Decentralized Wireless Network
VeradiVerdict - Issue #196
Traditional wireless networks are currently weighed down by bandwidth issues, network congestion, service lags, and outages. Customers have to deal with these issues combined with determining the right coverage - often a difficult and costly task. What’s more, many individuals don’t even have access to the Internet at all. A study by Cornell showed that “low-income areas receive almost 15% less network coverage compared to their affluent counterparts,” creating a “mobile divide.” Since many individuals in low-income communities access the internet primarily through their cell phones, having sufficient coverage is crucial. The Cornell study also found that “regions with substandard access tend to become more economically depressed, encouraging service providers to continue to turn their attention to more affluent neighborhoods.”
An up-and-coming decentralized network called the Helium Network is working on solving these systemic, costly, and inequitable issues by introducing coverage operated by a cluster of nodes each emitting their own radio frequency from their location. By enabling anyone with a Hotspot the ability to participate in the network, hundreds of thousands of people are able to earn rewards, access more reliable coverage, and participate in creating a robust network.
The Helium Network
Nova Labs – formerly known as Helium Inc. – is the pioneer of decentralized wireless communications and creator of the Helium Network, a physical decentralized wireless network powered by nodes, or “Hotspots.” Users who deploy Hotspots are rewarded with cryptocurrency in the form of HNT, Helium Network’s token for growing the network. Pantera is excited to have participated in Nova Labs’ $200M Series D equity funding round, which values the company at $1.2B and elevates the company to unicorn status. The round also included participation from Tiger Global, a16z, Seven Seven Six, GV, and Deutsche Telekom.
Right now, the most popular form of telecommunications networks are enabled by centralized mobile carriers that compete with each other for business. Nova Labs takes a different approach: the Helium Network is powered by a collection of consumer-deployed nodes called Hotspots that operate together to provide coverage. Essentially, owning a Hotspot means the owner becomes a “mini cell tower” that emits coverage via radio frequency technology. The Helium Network, also known as The People’s Network, is run on Proof-of-Coverage infrastructure and incentive mechanisms to build the network in a decentralized way.
The Helium Network uses a unique algorithm called Proof of Coverage to run their network that essentially verifies that Hotspots are located where they claim. If a Hotspot is emitting wireless network coverage from a certain location, Proof of Coverage consistently verifies that that location is honest. Proof of Coverage harnesses radio frequency (RF) technology to create proofs that help the network run. According to the company, Proof of Coverage relies on three core characteristics: RF distance, RF strength, and RF speed. Using an algorithm called the “PoC Challenge,” PoC routinely “checks in” on Hotspots and ensures that they are actually broadcasting coverage from where they say they are. The “challenge” involves the Hotspot that issues the challenge, the Hotspot that receives the challenge, and a geographically proximate “witness” that reports the existence of the challenge to the network. First, the Challenger Hotspot generates a public/private key pair for the challenge. Next, the SHA256 algorithm is submitted to the blockchain with the public/private keys as a Proof of Challenge “request.” The blockchain will then accept the request if it is valid, and a new block will be created with the challenger’s identity and a hash of the public key. Challenge proofs are issued by Hotspots about once every 360 blocks, and they earn HNT, Helium’s token, in return. Once a Hotspot is checked and verified, the data is stored in the Helium blockchain.
HNT: The Helium Network’s token
HNT is currently trading at $6.64, with a market cap of $1.5B and 24H trading volume well above $146M. The circulating HNT supply is more than 100M, which proves the strength of Helium’s core infrastructure and Nova Labs’ thesis on decentralized telecommunications.
The percentage of HNT distributed as rewards depends on whether the node is a Challenger, Challengee, or Witness, and also what type of work is being performed (verification, data transfer, issuing new blocks to the network). Mining HNT also is done via radio technology, as opposed to traditional mining, which utilizes energy-intensive GPUs. Mining crypto via GPUs is one core critique of crypto skeptics – the Helium Network takes these demanding processes out of the equation entirely.
HNT token allocation. Source: Helium
As of today, there are over 781,600 active Hotspots up and running on the Helium Network, up from just 14,000 at the beginning of 2021. According to Nova Labs analytics, there are over 59,000 cities around the world with Hotspots, and nearly 5,000 additional cities are added each month. When the presence of a new Hotspot is verified or when coverage that the Hotspot provides is utilized, HNT is mined.
A Helium Hotspot. Source: S. Higginbotham
Hotspots connect to existing WiFi or Ethernet to operate. At a given time, around 65-85% of deployed Hotspots are online and emitting coverage to the network. The Helium Network also recently introduced Light Hotspots, “a software update that removes the need for all Hotspots on the Network to store blockchain data.” Instead, validators store the information on the blockchain; this improved Hotspot efficiency allows the entire network to run more seamlessly. When Light Hotspots are rolled out, the upgrade will be applied to all Helium-compatible Hotspots for free and with no action required on the user’s part. These improvements will make the necessary amount of data storage for a given Hotspot much less and therefore help alleviate network congestion and other inefficiencies. The scheduled date for Light Hotspot activation is May 11.
Locations in the US covered by The Helium Network. Source: Helium
Nova Labs (formerly named Helium Inc) was created by Shawn Fanning, Sean Carey, and Amir Haleem in 2013 with the intention of the network being for Internet of Things (IoT) devices, such as trackers and sensors. In 2019, the team transitioned to a decentralized network coverage model with tokenized rewards. Fanning is an entrepreneur, investor, and computer programmer best known for developing Napster. Haleem has a wealth of experience in the gaming industry as a member of the team behind Battlefield 1942 (developed by DICE) and at startup Diversion. He also co-founded the esports community esreality.com/. Carey has years of programming experience, including at Brightcove and Basho Technologies (developer of the technology Riak).
Network growth & the future
In talking about scaling the Helium Network, Nova Labs COO Frank Mong commented, “... this is clearly a marathon and not a sprint. While we’ve had sprint-like traction, I really want the entire team and ecosystem to run like a marathon. This is, to me, a multi-decade effort.” Eliminating the need for large coverage-providing corporations will be a slow but steady effort as individuals make the more cost-effective and secure decision. Entire communities and cities will transition to using decentralized coverage, especially as The People’s Network becomes more and more commonplace.
The use cases for trustless, equitable, and wide-reaching network coverage are numerous. For example, in 2021, the Helium Network and the City of San Jose partnered to help provide internet access for low-income communities within San Jose, funded by hotspot rewards. Furthermore, decentralized network coverage eliminates collusion and unfair behavior by big coverage providers and reduces the negative effects of oligopoly. It also empowers individuals themselves to contribute to the network, earn rewards, and use the network. With the raise, Nova Labs plans to grow out their team, invest in the Helium ecosystem, build community, and drive “continued wireless protocol support.” The company also intends to build out new applications on top of the Helium network itself.
These benefits culminate in a strong and impenetrable network – one in which, if a few nodes were to fail, the Helium Network would continue operating smoothly. Decentralizing telecommunication networks is an impressive engineering feat, and Nova Labs is well-suited to continue to expand and strengthen their coverage as well as grow its community. Pantera is proud to have participated with Nova Labs as they built out decentralized, efficient, and secure wireless telecommunications coverage and close the digital divide.
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Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.