https://blog.dshr.org/2022/08/helium.html
DSHR's Blog
I'm David Rosenthal, and this is a place to discuss the work I'm
doing in Digital Preservation.
Thursday, August 4, 2022
Helium
A major reason that cryptocurrencies have become such a problem is
that mainstream journalists normally just regurgitate the hype they
are fed by people Talking Their Book. Kevin Roose is a New York Times
"technology columnist" who is infatuated with cryptocurrencies. Last
March he wrote The Latecomer's Guide to Crypto, which was so bad that
Molly White assembled a group of experts to perform a devastating
fact-check. Roose responded by justifying "talking his book" in a
since-deleted tweet:
Crypto is pretty experiential compared to traditional finance,
and it's going to get harder for journalists to report on this
stuff if they're prohibited from touching it at all (especially
as more activity moves into token-gated Discords, DAOs with
ownership requirements, etc.)
He conveniently ignores that conflict of interest policies prevent
journalists owning cryptocurrencies, not experiencing them using the
paper's money.
A month earlier Roose had published another masterpiece of credulity
entitled Maybe There's a Use for Crypto After All whose subhead was:
Helium, a wireless network powered by cryptocurrency, hints at
the practical promise of decentralized services.
Below the fold I compare reality with Roose's naive boosterism.
Roose provides some numbers:
The network is made up of devices called Helium hot spots,
gadgets with antennas that can send small amounts of data over
long distances using radio frequencies. These hot spots, which
cost roughly $500 apiece
...
More than 500,000 Helium hot spots are in use around the world,
...
In the first few days after I plugged it into my Wi-Fi router, it
generated about $7 worth of $HNT
Lets assume that a "few days" is a week. If Roose's hot-spot was
representative of the network (he didn't check the sub-Reddit to see
if it was) that would mean that the network was paying out $3.5M/week
or $182M/year.
[MarkFelt]
Mark Felt (Deep Throat)
Roose is in his mid-30s. I thought all aspiring journalists of his
generation watched All The President's Men and heard Hal Holbrook as
Deep Throat say "follow the money". So if the network was paying out
$182M/year, and it was a sustainable business, it should have been
taking in more than $182M/year from the kind of customers Roose
described as:
companies like Lime (which has used Helium to keep tabs on its
connected scooters) and the Victor mousetrap company (which uses
it for a new line of internet-connected traps).
[HNT-Price]
Source
Did he call up Lime and ask "how much are you paying Helium, and are
you getting value for it?". Did he check the public blockchain to
identify Helium's wallets and see how their HNT token was moving? Did
he notice that by the time he wrote HNT had dropped from its peak on
11^th November 2021 of $51.20 to $30.00, and ask other Helium
hot-spot owners how they felt about their income being cut 42%? As we
shall see, he didn't.
Of course, money from these corporate customers was not the only
money flowing into Helium. Six months earlier, Joanna Ossinger
reported that Andreessen-Backed 5G Blockchain Network Raises $111
Million:
The Helium Network, a decentralized peer-to-peer 5G wireless
network, has raised $111 million in a token sale led by
Andreessen Horowitz.
The transaction was structured as a purchase of Helium's native
token, HNT, and included participation from Ribbit Capital, 10T,
Alameda Research and Multicoin Capital, according to a statement.
[XCH-073022]
Source
At that date HNT was trading at $16.46. Had Roose been paying
attention to the fortunes of tokens issued by A16Z-backed companies,
he might have noticed that HNT's price history was not unusual. Chia,
another A16Z-backed company, had a similar trajectory, without HNT's
early history. He might even have read Fais Khan's "You Don't Own
Web3": A Coinbase Curse and How VCs Sell Crypto to Retail, published
three weeks earlier. Khan shows that, after an initial pop, the
longer a VC-backed coin has been on Coinbase, the worse it performs
relative to BTC and ETH, and:
A16z's returns are much worse than Coinbase's listings overall!
This to me smells of insider selling. These should be the best
coins there are, given a16z's access, but instead 100% of those
older than 12 months and 90% older than 6 months lag Ethereum.
Of course, VC money coming in is good, but a sustainable business
can't survive on it. Another source of money coming in is the $500
for each of the hot-spots. They are LoRa gateways, and he could have
searched on Amazon to find how much other LoRa gateways cost. I just
did, and right now the cheapest I found is $52.99, and a professional
one is $193.99. So each hot-spot is generating at least $300 over
retail. That's $150M right there, but it isn't a sustainable cash
flow either.
So just by using arithmetic and the Internet, Roose could have
rapidly found enough information to cast doubt on Helium's
sustainability. But he wasn't alone in believing the hype. Seven
weeks later, Hannah Miller reported that Crypto Wireless Company
Helium Hits Unicorn Status:
Helium Inc., the creator of a blockchain that powers a
decentralized wireless network, raised $200 million in a funding
round led by Tiger Global Management and Andreessen Horowitz. The
startup, valued at $1.2 billion with the latest funding, also
said Wednesday that it is changing its name to Nova Labs Inc.
At that date, 30^th March 2022, HNT was $24.98, down 51% from its
peak. Of course, A16Z probably sold around the peak. Even if they had
HODL-ed they'd be up 52% but anyone who bought after 10^th October
2021 would be under water. On 17^th May A16Z published Introducing
the 2022 State of Crypto Report describing Helium as:
a grassroots wireless network, is posing the first legitimate,
decentralized challenge to entrenched telecom giants.
This was impeccable timing. One week earlier, Terra/Luna had
collapsed, setting off the "crypto winter". HNT dropped to $8.70, 83%
down from the peak. As I write it is $9.30. Amy Castor read A16Z's
report and posted A16z's 'State of Crypto' report: A rehash of bad
crypto market pitches:
Helium is a utility token ICO scam where you mine HNT to pay for
long-range/low-bandwidth wireless connectivity. To start mining,
you have to buy $80 worth of gear from a Helium-approved vendor
marked up to $600. Some miners report making less than $1 per
day. HNT has lost 85% of its value since November.
But it doesn't appear that anyone actually followed the money until
26^th July, when Liron Shapira's thread (unroll) went viral. He
starts with the TL;DR:
.@Helium, often cited as one of the best examples of a Web3 use
case, has received $365M of investment led by @a16z.
Regular folks have also been convinced to spend $250M buying
hotspot nodes, in hopes of earning passive income.
The result? Helium's total revenue is $6.5k/month
The Generalist explains:
To use Helium's IoT network, customers burn HNT in exchange for
Data Credits (DC). This has a deflationary effect on the price of
HNT. Data credits maintain a steady value of 1 DC equalling
$0.00001. Companies spend Data Credits by transferring data via
LongFi and making transactions on the Helium blockchain.
...
Data Credits are used when onboarding a hotspot, asserting a
location, and processing a payment. Onboarding hotspots, in
particular, is intensive from a Data Credit perspective. Since
Helium is onboarding so many new hotspots, this skews results,
suggesting greater customer activity than is actually present.
Data from The Decentralized Wireless Alliance removes these three
uses, demonstrating the size of the Helium economy's customer
demand. By this measure, DC usage was just $6,561 in June.
Inspired by Shapira's tweet, actual journalists started asking the
questions that Roose couldn't be bothered with. First out of the gate
was Matt Binder with Web3 darling Helium has bragged about Lime being
a client for years. Lime says it isn't true.:
Since 2019, the decentralized wireless network service, which
bills itself as a peer-to-peer network for the Internet of
Things, has touted rideshare company Lime as one of its marquee
clients, claiming the company uses its service to geolocate
rentable escooters. There are numerous mentions of this
partnership on its website, along with the presence of Lime's
company logo, and in press coverage with various news outlets.
There's just one problem: That partnership never really existed.
"Beyond an initial test of its product in 2019, Lime has not had,
and does not currently have, a relationship with Helium." Lime
senior director for corporate communications Russell Murphy said
to Mashable.
According to Murphy, there was a "brief test of [Helium's]
product that didn't last beyond a month or two" in the summer of
2019. ... Murphy says that, as a condition of the trial, Lime had
requested that its name not be used by Helium in promotional
material.
...
According to Lime, The New York Times did not reach out to the
company to confirm the partnership.
Closely followed by Mitchell Clark with Helium says its crypto mesh
network is used by Lime and Salesforce -- it isn't:
Now, Salesforce, whose logo appeared on Helium's website right
next to Lime's, says that it also doesn't use the technology.
"Helium is not a Salesforce partner," Salesforce spokesperson
Ashley Eliasoph told The Verge in an email.
Since when probed, Helium's customers seem to evaporate, it isn't
suprising that the system's actual revenue from customers is so low.
Shapira writes:
Members of the r/helium subreddit have been increasingly vocal
about seeing poor Helium returns.
On average, they spent $400-800 to buy a hotspot. They were
expecting $100/month, enough to recoup their costs and enjoy
passive income.
Then their earnings dropped to only $20/mo.
These folks maintain false hope of positive ROI. They still don't
realize their share of data-usage revenue isn't actually $20/
month; it's $0.01/month.
The other $19.99 is a temporary subsidy from investment in
growing the network, and speculation on the value of the $HNT
token.
Meanwhile, according to Helium network rules, $300M (30M $HNT)
per year gets siphoned off by @novalabs_, the corporation behind
Helium.
So a reasonably skeptical journalist should have discovered that
Helium was a typical Web3 company, peddling lies and hype in order to
enrich insiders and A16Z.
But there's more. A diligent "technology columnist" might have been
expected to make at least these four important observations:
1. The economics of running a Helium hot-spot are analogous to those
of Proof-of-Work mining. In the long term they are both
low-margin businesses. There is a limited suopply of rewards for
mining blocks or carrying traffic. There is nothing to stop
competitors joining in and eroding your margins. PoW mining is
profitable only when it takes time for competitors to enter; when
the currency is proceeding moon-wards and/or when the supply of
mining hardware is restricted. Neither is guaranteed. When they
aren't, the lowest-margin miners are forced out. The same will
happen to Helium hot-spots.
2. Hot-spots compete for the available traffic in their area of
coverage. In areas of high hot-spot density, typically urban
areas, each will get a small share of the traffic, although if
Helium were ever to have a lot of customers there might be quite
a bit of it. In rural areas the hot-spot density will be low, so
each will get a big share of the available traffic. But there
won't be much of it, because there won't be a lot of Things in
the Internet there, and because the low hot-spot density will
cause gaps in coverage, discouraging use of the network in rural
areas.
3. Helium hot-spots are often described (not by Helium itself) as
forming a mesh network. How does a mesh network deliver traffic?
Devices connect to a mesh router. Wikipedia explains what they do
:
Mesh routers forward traffic to and from the gateways, which
may or may not be connected to the Internet
In other words, packets hop from node to node until they arrive
at their destination or a gateway that can forward them onto the
Internet. That isn't how Helium works. Each hot-spot (router) is
a gateway, so data packets never need to hop between nodes. This
makes sense because Helium uses LoRaWAN radio protocols:
Together, LoRa and LoRaWAN define a Low Power, Wide Area
(LPWA) networking protocol ... The LoRaWAN data rate ranges
from 0.3 kbit/s to 50 kbit/s per channel.
If packets took multiple hops at this low bandwidth, the network
performance would be miserable. They don't; after the first hop
to the hot-spot they use the much higher bandwidth of the
hot-spot owner's ISP's broadband link. Clearly, a maximum of 50K
bit/s wouldn't significantly load this link.
4. [MedianSpeed]
Source
One thing Helium constantly stresses is "5G":
Helium 5G will be the second major wireless network that the
Helium Network supports. If you have a phone that supports
5G, such as an iPhone or Samsung Galaxy, you will soon be
able to connect through Hotspots that are powered by the
People -- you may be getting 5G from your neighbor!
5G cellular networks deliver serious bandwidth:
5G speeds will range from ~50 Mbit/s to over 1,000 Mbit/s (1
Gbit/s).
Assuming Helium eventually gets a lot of customers, the impact of
connecting a LoRa router to the median US broadband with 150M bit
/s down and 20M bit/s up will not be noticeable. But connecting a
5G router will have a big impact on anyone lacking my superb 1G
bit/s symmetrical fiber from Sonic (best ISP ever!). Because they
don't have a lot of customers, the impact will initially be
negligible. But just as competition and the drop in HNT's value
led over time to a lot of unhappy hot-spot owners, success with
5G would lead to similar unhappiness.
It really should be the job of mainstream journalists to apply
skepticism to technology hype, not to depend upon tweeters and
bloggers to ask the obvious questions.
Posted by David. at 8:00 AM #
Labels: bitcoin
3 comments:
[blo]
Tardigrade said...
Not to mention that if 5G Helium ever takes off the ISPs
providing the bandwidth to the Helium nodes will likely add a
terms-and-conditions denying commercial resale over the cheapest
consumer lines (if they don't have these already).
The only way Helium could ever compete with the big carriers is
by becoming a mesh network (with Nova labs or other partners
footing the bill for backbone connections), or upping the fees
for every node to pay for a commercial line.
Networks like Uber which float local ordinances make people think
they can get away with sticking it to the private enterprise man.
But private enterprises, even those that are common carriers,
don't have to sue in court to stop behavior they don't like. They
can just drop your service.
So we've got at least two kinds of idiocies: Crypto-idiocy, and
Wild West idiocy.
August 4, 2022 at 10:46 AM [icon_delet]
[blo]
Tardigrade said...
Float = flout. :( Caught it as I was hitting publish.
August 4, 2022 at 10:47 AM [icon_delet]
[blo]
David. said...
Tardigrade, you're right about ISPs not liking Helium 5G. Ev en
Roose admits that:
"Putting a Helium hot spot in your house might also technically
violate your internet service provider's terms of service, since
it involves reselling a portion of your bandwidth."
Also, the Roose article has been updated to admit that:
"Months after this column was published, some of Helium's
partnerships came under scrutiny from crypto skeptics who claimed
that the company was claiming affiliations with companies it had
no official deals with. A spokesman for Lime said in an email
that "beyond an initial test of its product in 2019, Lime has not
had, and does not currently have, a relationship with Helium.""
Of course, this doesn't admit that Roose should have asked Lime
about their relationship with Helium, or that Lime had
specifically made it a condition of the trial that Helium not
claim a relationship.
August 5, 2022 at 7:34 AM [icon_delet]
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