Why Helium May Fail In 2022, And Why It May Soar

12 min read

Helium Cryptocurrency Value

Nearly 174 years ago . . .

James Marshall found gold near Sutter’s Mill in California. His discovery led to the most famous gold rush in history.

In 2021 a different kind of gold rush has gained momentum. In 2021 alone, cryptocurrency miners have claimed more than $414 million worth of Helium tokens (HNT).

That’s 15% more than the $360 million pulled out of the Earth in California in 1849, after adjusting for 174 years of inflation.

 

Why the Rush?

High demand for gold as a scarce and valuable resource fueled the 1849 gold rush.

Beyond the possibility of striking it rich, however, there was also time pressure. There was only so much gold to be had. Every gold nugget pulled from streams and mines diminished the amount available for other miners to find. 

The Helium rush of 2021 bears striking similarities.

For Helium miners the scarce resource is Helium tokens. In the first seven months of 2021 Helium minted 5 million HNTs per month, with about two-thirds of those HNTs going to Helium miners. Starting August 1st Helium is only minting 2.5 million HNTs per month. In two more years that number will halve again to 1.25 million HNTs per month.

And so on, every two years. At the end of its 50-year plan Helium will have minted 223 million HNT and then it will stop minting new tokens, excepting a “Net Emissions” provision that allows for continuing payments for data transfers.

In the meantime, more and more Helium miners are competing for fewer and fewer minted HNTs. In 2021 alone, the number of Helium hotspot miners worldwide went from less than 15,000 to more than 400,000.

That number could be a lot higher, as miner demand is far outpacing supply. Typically, lead times for new mining devices range from a few weeks to several months, with some manufacturers refusing to even take orders.

Taiwan manufactures most of the world’s supply of semiconductor chips, an essential component of Helium miners. In the last two years the Covid pandemic has catalyzed a cascading effect on manufacturing labor, raw material availability, shipping containers and shipping port backlogs.

As the number of miners increases and the number of mine-able HNTs decreases supply and demand will equilibrate. HNT is a cryptocurrency, however. Despite expected volatility, its value has the potential to grow enough to offset the effects of fewer minted coins.

At the start of 2021 a Helium token was worth $1.29. The value spiked to more than $52 in November and is currently hovering around $30. Meaning it’s hard to predict future demand.

Where is the HNT coming from?

Cryptocurrency coins are not made from precious metals. They’re digital mediums of exchange created and accounted for securely on a ledger that is transparent to everyone, real-time, otherwise known as a blockchain.

HNTs were created to facilitate Helium’s business plan for creating a low cost, universal network for the Internet of Things.

The Internet of Things (IoT) is all of the smart devices that help us automate our homes and lives. These smart devices have sensors that record information, but to be useful they have to have a way of communicating that information to our smart phones or other data hubs

The Helium Internet of Things Network. Image adapted from: Image by jeferrb from Pixabay

IoT device data could be transmitted via wi-fi or cellular networks, but these networks have much more capability and power than needed for the IoT. Wi-fi or cellular networks are also not a practical solution for the IoT because of their shorter range and their high cost of transmitting small IoT data packages. 

The creation of HNTs does a couple things for Helium. It provides a way to incentivize people to host hotspots which create the Helium network. It also provides a simple way to charge transaction fees to developers and IoT companies, by burning HNT.

Every time an IoT device sends data on the network it uses Data Credits (DC). DCs are converted, or burned, from Helium tokens. The value of each DC is always $0.00001 and lets the user send 24 bytes of data within the network.

But the value of HNT fluctuates, so the cost of each data credit in Helium tokens also fluctuates.

For example, if a user needs to send 480,000 bytes of data they will need 20,000 DC, which are worth $0.20.

                          if one HNT is worth $30, they will need to burn 0.0067 HNTs

                          if one HNT is worth $40, they will need to burn 0.0050 HNTs

This is known as a “burn and mint” equilibrium model. As the use of IoT services increases more HNTs are burned, decreasing supply and creating upwards price pressure on HNT. As HNT prices rise that means fewer tokens have to be burned to buy the same amount of service from the network, returning the network to a state of equilibrium.

This rewards and payment system means that as network use increases it contributes mostly linear, non-speculative growth in HNT value. This real demand is a significant driver of HNT price growth, but it does not mean there is no speculative demand. To get an idea of the relative effects, compare the following two one-year charts.


Image Credit: Medium.com, stin.eth “Connecting the HNT price to demand for using the Helium network by analyzing data credit burns

Is it still the Wild West?

In 1849, gold prospectors often risked all they had, even their lives. They endured great hardships in the hope of striking it rich.

The challenges facing Helium prospectors in 2021 are less life threatening, but the competition is still very real. There are miners that make only a few dollars in HNTs per month. Other miners make as much as $2,000 or even $3,000 per month.

The most striking difference is that Helium miners are not human. People set up small mining devices in their homes or workplaces, then go about their businesses, letting the mining devices do all the work. They don’t even have to take their HNT to the bank: it gets deposited automatically to their digital cryptocurrency wallets.

California Gold Rush Miner
Helium Hotspot Miner
Nik Hawks Helium Hotspot Expert

Ab Townsend, Miner, California Gold Rush.

https://creativecommons.org/licenses/by-sa/4.0/

 

Bobcat 300 Helium Hotspot Miner.

image credit: author

Nik Hawks, 2021 Helium Miner Boss (aka host)  Image credit: Nik Hawks

The 1849 gold rush saw more than 100,000 people looking for gold in relatively small areas in California. In contrast Helium mining is worldwide. At the beginning of 2021 there were less than 15,000 Helium miners worldwide. As of December 10, that number has grown to more than 400,000, adding 88,000 in the last 30 days alone.

Just as successful gold miners found ore in pockets or veins, the most successful Helium miners tend to be close to each other.

Helium miners receive HNT rewards every time they talk to other hotspots and when they transmit IoT device data. The highest paying miners are relatively close to many other hotspots. They’ve got more hotspots to talk to, so they get paid more often.

Helium is happy to pay miners for this work, but within some very specific guidelines. The Helium network succeeds by creating global coverage, and that doesn’t happen when all the miners stick close to one another. So for each size area, Helium only allows a certain number of miners to receive full HNT rewards for their work. If there are too many miners in a given area, then they have to share the HNT rewards with each other.

If two miners are within 300 meters of each other, Helium says that’s too close and will not pay out full rewards. The rules are a little more complicated for larger areas, but they are very specific about maximum hotspot density for all sizes of geographical areas.

The city of Las Vegas provides a good example. As the number of hotspot miners grew, so did the HNT rewards. New wanna-be hosts saw the success of established miners and could not resist “jumping their claims.” At last count there were 1693 Helium hotspots in Las Vegas, in an area that will only support just over 1000 miners for optimal network coverage. The result is that nearly all of the miners in the best locations are now sharing their rewards with newer miners.

                                             Las Vegas, Nevada Helium Hotspot. Image Credit: screenshot, explorer.helium.com

Obedient Khaki Fox is a randomly chosen Helium Hotspot in Las Vegas. There are so many hotspots in Las Vegas that Obedient Khaki Fox is able to talk to and witness 149 other hotspots. In spite of this abundance of riches, Obedient Khaki Fox is only receiving a fraction of the total HNT rewards available. The rest of those rewards are being shared by other nearby hotspots.

According to Helium, there are 587 too many hotspots within the Resolution 4 hexagonal area around Las Vegas. The Res 4 area is 683 square miles in size, larger than the city of Las Vegas.

The entrepreneurial environment is a lot different from the Wild West of 1849, but human nature has not changed. There will always be those who don’t mind killing someone else’s golden goose, even if they only get a drumstick for their trouble.

Selling Shovels

Mark Twain may or may not have been the first person to say “the secret to getting rich in a gold rush is selling picks and shovels.” But it was true in 1849, and may be as well with Helium mining in 2021.

In 1849, savvy entrepreneurs charged miners premium prices, not just for picks and shovels, but for denim jeans, coffee and just about everything else they needed.

In 2021, smart entrepreneurs and big businesses also make a healthy profit supporting the helium mining business. The average price of a hotspot miner is between $400 and $500. Bobcat has shipped over 150,000 hotspot miners in the first 10 months of 2021, and opened a fourth production facility in November.

Before Helium halving in August the most productive miners were earning more than $2,000 in HNT per month. When the supply chain for new miners backed up, the available supply was reduced, but demand was taking off. As a result the market value of helium miners increased by as much as 3x or even 4x retail.

Here are three recent examples. In August, 2021 EBay seller ahmed_2000us sold a RAK v2 miner for $1790. On 11/13/21 EBay seller shipnow1123 sold a Bobcat 300 for $1995. On 12/3 EBay seller oscacru-841 sold a Bobcat 300 miner for $1750.

Bobcat Miner advertised on EBay

This image is a screenshot of an email from EBay in December 2021 sent to the author.

The Gristle King

Nik Hawks (pictured above) is an ex-Navy Seal and an entrepreneur.

In 2020 he discovered Helium, learned how to build his own hotspots using raspberry pi technology and quickly became an expert in Helium hotspot placements and setups.

When he’s not setting up his own Helium miners Hawks does Helium mining consulting. He’s a good example of a modern prospector who makes as much from selling shovels as from mining.

The Concessionaire Model

Making passive income from a hotspot miner is an attractive idea, and setting up a hotspot in a home or place of business is pretty easy to do. Even so, many people are held back by concerns.

  • It seems too hard technically
  • They can’t afford to buy their own miner
  • They’re worried about the risks of getting stuck with a miner that’s not paying off

To answer this need in the marketplace a number of companies offer free miners to people, in exchange for a share of the Helium Token rewards.

Emrit offers their hotspot hosts 20% of their miner’s rewards and keeps 80% for themselves. Fairspot offers a generous 70%, but only to potential hosts in the best hotspot locations. However, neither Emrit nor Fairspot have been able to fulfill orders within the last couple months.

This is also a productive model for individual entrepreneurs, who buy mining devices then negotiate with individual homeowners or businesses to host the miners for a share of the profits. 

The Affiliate Model

iHub Global has taken the Concessionaire Model to the next level. They offer 25% of mining rewards to hosts, after an initiation fee and with an $18/mo lease. These fees cover some of their operating costs and also tend to prequalify the most engaged hosts.

25% of rewards is not a remarkable deal for potential hosts, but they stand to make considerably more as an affiliate of iHub. Affiliates earn monthly recurring bonus percentages for every new host they recruit, with no limit on the number of recruits.

This is an effective shovel-selling strategy for iHub. Not only do they make a healthy recurring profit from every host, but their host/affiliates provide viral marketing for more hosts that iHub doesn’t have to pay for. And their host/affiliates also win, as they are rewarded for every new active host they recruit.

Is Helium the new Gold Standard?

 Helium fills an important niche in the cryptocurrency world as a unique utility token, with the potential to increase greatly in value. But it’s unlikely to overtake Bitcoin, the current crypto standard.

So, no, Helium is not the new gold standard. But an argument could be made for cryptocurrencies in general as an evolving new gold standard. 

cryptocurrency quote

Brian Forde, former White House Senior Tech Advisor to President Obama believes cryptocurrencies have the ability to transform the way we do business as much as the internet has done over the last 20 years.

Helium’s business model provides a good example. HNT has provided a secure, transparent way to reward hotspot hosts. It’s use of the burn and mint equilibrium model also provides a stable transaction medium for data transfer within the Internet of Things.

Chainalysis has reported that worldwide crypto adoption has grown 2,300% between late 2019 and mid 2021. That bodes well for Helium’s crypto fueled global Internet of Things.

At the Summit for Democracy, held in December 2021, Indian Prime Minister Narendra Modi called for the creation of a global standard for cryptocurrencies, so that they are used to empower democracy, “not undermine it”.

That sounds noble enough, but Modi is a politician above all else, so it’s not clear what kinds of actions these words will inspire.

Why Helium may Fail – the Competition

There is strong demand for HNT from a growing list of IoT companies that want lower cost networking services for their low-bandwidth devices. 

But, HNT’s success as a cryptocurrency is predicated on fulfilling its first mission: incentivizing the building out of the IoT network. If Helium fails complete this vision then market share with IoT companies will lag, as will the appreciation of HNT. 

Helium has an extraordinary vision for building out the Internet of Things. And already Helium has become the world’s fastest growing wireless network. 

But it’s still not a one-horse race. 

Helium is not the only company with a plan to create a network for the Internet of Things. Amazon and SpaceX are minding their own device connectivity related businesses, but those businesses have the potential to overlap or even overtake the Helium network. Smaller companies such as Hiber, Kepler Communications, Samsara and RBC Signals also have IoT potential.

Amazon

Jeff Bezos has a vision for an “Amazon Sidewalk” IoT network. The Sidewalk Network, which went live in June of 2021, uses radios embedded in thousands upon thousands of Amazon Echo and Ring devices in people’s homes. These Sidewalk “bridges” piggyback on their customers’ wi-fi networks.  

The Sidewalk network increases the usable range of Amazon’s devices to about a half mile, making sure they stay connected to Amazon servers in the cloud.

Amazon does not incentivize consumers to contribute their wi-fi bandwidth. But, at the cost of a small amount of their wi-fi bandwidth, Amazon customers may benefit in this low-cost connectivity solution for Amazon IoT devices.

Amazon has a long history of collecting and occasionally mishandling user data to maximize their marketing profits, so consumer trust is an issue. Even though Amazon has taken steps to ensure Sidewalk privacy and security, it has also stated that in the future it may share Sidewalk data with third-party developers.

SpaceX

Elon Musk’s SpaceX Starlink could compete to service the Internet of Things, as well as the current acquisition of Swarm.

Starlink’s mission is to sell fast broadband internet anywhere on earth with a constellation of up to 42,000 very small satellites, but especially in rural under-served areas. Starlink’s low earth orbits offer low-latency transmission speeds: signals don’t take as much time because the satellites are much closer to earth than geosynchronous satellites. Starlink satellites are also used in limited cases to boost IoT connectivity on the ground.

There is high demand for IoT services in areas where Helium has not and may not deploy hotspots. Think remote agricultural areas, container ships at sea, or oil and gas pipelines. In populated areas Starlink currently can’t compete with the Helium IoT network on price, reliability or with access to 5G, but there are other areas where they’re more capable.

The biggest mismatch for Starlink and IoT service right now is Starlink’s higher, more expensive data rates, developed for broadband use. But, there is a lot of room for development of smaller nodes with lower data rates that can be used in those areas that are hard to reach except by satellite.

Swarm is a company focused on creating and serving IoT networks. Even before it agreed to become a subsidiary of SpaceX it was in the process of launching a constellation of 150 sandwich size satellites into low earth orbit. This constellation connects IoT devices to its global communications network. The current subscription fee to use the network is $5/month. This is more expensive than Helium, but could become competitive, especially if Swarm technology is used to address some of Starlink’s IoT deficiencies mentioned above..

High Stakes race to build out a network for the Internet of Things. Helium (Amir Haleem) has a good start but faces competition from Starlink & Swarm (Elon Musk) and Amazon Sidewalk (Jeff Bezos). 

Helium’s adoption of blockchain technology in its business model provides a uniquely innovative solution to the need for a low-cost Internet of Things network. This has successfully translated to a top 50 market cap out of more than 13,000 cryptocurrencies. It has also rewarded entrepreneurs and regular people by paying them to help create “The People’s Network.”   

Helium has a long way to go before it covers the globe with it’s IoT network, but it continues to make progress with that goal, in developing new capabilities, and in attracting network customers.

Network Customers

Helium is backed by Marc Benioff, First Mark, Multicoin Capital, Khosla Ventures and Union Square Ventures. Some of the businesses that use the Helium network for data tracking include Smart Mimic, Salesforce, Airly, Nobel Systems, myDevices and Conserv.

In August 2021 GPS tracking company Invoxia joined the Helium network, following in the footsteps of other GPS tracking companies Lime Scooters and Invisileash.

In September 2021 IoT business leader Senet announced a partnership with Helium. Senet runs one of the biggest LoRaWan networks in the U.S., serving over 55 million customers in more than 1300 cities. That means more network traffic and data transfer fees for Helium and more rewards for existing and new Helium hotspot hosts.

5G

In 2021 the Helium community voted to begin supporting 5G infrastructure. Interest and demand for 5G is very high, but there are a number of technical and associated cost challenges that have slowed its rollout. Helium’s IoT decentralized business model is a good fit to play a supporting role with 5G networks, with people incentivized to host their own 5G hotspots.  

In fact, the first LoRa/5G hybrid hotspots are already in production. They are designed to mine HNT for the IoT, like every other Helium miner, but also earn HNTs by offloading 5G cellular data.  

In October of 2021 Dish Network Corp. agreed to partner with Helium to help build out Dish’s own planned nationwide 5G wireless network. Helium’s role is to use their incentive model with Dish customers to pay them in HNT to host their own 5G hotspots. Dish holds numerous airwave licenses that it must use or lose, providing additional motivation for getting Helium’s help. 

In September GigSky created the world’s first 5G mobile plan, and it will use the Helium network.