Bear markets are for building and September 24th marks the announcement of XNET, a new cellular DeWi project building with CBRS spectrum. It also means the cellular DeWi space has effectively tripled in size from a single player in 2021, to three in 2022, with rumors of more protocols within the year. What’s different about XNET? Can it be the first to sell bytes for dollars?

The DeWi narrative is that these crypto cellular networks have a clear path to real cash flow by offloading traditional incumbent networks like T-Mobile, AT&T and Verizon, a.k.a. Neutral Host. Helium was explicit in that mission for the last two years, but just launched the Crypto MVNO – which sounds similar to, but is vastly different from neutral host. Pollen launched Feb 2022 as a privacy-first data-only network for people who want to opt out of their traditional plans, but is not shy about exploring Telco offload deals. Yet, nobody has sold a single byte of data. Submitting to Big Telco must be harder than expected.

XNET is pursuing neutral host with far greater zeal, using a hardware stack capable of ‘full-service voice and data’. These packet core features are not cheap or simple, which definitely rules out Magma. XNET’s vision may even extend beyond mere neutral host with hints scattered regarding a MNO service built on top of this project (hybrid mobile networks seem to be all the rage in DeWi). Is there substance here? Let’s dive into the whitepaper and see.

Links: XNET home – Whitepaper – Twitter – Discord

under the hood: token rewards

My first question is whether XNET makes any notable departures from DeWi norms, starting with rewards. Introduced are the concepts of Connectivity Mining and Mining Difficulty: “XNET turns the multivariate, nuanced connectivity factors of a node into a convex, real-valued function, with higher scores representing better connectivity.” If you’re a little lost, I’m with you. This sounds suspiciously like a Proof of Coverage yield to me. (why can’t we all just use the same phrase? :) To calculate token reward, the XNET reward function combines several weighted scores:

• Self reported heartbeat via chain hash calculation (this looks like an uptime checkpoint).
• Value of your XNET token stake (a disincentive for cheating).
• The issuance of challenges to other nodes who may or may not be physically nearby (reminiscent of Helium beacon/witness).
• A self nomination mechanism (reminiscent of Helium challenges)
• Physical location.
• And data demand at the local market rate.

Details are slim, but the concept of Mining Difficulty looks like a token emission tuning mechanism to keep token delivery “in check” as to not over or under reward participants. Based on cutting remarks directed at Helium and Pollen, both who use simple issuance mechanisms with halving schedules, I’m going to guess there will be less of an incentive to rush XNET deployments to capture early token allocation. XNET avoids a front loaded issuance schedule to such an extent that they appear philosophically opposed to a bitcoin-like models. On the flip side, both Pollen and Helium allocate ~11% of all tokens to miners in the first year. For XNET, my guess is lower.. much lower. One highlight in my view: both investor and insider token pools have vesting of 36-48 months. This is longer than the norm. However, elsewhere in the whitepaper there are brief mentions of ROI which frankly open more questions than they answer: a time horizon of 6-12 months to recoup HW costs is provided as an example, but baked into this assertion is a FDV of $4-5B. How XNET expects to maintain this token valuation using a mining difficulty function is anybody’s guess.

under the hood: new stuff

Venturing into new DeWi territory are the concepts of slashable node-level token staking and variable-rate data cost. Pollen and Helium data costs are both anchored at $0.50/gb, however XNET created an entire data marketplace using burn/mint XNET data tickets (XNETD) with exotic qualities: expiration, priority, and restrictions in geography or time-of-day. Variable data costs within the TradWi industry are a thing, but extremely coarse in comparison to that proposed by XNET. Astute members of the DeWi peanut gallery have suggested such a marketplace in the past, but XNET appears to have built it. Bravo.

Node level token stake is used in XNET both as a way to improve your earnings through locking, and as a slashable pool of funds to deter cheating or abysmal quality of service. Anybody involved in a DeWi gaming police capacity will tell you: the real overhead comes in issuing judgment against a suspected bad-actor. I’m not sure how XNET is solving the core scalability challenge of stopping cheaters, instead it just forces would-be cheaters to further calculate the business impact of getting caught. However, XNET staking is not purely a cheat deterrent, but mainly a “big stick” to get nodes to keep uptime and QoS high. Not to mention, token locks separate holders from liquidity, and a certain class of people really like these functions.

Signal validation will come from three sources: the CBRS units themselves (picture a Helium LoRa node which can both beacon and witness), band 48 cell phones, and finally XNET-funded 3rd party validation, according to XNET discord. This is a departure from both Helium and Pollen who rely on the purpose-built Spot and Bumblebee hardware. I’m personally a fan of dedicated hardware and funny validation rules. There is actually an enormous community & cultural appeal to these devices, with miniature economies and job functions sprouting up to support this task. A well designed validation requirement can also act as a very powerful behavioral incentive: Pollen’s need for daily bumblebee validation is actually a force for network densification in disguise. But, something tells me XNET will use other means of steering the masses. Which leads me to my next point..

under the hood: centralization

I have a nagging question in the back of my mind reading the whitepaper: whose network is this, really? Reading “XNET fully controls its hardware supply and delivery logistics and does not intend to randomly deploy its network nodes” and “The number of nodes per coverage area will be strictly limited and balanced” strikes a tone like they will control where every node will live, how it will arrive at your door, and how much you’ll earn from it. There are several pages dedicated to the description of a future DAO structure, including some cool sounding token governance NFTs. But it’s reminiscent of Pollen’s Phase II and Phase III, which is to say, far from realization.

These centralized control themes stand in contrast with Helium culture which takes a firmly hands-off approach: incentives, not decrees, steer the behavior of masses. On one hand, Helium’s approach led us to 40 LoRa hotspots per square mile in San Francisco (a ridiculous quantity), a ocean of youtube rants regarding gaming and profitability, but on the other hand it’s not clear they would have gotten to 1 million nodes, dozens of LoRa OEMs and a global footprint any other way.

DeWi projects are still retail oriented and these people are scattered far and wide. Pollen tried to control geographic distribution at first, but quickly gave up as they faced an upset community of early enthusiasts. Plus, they sell more hardware when they don’t limit where people place them. Other projects like Planet Watch have had a little more success controlling geographic dispersion with the sale of licenses. Then again, nobody talks about Planet Watch. I’ll be watching with great interest to see how the XNETs approach plays out.

In closing

XNET’s non-Magma tech stack is easily its most differentiated feature and the XNET whitepaper strikes a mature tone, as if saying: ‘Sit down. This is how you do DeWi.’ Implied is the expectation of mature execution by participants. After all, integrating with MNOs is firstly a question of technical and operational feasibility, both of which XNET plans to nail from day one.

The Helium MVNO launch, while laudable, is also a tacit admission that a pure tier-1 neutral host is far more difficult, if not outright impossible to accomplish. This is what I love about the XNET approach: the team is clearly inspired by the Proof of Coverage breakthrough from Helium but also exploring a new radio access tech stack. While the reception amongst DeWi regulars has been mixed mainly due to economic and token questions, I have a feeling there are some interesting web3 features to come as well as general clarification as the XNET team emerges from stealth, finalized funding and starts shipping hardware.

One thing is clear: the race is on. Three teams, zero bytes sold. Who will be first? LFG!

Blockchain is breaking into entrenched industries. ExxonMobil now mines bitcoin. Goldman has a crypto desk. At par with banking and natural resources lies Telecom, an industry characterized by government sanctioned monopolies, regulatory capture, awful consumer experience and consolidative economies of scale. Decentralized wireless, consisting of Helium, Pollen and a growing list of others, is blockchain’s grand entrance into Telecom.

It’s easy to be overzealous and suggest DeWi will push out the TradWi incumbents. However, just as bitcoin’s digital energy narrative doesn’t displace the need for electrons, and permissionless collateralized loans doesn’t eliminate the need for traditional mortgages, so too does decentralized wireless not replace the need for macro cell towers and fiber optic trenches.

This essay is a sober look at how decentralized wireless networks scale and might eventually fit into our lives. I’ll be focusing on the recently emerging cellular CBRS variety.

Decentralization is leverage

Today’s CBRS DeWi doesn’t even begin to satisfy the needs of a modern mobile experience. How can it possibly (1) get scale, and (2) attract users? Broadly speaking, early blockchain applications have an awful user experience and there is no shortage of friction in CBRS DeWi networks. As projects like Helium and Pollen begin to ship early CBRS products, sky high expectations are crashing back to earth: these networks have low transmit power, no voice or e-911, no existing coverage, limited bandwidth, wide range of deployment skill, downtime, low or no roaming capability, and spectrum sharing overhead.

DeWi networks actually have much more in common with decentralized finance (DeFi) systems beyond first glance, especially when it comes to learning curve and friction. To collateralize your first DeFi loan, you must grasp public key / private key cryptography, gas fees, wallet management and all the new jargon. Cheapshots are easy, reminiscent of the Letterman / Gates bit. There’s a learning curve. It’s painful. What sets these DeFi systems apart from TradFi, and thus gives DeFi protocols value, are special decentralized qualities of composability and neutrality. These effects can transform casual participants into a type of permissionless protocol employee, working behind the scenes to grow the underlying project, or enable features to combine across different protocols like legos. Uniswap is a good example of this effect taken to its logical conclusion – Uniswap Labs, a company with a grand total of ~50 traditional W2 employees, has birthed a protocol which recently facilitated over $1T in volume to date. DeFi token distribution mechanisms called yield farming (or liquidity mining) have been the key to immediate scale for dozens of other DeFi protocols, with unique yield farming strategies permissionlessly mixed and combined. Some new and interesting ideas have been born out of this, some not so useful ponzis have crashed to zero. Love it or hate it, composability and neutrality is a 21st century form of leverage and this applies to both DeFi and DeWi.

Proof of Coverage = Yield Farming

Why build and use an early DeWi CBRS network? Why download an eSIM, why seek out spotty connectivity, why purchase and setup a node? The answer is almost too obvious. DeWi networks give you crypto! The first, and most important use case for DeWi networks is to farm crypto. Proof of Coverage is just yield farming by another name. Proof of Coverage has different economies of scale compared with DeFi yield farming, but PoC is yield farming nonetheless

Any DeWi project that puts roadblocks in the way of man’s insatiable desire to yield farm, even if done for the sole reason of emphasizing long-term sustainable protocol revenues, is doomed to lackluster adoption. 👏 People 👏 just 👏 want 👏 crypto 👏 — and I’m happy to see this fact recognized in Helium’s latest protocol improvement proposals HIP51-53. Flatly rejected are the notions that Helium 5G doesn’t need PoC to work, instead to be replaced by airdropping $MOBILE to participants who merely plug in approved CBRS radios. Plug in, get paid. This alone is all which is needed to keep Helium growing in a competitive CBRS DeWi landscape.

So, we’ve established that DeWi networks get big through the distribution of tokens, with numerous precedents. PoC is basically a bet on human nature and size is an important ingredient for utility. Let’s talk about the path to real usage.

Wen Utility?

Yield farming is not the be-all end-all. I view DeWi networks at the sweet spot intersection of speculation and utility, because at a certain scale DeWi networks transform from speculative instrument to a network with obvious normie utility. As the DeWi project (and coverage) grows, so do the reasons for building and consuming.

Beyond the initial crypto fascination, becoming involved in DeWi evolves into a mission or even a competition. Now you are building with a purpose. Now, you are empowered to cover your friends and family or fix coverage gaps in parts of your life that annoy you – like that mountainous gas station where you rendezvous with your ski buddies, but nobody has cell phone service.

Before you know it, urban residents may find that they have DeWi reception more often than not, and so we enter the phase of flexibility. Maybe you can finally opt for the lower tier MNO data plan now that you’ve got a source of cheap pay-as-you-go data. You can have the flexibility to work somewhere lacking free wifi and not decimate your data plan. Or, you can outfit your kids with old cell phones without spending an afternoon at the AT&T store dealing with upsell tactics and dark patterns.

The maturity chart looks linear, but in reality each step is 10x harder to accomplish. In the final stages of maturity, you’re already using the DeWi network and you don’t even realize it. Such use cases might be because your MNO/MVNO plan roams onto a DeWi node, or some new standalone wireless device comes bundled with a lifetime supply of prepaid data. Perhaps you have a device built on top of these new networks, like DIMO or Hivemapper.

You’ll note I never once declare that people will drop their existing MNO plans all together. From where I stand, there’s just too much missing – mainly continuous coverage, phone numbers and customer support. However, this is far from an admission that these DeWi networks have no use.

Utility Soon™

Every credible blockchain project has a word for mainstream adoption – that moment for when the obvious 100x boost to utility unlocked by blockchain finally convinces incumbents to go all in and bring sustained protocol revenue with them; in DeFi they call it the DeFi Mullet, because FinTech firms of all shapes and sizes will use a DeFi backend for their normie client frontend needs. For Bitcoin its the digital gold narrative. In DeWi this moment is “Neutral Host”, aka the moment you rely on the network without realizing it. The Bitcoin digital gold narrative is arguably in progress, but the DeFi mullet is still in its early days and Neutral Host is just a twinkle in our collective eye. If anything, this is the everlasting criticism for blockchain in general. Too much supply, not enough demand. Too many tokens, not enough usage. I’m getting a little facetious in this final closing section, but the truth is I believe yield farming methods can be a tremendous tools for building tangible and useful physical infrastructure at an incredible pace.

Until that moment in time when blockchains carry us to the golden gates of Valhall sustainable protocol revenue, at least we’ll be farming crypto.

Pollen Mobile, a product of the Pronto.ai self driving car startup engineering team, burst onto the decentralized wireless scene with a small San Francisco Bay Area launch in February 2022. In Part 1, I established that the Pollen Mobile impressed me by delivering the core product after a super fast development cycle started in late 2021. Given the product is based in CBRS technology and has a working CBRS-based Proof of Coverage mechanism, the Helium community was quick to compare – and judge. In this Part 2, I’ll break down the differences, address the implications and tackle my clickbait headline: is Pollen a Helium 5g killer? (According to Betteridge’s law of headlines: no)

How are they the same?

Helium 5G, despite the name, is firmly rooted in currently available CBRS radio technology underpinned by the 4G LTE protocol (this will evolve as available tech evolves). Pollen shares the exact same mobile hardware & software stack: CBRS radios and Magma packet core. So, both products are able to service modern cell phones: iPhone 11+, Pixel 4+, Samsung s20+. Operational experience in planning deployments, tracking signal propagation and measuring coverage is more or less identical between the products. In this sense, Pollen is an excellent preview of what Helium 5G stands to offer. Both products have set a price of $0.50 per gigabyte of data usage, a rate between 70-90% cheaper than what incumbent MNOs may charge MVNO partners for roaming. Finally, and very important, both projects offer or plan to offer a Proof of Coverage (PoC) mechanism for their CBRS/5G coverage product. Referring back to Part 1, PoC is the rocket fuel for network buildout.

The token economic model also carries some similarities. Helium allocated about 35% of tokens for insiders, Pollen has a similar quantity, and both are subject to lockups & cliffs. There are funds dedicated to community development grants and there is a mechanism to charge for data consumption. However, I argue the differences outweigh the similarities.

Where are they different?

The most glaring differences between Pollen Mobile and Helium 5G come down to foundational societal value offering. Pollen is actually much closer to Helium LoRa than it is to Helium 5G. Helium LoRa started by building a fragmented and disparate LoRa network and achieved roaming status after demonstrating massive scale through real coverage. Helium 5G is taking the opposite approach as Helium LoRa: roaming-first, also known as neutral host.

An obvious criticism for the Pollen roadmap is the lack of market participants, since they have no neutral host plans (yet). Who wants to bother trying to access a wireless network which is admittedly tiny? I’d like to remind readers Helium LoRa was in an identical predicament just two short years ago. (Side note: Pollen has an eSIM mechanism which rewards you every day you connect to the Pollen network with about 75PCN as of today. There is no such mechanism being planned in Helium 5G outside of witnessing.)

With Helium 5G’s neutral host plan, any random individual can roam onto a Helium 5G hotspot with their ordinary cell phone plan, so the total addressable market is enormous from day 1. However, neutral host is like the final boss of network buildout. Striking an agreement with AT&T, T-Mobile and Verizon before having a large mature network is a monumental task. What helps to build large networks from scratch? Proof of Coverage! One problem. The Helium 5G proof of coverage roadmap is significantly delayed, deprioritized in favor of neutral host work, but also subject to changes in governance & blockchain roadmap. Without a pivot, there is a chance we won’t see Helium 5G PoC this year. By skipping neutral host and placing CBRS PoC up front, Pollen borrows Helium LoRa’s scaling strategy and does away with Helium 5G’s largest development hurdles. There are people who think Helium 5G doesn’t need PoC to succeed, and they could be right. I don’t want to call the delay in Helium 5G PoC a blunder just yet, but the growth of Pollen may change my opinion.

Currently the Helium 5g Proof of Coverage roadmap claims a testnet by June 2022. Add a few months of margin for validation and that puts the PoC release date somewhere in Q3 or Q4 of 2022. It’s reasonable to say Pollen PoC has beaten Helium to market by between 6-8 months.

Besides the approach to market, Pollen & Helium differ significantly in blockchain selection. Pollen adopted the Solana SPL token whereas Helium is of the era without viable L1’s (pre 2020) so had to create its own L1. This foundational difference has cascading effects, especially when it comes to interplay within emerging DeFi infrastructure.

Finishing with economic differences, Helium is clearly more mature in its economics than Pollen. Helium has several drivers of hodling: validators and (soon) token-lock based governance. Pollen governance, validation, etc, is nebulously dealt with in Phase II and III. Not to mention PCN isn’t even available to trade anywhere. Finally, and most significantly, is how Pollen and Helium address the question of utility. Helium has a fixed-price data credit (DC) system for usage and a floating price token HNT for rewards/validating/voting, whereas Pollen’s one and only token PCN has a notional fixed-price from the start. I believe this is a design decision meant to avoid early conflicts with securities law. After sufficient decentralization, a new system could be voted on which would allow PCN to float. That said, right now there is no detail provided for how a fixed-price PCN token is going to function because that buy/sell arbitrage bot doesn’t just happen on its own.

Decentralization

There is a stark contrast in levels of decentralization within these two projects. Helium continues to impress me with their efforts to remove central coordination from Helium Inc and instead offload responsibilities with the Decentralized Wireless council, or with the manufacturers themselves. Recent examples of this being the requirement for manufacturers to produce and maintain their own hotspot apps and move away from a single Helium app. This is a great move to thrust more responsibility with hotspot makers and also create an opportunity for them to differentiate their product.

Pollen, by virtue of their speed, appears entirely centralized in nature. Much of the inner workings of the project are opaque: lack of API, calculations, smart contract, PoC data. However, in their whitepaper they lay out a path towards transitioning ownership into a DAO type entity. I am confident each concern will be addressed in due time.

From where I stand, Helium is striving for pure & credible decentralization with an ethos resembling Ethereum, whereas Pollen is the scrappy newcomer who has prioritized speed above all else. There are many such dichotomies in the L1 space where teams take significant liberties with the label of “decentralized”, or make conscious decisions to trade decentralization for speed. Perhaps such a scenario is evolving within the decentralized wireless space. There is absolutely room for both approaches and the L1 landscape is proof.

They actually need each other

Its easy to view these projects as competing head to head, but in such a nascent industry I firmly believe the success of one bolsters the success of the other. A project without competition is probably not a great idea to begin with, so competition first and foremost is excellent conceptual validation – it reminds me of the dancing guy analogy. I can see a world where a successful Pollen private LTE network may actually drive customers away from MNOs in dense urban areas, so in response, the MNOs are forced to compete on price and become more likely to explore creative neutral host ideas. Or, perhaps a different outcome: Helium 5G develops private network eSIM functionality and effectively swallows the Pollen addressable market (this function is on the roadmap but lower in priority). Either way it ends up, competition legitimizes an industry and I’ll be eagerly watching & participating.

Pollen Mobile quietly launched on February 1st 2022 to little fanfare compared with typical crypto blitz marketing campaigns. Unless you’re a close watcher of the CBRS / decentralized wireless space, you probably missed it all together.

Part 1 of this article covers the basics of Pollen. Part 2 will address the question everybody has been asking: is this a Helium 5g killer? Be sure to follow me on twitter for more content.

Pollen immediately caught my eye so I dug deeper with an eye towards red flags: sleazy kickstarter vibes, huge markups or just ridiculous vaporware. What I saw was a legit Baicells CBRS hardware lineup sold at-cost, a drop date 7 days after announcement, claims of a working mainnet via Solana SPL token, a working Magma packet core, working eSIM and a working (!!) Proof of Coverage mechanism. No kickstarter vibes, no overpriced hardware.

Learning about CEO Anthony Levandowski’s involvement was icing on the cake. Anthony has been accused of many things but ‘visionary engineering leader’ is one label for which he won’t need a pardon. Pollen, you had my curiosity but now you have my attention.

Securing equipment

Given that Pollen’s first launch geography is my backyard, I just had to bite. While the price I paid for an indoor and outdoor unit is steep for any hobbyist budget I justified it with the thought that experience on this system translates directly to the Helium 5G rigs.

After playing with the project this week I’m here to say, YES, Pollen delivers on all of the promises. I am told this has been a big focus of the scrappy Pronto.ai engineering team since late 2021 and I am extremely impressed at what the team has accomplished in a short period of time. Larger teams have accomplished far less with far more time.

Better to tell my neighbors this is a cellphone tower or a cryptocurrency miner?

The Pollen idea

Pollen brands itself as a private mobile network: cheap, secure, private 4G/5G data for the masses. The value offered is an intersection between neutral host, home wifi and private networks. Picture a way to supplement poor mobile coverage at your home, or an eSIM you can install on your phone to feel confident you are getting rock bottom data rates when you’re out in public.

However, the way of achieving this dream sounds a little strange if you’re new to decentralized wireless. Building a network, one small owner-operated roof-mounted radio at a time? How can you compete with ATT, T-Mobile and Verizon with their massive towers and spectrum? This is where it helps to know about Helium and the effect Helium’s Proof of Coverage (PoC) incentive has had on the human psyche. Helium has created a culture of people willing to buy hardware, climb roofs and hustle for locations all to the benefit of the Helium network. In other words, Helium PoC convinced participants to absorb the largest costs of building a mobile network in exchange for an equitable portion of the network value. Needless to say, proof of coverage is an effect to behold. One could dismiss PoC as empty crypto ponzi-nomics but you can’t argue with the results.

Here’s what I want to emphasize: Pollen is Helium – but replace the LoRa network with a 4G/5G network. Climbing the roof is the same, hustling for locations is the same and proving coverage is the same. As I’ll explain in Part 2, Pollen adopted Helium LoRa’s strongest growth strategies and skipped Helium 5G’s largest development hurdles, however their private network goals may put a ceiling on success.

Does Pollen work?

Enough talk, does Pollen work as promised? YES! My founders kit consisted of a “Flower”, or the Baicells radio and Magma gateway pair, several small embedded Beaglebone linux devices with a custom printed circuit board and Band 48 modem (Bumblebees) and a bunch of eSIM downloads (Hummingbirds).

The Pollen token PCN can be earned in several ways. eSIM devices can earn a small amount per day by simply attaching to a Pollen CBRS Flower node. Bumblebees earn in a similar fashion, except earnings are multiplied according to the number of unique geospatial Hex9 attachments in a day, coordinated by GPS (side note, this is an abuse vector). Most earnings will go to the Flower, who will receive 10x more rewards for each unique Flower-to-Bumblebee Hex9 confirmation, up to a maximum dictated by the type of Flower.

Just two days after securing equipment, I’ve seen all the main functions work as intended. I’ve proved my location with bumblebees, I’ve roamed with eSIM devices, I’ve had a CPI come check out my install, and earned PCN. I am thoroughly impressed.

The filled turquoise cells indicate a bumblebee has verified a radio connection within this hex. The empty cells indicate…something else (i’m not sure).. There is also a bounty system, where signal validation events in some cells are worth a bonus. Clearly there is much to be improved in the UX of just about every feature, but the core is here.

At a later date mobile data transfer & other mechanisms will factor into rewards. Worth emphasizing is that for now the network is basically dishing out stable coins because the PCN token is designed to be pegged at 1PCN = $0.10. To me this looks like a trick to avoid securities law conflict, akin to airline miles. Anthony, take note: compliance will be a significant part of your life if Helium’s Amir Haleem SEC experience is any indication. People love speculating, DeFi and price action. Give the people what they want.

Can Pollen work?

Can Pollen achieve its goal of creating supplementary offload opportunities for eSIM users? There are ~40 Helium hotspots per square mile in San Francisco, which is a ridiculous density. If just 10% of those users deployed a CBRS radio, that’s 4 radios per square mile. Suddenly a viable cheap & private mobile network in San Francisco doesn’t seem crazy. The early adopter culture of crypto is legendary, so I actually have no doubt we’ll see some serious adoption in SF at least. However, I think Pollen token economics need a major overhaul before we can expect stratospheric results.

Above is a modeled CBRS Band 48 coverage map of an outdoor node similar to mine, positioned in prime real estate overlooking Dolores Park, San Francisco. On a sunny day, this park sees tens of thousands of folks visiting and hanging out for hours. One of these outdoor nodes can easily blanket the entire park with coverage. The thought of giving visitors an alternative source of mobile data is very enticing; I fully expect we will see these kinds of deployments pop up, owned by the lucky few with access to such valuable real estate.

I found these signal propagation models quite accurate when applied to my own neighborhood. After doing spot checks with my Pixel 6 Pro + eSIM I was able to stream youtube videos about .25 miles from the base station, within a total area of about a tenth of a square mile filled with about 80 suburban homes. I lacked line of sight for pretty much the whole time with tons of large trees and typical residential objects blocking LOS. Superior positioning will surely grow this usable area by a factor of 2-5x.

In summary:

• The good: Super early no-nonsense release, all the major functions work, the tech & packaging is downright cool.
• The bad: everything is clunky, nonexistent tooling or ability to understand status/function.
• The ugly: broken token economics and a long road towards credible neutrality & decentralization.

No matter how you slice it, a talented team just entered the decentralized wireless ecosystem who have managed to pull off something exceptional in a short amount of time. 2022 is starting off to be a great year for DeWi. Stay tuned for Part 2 where I’ll go into depth about how Pollen differs from Helium 5G.

HIP20 is the present-day monetary policy for Helium and utilizes tried and true crypto economic mechanisms: capped supply and halvings (github). Thrown into the mix are the concepts of Burn & Mint equilibrium and Net Emissions. Understanding the network outlook boils down to answering one simple question: are the total number of HNT growing or shrinking? Despite the clear language of HIP20 it’s still not easy to form an intuition for this question. “$1M/month of network usage means a price of $20” is a line popularized by JMF, but what does it mean? How does one arrive at this conclusion? Are there other surprising conclusions?

→ follow me on twitter @DeWiGoSite ←

This post is really just an explanation of key concepts I wished were around when I tried to digest HIP20, starting with some of the common phrases thrown about when discussing Helium economics.

DC Burn is the core function of the network, and what we’re all here trying to do. Less understood is that there are two types of DC burn functions and the accounting is different for each.

• Data transfer (not deflationary, up to a point)
• Non-data transfer (deflationary)

Since the value of a data transfer DC burn is paid to the hotspot routing traffic, by definition it does not deflate the total supply of HNT until the total DC transfer in a 30 minute period (epoch) exceeds the allocation codified in HIP20. Today, this amount sits at 35% of total HNT emission per epoch, or approximately 1712 * 35% ~ 600 HNT. Due to nascent network utilization, true consumption is less than a 1/10th of a single HNT per epoch, so the unused portion is generously given to PoC participants.

Non-data transfer DC burns are from actions such as HNT transaction fees, onboarding fees and location assert fees. Since nobody is the recipient of these fees, there is no connection with Burn & Mint, and they are by definition purely deflationary.

Burn and Mint is where the use of the network is derived from burning the native token to redeem what amounts to non-transferable airline miles. The Multicoin Capital post will do the explanation more justice than I ever can. To say B&M is “kicking in” is really just a situation where demand-side HNT burn (constant cost) exceeds supply-side hotspot reward allocation (fluctuating), and thus the total supply of HNT is under deflationary pressure. Equilibrium is once again reached when the native token appreciates in price.

Put another way, when B&M is “kicking in”, hotspots won’t actually get paid the nominal rate for data transfer ($0.50 per 5G gb, $0.00001 per LoRa packet), instead earning a scaled portion. It always costs the same to use the network, but data routers only earn up to parity with cost. People assume this data transfer rate is fixed forever, but high network demand paired with volatile sentiment on $HNT can result in data transfer earnings less than expected. Today, it’s a far-off scenario but if the network really catches on it will surely happen and possibly catch people off guard.

Halvings. Like bitcoin, the monetary equation for Helium changes on a regular basis. Helium emission rate will halve every two years, but actually goes through changes on a yearly basis when the ratio of reward allocation between PoC, data transfer and founder reward all change. However, until DC burn from data usage becomes a greater quantity of usage, yearly changes are not especially relevant. I expect further changes to this reward schedule as more HIPs get implemented which factor in new forms of Proof of Coverage.

Net Emission is relevant many years from now and is framed as ‘a mechanism to ensure network participants always get paid’. The value of Net Emissions is locked at 34.42 HNT per epoch, and will not go down during halving cycles. Another way to think about Net Emission is it establishes a non-deflationary network utilization floor, or, a forever-window of 1:1 payment for data transfer participants.

There is a future date at which Net Emission, 34.42 HNT per epoch, makes up the lion’s share of all HNT available. Today, Net Emission consists of only 2% of the bucket per epoch (34.42 / 1712 HNT), in 5 years it will be 8%, but in 10 years it will be much higher at 65% and eventually consist of close to 100% of all available awards.

Crypto moves fast – how many headline projects from 2017 are around today? Its an interesting economic mechanism and critical for the long term network utility, but not likely a factor in Helium’s near term survival.

Painting a picture

I present below the first true visualization of HIP20. Using two simple numbers – price of $HNT and daily DC burn, you can use the chart to determine if the maximum supply of Helium is increasing, decreasing, or staying the same. Because the economic model changes on a yearly basis, so must this graph, so the present-day 2021 3 Year graph is next to the 20 year steady-state chart.

Make note of the location of lines representing DC B&M Equilibrium and N.E. Equilibrium. They actually switch places in the year 20 chart because halvings decimate HNT total emission, allowing Net Emissions to become the steady state non-deflationary floor. Year 3 also contains a section I called Slowed Inflation, which amounts to contributions to total supply from PoC. By year 20 this inflationary buffer has disappeared entirely and the inflationary floor shrinks to meet the line of net emission.

This brings us back to JMF’s million-dollar comment: “$1M DC burn per month (33k per day), guarantees support at $20”. You can see this statement visually now by tracing the $20HNT dashed line and seeing it intersect with the $33k per day DC burn price. This relationship is linear, meaning $2M/mo burn equates to $40 equilibrium, $10M/mo burn to $200 equilibrium and so on.

A less sexy but more accurate statement would be “In Helium’s steady state economic environment 17 years from now, DC burn in excess of $1M per month causes deflationary pressure on total supply when the token is priced below $20”.

(But that’s not as good of a tweet.)

I must point out this pertains to Data DC Burn only. The network burns on the order of $200k worth of onboarding fees daily, which is indeed deflationary. You can use the non-data DC burns alongside these charts, but the colors and boundaries will lose meaning.

The Helium economics are a simple but cleverly designed, utilizing well understood and accepted ideas within the crypto world along with a few new ones. The long term viability of the project requires the existence of a healthy stream of demand-side HNT burn. We are NGMI as long as HNT demand is driven by circular onboard and transaction fees. Stay tuned for a future article where I will discuss those exact prospects as it pertains to 5G.