In today’s age of 140 characters or less, people think that a one-sentence review is enough of a way to challenge someone else’s thesis. “My boy, it hasn’t aged well,” they will say. If they totally disagree with everything you’ve said, you’ll get a similar intellectually lazy response. “You enlighten everyone” or the classic “ok boomer”. The latter happens to be a favorite warning from the crypto cult, a group of people who see cryptocurrencies as only increasing and whose vocabulary does not contain the phrase “intrinsic value.”
Crypto “thought leaders” are sinking deeper and deeper into the quagmire, refusing to simplify the topic for the rest of the class who “just don’t understand Web 3.0.” Instead, they obscure things behind more layers of drivel. From one of the biggest advocates of the “creative economy”:
Crypto, as mentioned in both pieces, can be seen as a techno-populist movement to push for reform against centralized incumbents who wield monopsony power. Optimizing user ownership, autonomy and empowerment is how we are solving this crisis of legitimacy.
It’s good that you went to Hahvud, but can you tone things down for the commoners a bit? It’s hard to decipher anything useful from this babble except that this thought leader broke away from the investment thesis. We don’t invest in business because we believe that the working class is not being treated fairly and this needs to be urgently corrected according to Karl Marx ruminations, we are investing to show a return on the capital that we have worked so hard to accumulate. Period.
One thing you learn very quickly as an investor is how easily you can go wrong. This is why it is important never to dismiss the most superficial criticisms outright. You need to constantly review your assumptions to make sure things haven’t changed. When someone said our helium article “hasn’t aged well”, we decided it was time to take a second look.
What is the HNT?
A few years ago we published an article called Helium – Solve the IoT connectivity problem. Probably the most notable news since then was Mr. Musk’s switch to IoT, something we covered in an article titled SpaceX takes on the Industrial Internet of Things. As for helium, things seem to be taking off based on their initial value proposition which was:
- Sell an IoT connectivity device for hundreds of dollars
- Reward people who use these devices so that they are encouraged to buy them in the first place and keep using them
- Allow IoT developers to access this connectivity that only requires 50-100 devices per city for full network coverage
Here is our conclusion from several years ago:
If we pay $ 495 for a device, what is the payback period? Until we start to see information pouring out about the usefulness of running these devices, how can we tell how much of an incentive that is? While we wait and question, others don’t hesitate so much. Helium has sold its devices for its upcoming launch in Austin and the nationwide rollout of Helium Network US is slated for Q4 2019.
A key part of the missing information was the type of reward device operators were supposed to receive. This information is now known. The reward is a cryptocurrency called Helium, and the price of that cryptocurrency has taken off.
In the past 16 months, the award for using a Helium hardware device (helium extraction) increased + 7.890% giving the “market capitalization” of this token (supply of coins in circulation X coin prices) worth $ 2.2 billion. No, that’s not the value of the company called Helium that we talked about. This is the value of a token backed by biggest fools cryptocurrency speculators. You might not agree with this, but all you need to do is look around to see the blind mania that drives the price of cryptocurrencies like Shiba Inu Coin (market capitalization $ 9.8 billion), a token intended to mimic Dogecoin (market capitalization $ 30.5 billion), a cryptocurrency that is literally a running joke.
How many of those weekdays Robinhood warriors driving action memes on the moon actually understand the underlying businesses they are investing in? How many helium holders understand the underlying activity that it supports? This is a major point of contention. It seems that the helium coin exists only as a reward mechanism for miners, but derives its value from speculators.
If business models like ssoftware-am-a–sservice (SaaS) are given a market premium for their simplicity, then complex business models should be discarded. If this is true, then the helium should be at least half reduced. Trying to go through all the documentation that comes with this platform is no easy task. Here they describe what happens when the need to mine that $ 2.2 billion coin simply ceases in 50 years.
Using net issues, the blockchain would monitor the number of HNTs burned for data credits at any given time and add them to the number of HNTs to be struck at that time. For example, if 10 HNTs were burned for data credits at one time, the system would produce 10 more HNTs than expected at that particular time.
Enough already guys. Back to basics. How does the value of the HNT token relate to the value of Helium as a business, if not as a reward for people who use Helium hardware devices? All that “passive income” promised to people will quickly disappear if the price of that token drops as much as it has gone up.
The popular network
As with most cryptocurrency projects, there is an “us versus man” element of marketing. Now labeled “the people’s network,” Helium has grown as quickly as one might expect as the rewards for adoption increase by + 7.890%. Excitement is in the air. There is no longer a single device provided by the company Helium. There are now over a dozen devices you can buy from various vendors and hundreds of YouTube videos comparing them including the use of additional hardware like antennas.
In other words, things have gotten a lot more complex since the last time we looked. And complexity equates to more risk for investors, let alone the end consumer. Helium says, “Please do your own research because a supplier list does not equate to an endorsement or a recommendation.” Will a suitable industrial IoT enterprise implementation architect feel comfortable sending data to all of these different devices that are not approved by the platform vendor? (More on that in a bit.Speaking of which, this raises a very obvious question. How many customers pay to use this network? We have seen many “build it and they will come” business models fail miserably. Attention seems to be focused more on extracting the rapidly appreciating Helium token and less on the utility of the network for any Fortune 1000 referral customer.
A section of the Helium site entitled “ecosystem” allows users to filter on the platform. These are customers who will pay to access this decentralized network and create a real business around it. We don’t see many notable names in this list, nor any details as to actual usage. However, the Helium blog talks about the signing of “roaming” agreements where other networks can use the helium network in a transparent way for the solutions already deployed. This is great, but it still does not prove to us with certainty that significant revenue is generated from the use of the Helium decentralized wireless network. This missing data point prevents us from knowing what pull the helium achieves.
The good the bad and the ugly
As the price of HNT rises, more and more people are buying helium tokens believing that the appreciation in price results in an asset worth holding. In this regard, speculators are helping the network grow faster than it might otherwise. Using a cryptocurrency automatically solves the problem of miners receiving too many rewards today.
As more and more minors log in, the rewards will decrease as they are shared among more people. Once a mining rig’s payback period reaches a certain length of time – perhaps measured in months – people won’t want to wait that long to get reimbursed for the device. The company could eventually resort to distributing the devices, which would further increase coverage. In principle, this looks like a good business model. But there are things that can go very wrong if two fundamental assumptions turn out to be wrong:
- The underlying technology must be foolproof and secure in all respects. None of those “someone ran away with $ 100 million”.
- The HNT token must maintain a minimum monetary value. We don’t know what that value is, but right now it’s being attributed by speculators.
One question we have that we cannot find an answer for is about the longer term need for cryptocurrency. It must be possible to operate this business model without the need for a volatile cryptocurrency to underpin the whole transaction. Maybe that’s where they’re coming from. Cryptocurrency is simply used to accelerate adoption. Even if HNT eventually breaks down, they can simply pay a fixed rate of compensation to anyone who owns a device based on the simple measure of uptime. Again, we question the role of HNT in all of this, other than getting hundreds of thousands of people to quickly build a decentralized network that needs to generate a profit once the token excitement wears off. .
Conclusion
It remains to be seen how well the Helium utility token ages. A good scenario would be that it stabilizes at a certain price level which ensures a balance between all the constituents. IoT providers will get reliable connectivity at a fair price, and providers of this decentralized wireless network are encouraged to continue to provide it. Then, when Starlink is fully operational, let’s hope that Helium’s decentralized network will not be moved by Sir Elon of Musk. The whole shebang may be surrounded by great uncertainty, but one thing is certain. Only time will tell how badly helium ages.
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