On why Helium fundamentally doesn't work, along with a discussion on Web3 research methods

Author: Beichen

Aside from the poor coin price (down 97.6% from its peak), there seems to be no reason not to be optimistic about Helium—top-tier capital has co-invested $365 million, a team composed of tech giants, and a very hot DePIN (Decentralized Physical Infrastructure Network) narrative.

Moreover, in the current market environment, a poor coin price does not necessarily indicate a failing project… but Helium is indeed failing.

Next week, Steven will interpret why blockchain is not suitable for hardware infrastructure from the perspective of a communications engineer, while this article serves merely as a preliminary discussion, using Helium as an example to explain why such projects fail from a business perspective (the blockchain part will be supplemented by Steven), and to diss those who hype Helium in research analysis.

The reason for targeting Helium first is that just a few days ago, Coinbase Assets included HNT in its listing roadmap. My first reaction was—how is it still alive? Then I found that most of the available information is praising it (from the English-speaking world to the Chinese-speaking world, and even paid content), which made me unable to resist expressing some bold opinions!

What does Helium do?

Many research reports on Helium simply summarize a bunch of incomprehensible IoT technology introductions based on the official technical documents, concluding that "since IoT has a bright future and blockchain also has a bright future, it is undoubtedly true that Helium must have a bright future, buy it!"

I believe the simplest way to explain what Helium does is to compare it to Filecoin.

Filecoin is for distributed storage, primarily issuing a coin (FIL) and incentivizing people to store files on IPFS through "storage is mining."

Helium is for distributed wireless networks, primarily issuing a coin (HNT) and incentivizing people to provide hotspots for Helium's wireless network through "running a hotspot is mining." As for the role of HNT, it can be entirely referenced to FIL.

Helium's hotspots have two standards: one is the cellular network we are very familiar with, but the core is still LoRaWAN (a low-power wide-area network). Although the data rate is only 0.3-50 kbps, the coverage can reach 16 kilometers, and the battery life can last up to 10 years. It also supports dedicated and public networks, which is completely sufficient for the Internet of Things (IoT).

Note that the LoRaWAN network is not for streaming short videos or playing games, but for providing networks to devices that only need to transmit small amounts of information (such as GPS trackers, environmental sensors, weather stations, parking timers, etc.).

If we say that Filecoin at least started from the beautiful vision of its founder Juan, only to be ruined later by those selling mining machines, then Helium purely started from selling mining machines—initially, only the official could sell mining machines (dedicated routers, which users buy, connect to power, and link to Wi-Fi or Ethernet ports, then deploy wallets and sync to mine), otherwise, no rewards would be given. Later, it was opened to third-party manufacturers, but required community and foundation approval.

At this point, have you noticed—Helium's public chain only plays the role of issuing coins and order settlement (so those who hyped their public chain technology based on the technical documents early on were just blowing hot air), and this function can be achieved without a public chain!

Thus, Helium finally realized its mistakes last year and migrated to Solana in April this year, using smart contracts to perform the functions of a public chain.

Now you should have an intuitive understanding of what Helium does—it has built a wireless network and encourages people to buy routers to provide hotspots. Whether Helium can take off in the future entirely depends on whether IoT projects adopt their network, which is purely a matter of business logic.

Helium's Business Logic

From a telecommunications network technology perspective, LoRaWAN can replace 2G networks without any issues (the only criticism is that there is currently no universal standard, so security is relatively low), and indeed more and more IoT devices are adopting this network, but Helium's own business logic has significant problems.

Miners purchase routers to provide networks to earn limited HNT rewards, which is not an issue, but what is the value capture of HNT? If IoT hardware wants to connect to this network, it needs to burn HNT, then generate corresponding DC (pegged at $0.00001), and finally use DC for payment.

Theoretically, Helium's users are suitable for all IoT projects that only need to transmit small amounts of information, just as they promote—GPS trackers, environmental sensors, weather stations, parking timers, scooters, and even Nestlé's office fridge in Europe. Moreover, the scooter company has refuted claims, stating that they only conducted a brief test.

However, in reality, the demand for Helium's IoT is fundamentally a pseudo-demand. Not to mention industrial IoT devices with extremely high security requirements, even everyday consumer IoT devices like gumball machines, coffee machines, delivery lockers, and vending machines won't consider connecting to a third-party network, let alone everyday household items like speakers, rice cookers, and robotic vacuums!

Firstly, there are doubts about security; secondly, they want to establish their own IoT ecosystem (like Xiaomi's IoT developer platform). Only trivial IoT projects without grand aspirations would consider using Helium for cost reasons.

This is similar to how enterprises wouldn't consider storing data through Filecoin, although I have heard that some short video platforms have entrusted certain cold data to Filecoin miners for processing.

Thus, among the ecological projects promoted by Helium, a considerable portion consists of IoT solution providers, and having Helium as an alternative in their solution library is beneficial for PR, making this value equivalent to internet companies establishing partnerships with AWS or Alibaba Cloud.

Of course, Helium also has a 5G narrative, which you can completely understand as selling another wave of 5G routers using the same logic (this is a general cellular network, aimed at ordinary mobile users), earning tokens called MOBILE, which can be exchanged for HNT. According to the founder, they will also prepare for 6G, 7G, and 10G in the future…

How They Hype Helium

From the analysis above, we should not find it difficult to conclude that—LoRaWAN will be adopted by more and more IoT projects (and mainly due to the massive business increment of IoT itself), but they do not need to join Helium's LoRaWAN network.

Let's look at how those investment research institutions/media/KOLs hype Helium, which can help us avoid pitfalls.

The crypto research media Coinmonks wrote an article last month titled "The Future of the Helium Network and LoRaWAN Technology," believing that LoRa and LoRaWAN will reach a market size of $25.5 billion by 2028, and that Helium is already the world's largest decentralized LoRaWAN network, potentially connecting billions of devices in the future.

Blockchain analysis company Messari not only had a positive outlook on the project in previous reports but has also strongly promoted the DePIN narrative this year, with Helium being the leader of the DeWi (Decentralized Wireless Network) concept under the DePIN narrative.

Foreign investment research media (specifically referring to media, not investment institutions) are generally quite superficial, so we can ignore them. A report from BlockBeats released two months ago titled "The Fall of Star Public Chains: What Did Helium Do Wrong?" provided a more comprehensive analysis.

The summary of the article is "Helium is a team that does not understand blockchain, so it has missed many opportunities in public chains," but the final conclusion is unusually cautious—"Whether Helium can seize this opportunity to regain its initiative in the market is something everyone is looking forward to." This seems like a last-minute addition to avoid offending anyone, and I can't express agreement or refutation… I can only say it still has considerable reference value.

However, looking back, a more influential investment research article on Helium in China is "Understanding the IoT Leader Helium: Operational and Incentive Logic, Advantages and Disadvantages" by Wu Says Blockchain. The author believes that "not everything needs to be decentralized; it seems that Helium, as a centralized distributed product, will have better development in the industrial IoT field." Although his understanding of the IoT industry mainly comes from the project's guidance, he still understands blockchain very well.

The most influential investment research article on Helium in China should be the report from First Class Cabin, which states, "Currently, there are no direct competitors in the industry, and recently (August 2021), the business growth rate has been very rapid, remaining in a continuous upward channel. Therefore, it is worth paying attention to." The report from First Class Cabin is a ChatGPT-style extraction of Helium's official documents, being led around by the official all the way.

However, we cannot be too harsh on First Class Cabin's level, as during the same period, a16z led an investment of $110 million in Helium, reasoning that compared to traditional telecom infrastructure, Helium can cold start at a lower cost and faster, "We are excited about Helium's potential to provide comprehensive 5G connectivity globally."

To summarize the points that can be hyped about Helium: it has great potential in the IoT space. However, the singularity moment for IoT hardware has arrived, and its development trend is clearly not to connect to third-party networks like Helium.

Whistle's Research Methodology and Future Plans

From Messari to First Class Cabin to a16z, their misjudgments on Helium are quite regrettable, as their understanding has not escaped the confines of reading the project's documents, which means they will forever be led by the project to where it wants you to go.

As the crypto industry moves towards normalization, it also mixes in some drawbacks, attempting to analyze the crypto industry in the same way as the pig farming industry, and even the actual performance is more rudimentary than pig farming research.

The pig market is very mature, and the influencing factors and their interrelationships have long been thoroughly studied, so a summer intern can analyze it like solving arithmetic problems, ultimately arriving at conclusions that are close to the truth.

In contrast, the crypto industry is a frontier field undergoing transformation, where effective knowledge is often scattered among the most cutting-edge actors. This localized knowledge may be contradictory or even erroneous, but it is at least locally true, so listening to multiple perspectives leads to clarity.

As a complex system in dynamic change without clear rules, the crypto industry should have more complex analytical methods, but currently, crypto research reports are even simpler and more crude than those analyzing the pig market. At least pig farming research has a considerable portion dedicated to exploring the interrelationships between various factors.

The research methodology adopted by these reports, such as "6 major dimensions, 48 indicators," is purely a tool for financial workers to produce in bulk; a skilled worker can easily produce three articles a day. However, in the crypto industry, which has a strong learning atmosphere, it allows lay readers to talk confidently about another lay topic in just 10 minutes.

Of course, this article is not teaching the industry how to conduct research; it merely points out what kind of research is incorrect and which research methods we believe are heading in the right direction.

Industry iteration is driven by the underlying logic of the industry, but market attention has always been at the surface level. If you only use market volume as a reference, you will often become a bag holder.

"The Piercing Whistle" is not a preacher; it is merely a dialogue partner on equal footing, emitting some real voices (though mostly piercing whistles). Therefore, we will not publish comprehensive or overly balanced research reports; we will sharply judge others' viewpoints or projects and welcome others to sharply judge us (but we refuse to engage in a chaotic battle where everyone blames each other).

We do not guarantee that the voices we emit are 100% correct (but we will try our best), nor do we pursue 100% rigor and perfection (this point is directly abandoned); we only care whether the core viewpoints resonate with you. Whether you agree or not is not important; what matters is whether it inspires you (even if it leads to a momentary doubt that ultimately strengthens your conviction).

At this stage, our manpower is limited, so we focus on expressing bold opinions on things that should have been eliminated in the last and the previous rounds; this is the most cost-effective way to demonstrate our level. Truly constructive frontier discussions (like ZK) require more insightful friends to join.

Welcome to follow "The Piercing Whistle," a self-media in the crypto industry that speaks the truth (but not necessarily correctly).

Additionally, one point to clarify: we only evaluate the quality of projects, not the coin prices, as coin prices often depend on the project party's willingness to pump, which is unpredictable.