it.
So, how is it going? The coverage planner developed by Nova Labs is performing exceptionally well and is being leveraged to inform placements based on large telco company requirements, including boosted test locations in Mexico that are almost fully covered.
(Source: Helium Coverage Planner)
A Nova Labs team member recently posted a video featuring a Telefonica executive praising the integration and expressing hopes to expand into other countries across South America and beyond. Telefonica has 272 million users in 17 countries, and it appears the potential of this global partnership scale is not yet priced in. Data transfer from this initial pilot is expected to begin within weeks.
Moreover, the Helium community has been having exciting conversations in their weekly “mobile working group” over the past month for those deep in the weeds. My interpretation from those calls was that some MNOs and aggregators in the US have shown interest in the offload capabilities that Helium hotspots can provide in areas where they lack good service or experience massive congestion. This represents an additional potential user base of roughly 300 million more users!
While the US-based track will likely require plenty of additional short-term work in the form of testing, agreements on dynamic pricing, eligible radios, governance, and more, Helium has already moved into a beta testing phase with these players on a very small set of community Hotspots. The broader market seems to be largely unaware of this progress, beyond a small community active in the Helium Discord.
$HNT has a unique risk profile and characteristics that make it attractive over the mid-term
The recent bull run in crypto assets seems to be teaching us that Bitcoin's price appreciation no longer lifts all boats. This is evident from the majority of gains being captured by major assets (BTC/SOL), meme coins, and select protocols with differentiated, sustainable revenues (MKR). In a maturing market like this, I believe that $HNT and associated Helium Mobile services have unique properties that set them apart for the long term.
Helium Mobile provides an ultra-low-cost $20/month cell phone plan and aims to offer extremely cheap $/GB offload to partners. In the event of a global economic downturn, this value proposition for both end users and partners becomes even more compelling. Competing on price is recession-proof.
$HNT is particularly interesting because its fundamentals are not tied to the price of other tokens, such as DeFi protocols, whose total value locked (TVL) may fluctuate wildly with the price of the assets stored in them. Over a long enough time horizon, Helium protocol usage and valuation frameworks should detach entirely from the wild swings of speculation-based crypto assets. When an inevitable crypto bear market returns, $HNT will, of course, lose speculative value, but its usage metrics will remain unchanged.
Helium Mobile uses token incentives on the demand side that create a genuine moat in the battle for users. While several protocols distribute tokens to users for a service with low switching costs, Helium Mobile incentivizes users with $MOBILE tokens that require switching a phone plan to collect. Once you switch a phone plan, you are unlikely to switch back.
Helium’s $HNT supply is well-positioned from a float perspective. With over 72% of the supply already in circulation and halvings occurring every two years, it is further along than many DePIN projects in terms of early user/investor sell pressure. It may particularly look enticing given today’s discourse of “low float, high FDV projects”.
Risks
With all that said, why might this not come to fruition?:
While the opportunity set on the horizon for Helium’s cellular network is robust, the number of meaningful offload partners is small. There is only a subset of global-scale MNO companies in the US and abroad who move the needle in the way that makes Helium a decade-defining company. To see those companies engaging is phenomenal, but they tend to move slowly and/or may push their weight in terms of pricing power.
A large portion of the $HNT token pool was used to subsidize the original IoT network. While that was an incredible proof of concept, it has yielded negligible demand (so far) and brings up potential concerns about sustainable remaining rewards for the Mobile network.
Cellular network hotspot growth is growing far more slowly than the IoT network. Some of this is beneficial and based on learnings related to gaming and poor placement, but it also is a more “high friction” set-up vs the IoT hotspots. Mobile hotspots require more specific placement, and high-value real estate which reduces the population that is willing to engage.
$HNT price appreciation has underwhelmed other pockets of crypto in 2024 and there’s an argument that a liquid fund should simply follow those pockets of outperformance. Like any token that peaked significantly in a previous cycle, $HNT has to deal with a series of investors and institutions that may be sellers at various levels above this point. These flows can be significant.
Along these lines, Helium needs to start seeing organic offload demand come in to subsidize hotspot operators. As Proof-of-Coverage rewards decline over time, hotspot deployers will not be incentivized to deploy to additional locations or maintain rental deals with high-value real estate locations if they fall below break even.
Helium - The First crypto application to reach 100 million users
In closing, I believe that Helium and its $HNT token will soon emerge as one of the gold standard crypto assets. To the general public, most crypto projects are praised when they reach hundreds of thousands or millions of users. It often feels that no matter how exciting the technology the same group of whales and Sybil wallets are largely playing the same game in a different venue.
Helium is already nearing 100,000 verified subscribers from Helium Mobile alone and has legitimate in-flight partnerships that extend far beyond this. The most exciting part is that if just one or two of these large-scale conglomerate offload partnerships accelerate, we will see 10’s and then 100’s of millions of users around the world leveraging crypto daily in the short to midterm. The best part is they won’t even know they’re using it. Even at a fraction of the current $.50/GB price to offload data on the Helium Network, that sheer volume of users will cause massive buy and burn demand for the $HNT token, creating a deflationary supply and upward price pressure.
For the sake of brevity, this piece also ignores the various options Helium has outside of the mobile network to drive value to the $HNT token. The IoT SubDAO could garner more adoption, a new SubDAO (fixed wireless) could be introduced, or products and services built on top of Helium, such as an online auction house for large carriers to compete for access to cellular bandwidth, could create far more additional value that isn’t clear today.
With such a compelling offering and a large TAM, Helium has a path to being the first crypto-native application to reach 100 million unique users over the next decade. As a consequence, $HNT’s fully diluted valuation of $528,000,000 has a true 100x upside over that timeframe.
Disclosure: (The author holds both $HNT and $MOBILE tokens)