The fall of the star public chain, what did Helium do wrong?

Original authors: Jaleel, Leo, BlockBeats

On April 20, Helium announced that it has officially completed its migration to the Solana network, yet the community's reaction has been one of disappointment.

Helium's history dates back to 2013, just a few years after the birth of Bitcoin. In its early years, Helium could be considered an Internet of Things (IoT) project with no connection to blockchain until 2017, when Helium recognized the value of blockchain and leveraged its incentive model to rise. In hindsight, this decision appears to have been very wise.

After steady development from 2019 to 2021, Helium reached its peak in 2021. In 2021, it completed a $111 million financing through token sales; at the beginning of 2022, it completed a $200 million Series D round at a valuation of $1.2 billion. The financing amounts were quite staggering compared to other public chains, rivaling Aptos (which disclosed a financing amount of $350 million in 2022). As an emerging public chain, Helium's potential and prospects looked promising, marking a strong start.

Helium's potential and prospects stem from its mining model, with its unique PoC (Proof of Coverage) being an optimized version of the PoW mining mechanism, which can also be considered a location-based PoW mining mechanism completed through wireless network technology. Its characteristics include low energy consumption, requiring minimal electricity, and a very low entry barrier for mining, making it popular among users. According to Chief Operating Officer Frank Mong, the community has deployed nearly 450,000 hotspots, covering over 340,000 cities in 161 countries and regions. Approximately 3,000 new hotspots are added daily, with over 5,000 new cities added each month. Within 12 months, the number of recorded hotspots in the network grew by over 3,000%.

The reason Helium has attracted widespread interest from numerous star institutions may lie in its excellent concept and emerging narrative—decentralized internet and location-based oracles: a decentralized wireless network for IoT devices.

The IoT differs significantly from traditional internet and mobile internet, focusing more on the connection between objects to solve the problem of internet access for items. Therefore, the number of connectable terminals becomes an important competitive advantage for IoT. Shared bicycles, smart cities, smart agriculture, autonomous vehicles, and smart homes all fall within the IoT category.

Helium is supported by cryptocurrency, with its wireless network consisting of devices known as Helium hotspots, which have antennas that can transmit small amounts of data over long distances using radio frequencies. It can be said that among various projects, Helium's narrative stands out remarkably.

However, as time passed, the issues that were initially hidden beneath the high-yield bubble of the new chain began to emerge. How did Helium ruin a good hand? What mistakes did the team make? Why did the team abandon Helium and migrate to the Solana chain? Let's start with Helium's mining mechanism.

Helium's Focus on Mining Model, Yet Professional Miners Have No Advantage

Helium hotspots provide wireless network coverage for millions of devices using LongFi, allowing miners to earn token rewards in HNT.

The core of the Helium network is the LoRaWAN communication network, which has an incentive layer built on blockchain. It uses its unique PoC (Proof of Coverage) consensus to prove that Hotspots provide network coverage. Miners providing proof are selected into the consensus group approximately every 30 blocks and receive transactions submitted by other miners, packaging them into blocks.

Since Helium's hotspot mechanism is closely tied to its mining mechanism, it received significant community support in the early stages. HNT mining devices are also very compact and lightweight, similar to home routers, with low environmental requirements, allowing network construction to be unaffected by surrounding conditions. Mining can be initiated at home or in the office, resulting in extremely low energy consumption. For LongFi devices that transmit every five minutes, using the Helium network costs about $1.04 per year. As a typical PoW mining model, mining on Helium consumes negligible electricity.

At that time, the BOBCAT miner, which was most suitable for the domestic frequency band CN470, cost around $429. It was said to achieve nearly 200 times the effectiveness of traditional Wi-Fi hotspots, and could even share its owner's bandwidth with nearby internet-connected devices (such as parking meters, air quality sensors, or smart kitchen appliances).

The deployment steps for the Bobcat miner are also very simple: just connect the miner's antenna and network cable; download the Helium Hotspot app to create a wallet and verify the mnemonic; set up the hotspot, find the machine type to pair and connect; configure the WiFi network for device access; burn $10 worth of HNT as gas fees to declare the device's deployment location and synchronize the block; update the hotspot antenna and location information on the device's homepage, and once it is online, mining can begin.

Given that the mining operation steps are very simple, and the miner has almost no subsequent equipment maintenance costs with low environmental requirements, why do professional miners express complaints about the difficulty of entry?

It turns out that after being voted the most popular hotspot of the year by the community, the availability of "Bobcat" miners dwindled, and domestic prices were generally inflated to $2000-2500 per unit, gradually increasing the mining costs for miners.

At the same time, it is precisely because of Helium's unique mining mechanism that issues arose in its mining layer, preventing professional miners from entering.

Unlike traditional mining machines, Helium does not yield higher rewards with denser deployments. To ensure more stable earnings and higher output, hotspots must be spaced more than 300 meters apart to earn rewards, facilitating participation in PoC (Proof of Coverage) for higher returns. Therefore, hotspots do not need to be deployed too densely. Considering the building density in cities, the optimal distance between hotspots is best in the range of 500-1000 meters, and miners face many complex conditions when deploying distances, so the specific coverage effects require multiple adjustments and optimizations.

This adds considerable difficulty to the mining process, as professional mining teams purchasing large numbers of miners have no advantage; even hoarding ten or a hundred units cannot allow for deployment in a concentrated single location. This model determines that most of Helium's users are companies like Lime (which uses Helium to monitor its connected scooters) and Victor (which uses it for new internet-connected traps for rodent control).

Allegations of False Advertising with Partners

Lime and Helium both belong to the IoT category and have a very obvious strong synergy. Users can see available Lime scooters near their location based on their connection with Helium.

Lime is a short-distance travel sharing platform founded in San Francisco, initially providing shared bicycle services, later expanding to shared scooters, electric bicycles, and shared cars. Within less than a year, it secured over $300 million in financing, reaching a valuation of $1.1 billion, and quickly extended its business to California, Florida, Washington…

In April 2021, Lime was listed as one of the 2021 Time100 most influential companies by Time magazine. As of March 2022, Lime was operating in over 150 cities across more than 30 countries and became part of a trial approved by the UK Department of Transport.

Lime and Helium have strong collaborative attributes, and if a partnership could be established, it would be a powerful alliance.

However, Helium seems to have made no effort to expand its partnership landscape to secure Lime's market, instead prominently displaying its logo on its website before confirming any partnership, which raises allegations of false advertising.

In August 2022, a spokesperson for Lime stated, "Since a brief initial test in the summer of 2019, it has had no contact with Helium, and during the test, it was requested not to use Lime's name in promotional materials. We have now learned of this and are preparing to send Helium a cease and desist letter regarding its use of Lime's name and logo on its website and marketing."

Reports indicate that Helium has claimed for years that Lime is using its technology for geolocation, and a spokesperson for Salesforce also confirmed that the company has no partnership with Helium. Despite not having established partnerships with Lime or the American software giant Salesforce, Helium prominently displayed the logos of both companies on its website, which sparked strong dissatisfaction within the community. Under pressure from the community and "partners," Helium's official webpage removed the logos of these two companies from its partnership list.

This incident seems to have also jeopardized any potential future collaboration between Helium and Lime.

Monthly Income of Only $20 per Miner

Although the increase in the number of hotspots once allowed Helium to generate over $1 million in monthly revenue, income began to decline in 2022.

In July 2022, crypto investor Liron Shapira posted on social media that the decentralized wireless communication network Helium had received a staggering $365 million in financing, yet the monthly revenue of the Helium network and the income per miner were not promising. According to his statistics, the monthly revenue of the Helium network was only $6,500, while the monthly income per miner was just $20.

Moreover, in Helium's Reddit community, there are increasingly more comments regarding the dismal returns from Helium. They spent an average of $400-800 to purchase a miner (hotspot), with total miner sales exceeding $250 million, and node operators hoped to earn $100 per month. However, the reality is that the monthly income per node is currently only $20.

The situation stirred up a wave of discussion, and as Liron Shapira and the community's dissatisfaction grew louder, Helium's founder Amir and Multicoin Capital managing partner Kyle Samani had to respond.

Helium's founder and CEO Amir rebutted, "The Helium network earns about 1.5 million HNT per year, not the 30 million reported. The network generates about $2 million in expenses per month, most of which are hotspot entry fees. Helium is building a 5G network but is still facing challenges with coverage and costs. While Helium's revenue is currently low, the company has secured over $250 million in venture capital and is building a distributed network to address IoT issues."

Kyle Samani, managing partner of Multicoin Capital, did not dispute this figure. However, he noted that the delivery times for IoT customers are long, and customers only started taking Helium IoT seriously six months ago. Considering the time needed for network testing, hardware upgrades, service portal updates, and transportation, it takes 6-12 months.

The response from Helium's camp seems to have failed to convince Liron Shapira, who reiterated his pessimism about Helium, stating, "I know most tech platforms have their life cycles; does anyone still use CDs?" Liron Shapira even concluded directly: Helium has reached a dead end in the Web3 world.

Two months later, Helium announced it would abandon building its own blockchain and migrate to Solana. Since then, Helium's monthly revenue has continued to decline, dropping below $1 million in October, and the earnings from Bobcat miners became particularly low, leading many to exit the space. The once-popular Bobcat miners now seem to have become a thing of the past.

Obscure Programming Language and EVM Incompatibility Make It Difficult for Developers to Enter

Helium L1 is developed and written in Erlang, a language not commonly found in the crypto community. Although this has attracted some core developers and contributors in the blockchain community, the scale of the Helium developer community is relatively small compared to those using Solidity on Ethereum or Rust on Solana.

Erlang is an interpreted language that operates on a virtual machine, but it now also includes a native code compiler. Since version R11B-4, Erlang has supported script execution. In terms of programming paradigms, Erlang is a multi-paradigm programming language encompassing functional, concurrent, and distributed programming. Erlang is a functional programming language that emphasizes early evaluation, single assignment, and dynamic typing.

Compared to Helium's obscure programming language and development environment, the ecosystem of Ethereum's EVM has flourished unprecedentedly since the DeFi summer of 2020.

Thus, BSC supported EVM from the early stages of its ecosystem, allowing developers to easily migrate and deploy Ethereum DApps. Currently, there are over 200 GameFi projects on BSC, and according to Dappradar data from the end of 2021, 4 out of the top 10 GameFi projects originated from BSC. Subsequently, PlatON also released a new version compatible with the Ethereum ecosystem in November 2021, achieving seamless integration with the Ethereum platform.

Of course, Helium's lack of compatibility has its considerations, such as EVM-compatible chains potentially being constrained by Ethereum's roadmap, which could interfere with ecosystem development plans. Additionally, choosing to develop an independent ecosystem without EVM compatibility allows for many differentiated features outside the EVM framework.

However, compared to the advantages of non-EVM-compatible chains, Helium is clearly more affected by its disadvantages. We typically assess the prosperity of an ecosystem based on the number and activity of developers on GitHub. Therefore, according to the latest data provided by @ProofofGitHub, the number of developers for some well-known non-EVM-compatible public chains far exceeds that of Helium.

Most of Helium's developers are in Europe and the United States, with almost no developers in Asia paying attention to or contributing. Due to Helium's developer count consistently failing to compare with other public chains and the lack of outstanding applications launched, the on-chain ecosystem has hardly been shaped. This situation has persisted for a long time without significant improvement.

Lack of Market Understanding and Absence of a Solid Web3 Application Layer

In fact, Helium's situation is not very difficult to resolve. Their "dismal returns" can be reversed by making some changes. Successful public chains often have many excellent developers or well-developed ecosystem applications. To put it another way, for Helium, creating or collaborating on a blockbuster application could allow it to make a comeback. Therefore, Helium can look to Chainlink or StepN for inspiration.

Chainlink in Front, StepN Behind

First, everyone is familiar with Chainlink, the most well-known price oracle solution in DeFi, which provides a great way for off-chain information to be input on-chain. Chainlink is a product of the blockchain technology company SmartContract, which began with the release of the "ChainLink: Decentralized Oracle Network" white paper in September 2017, completing its ICO that same year and raising $32 million. In the following years, Chainlink continuously formed partnerships with various blockchain projects. A 2022 report from Bank of America indicated that over 1,100 blockchain projects, such as Aave, Yearn.Finance, Paxos, Uniswap, and even institutions like the Associated Press and AccuWeather, operate nodes on the Chainlink network.

The Chainlink Token is LINK, which is primarily used to pay off-chain data providers, Chainlink node operators, and other online service providers as service fees. Before operating nodes, a large amount of LINK must be staked, and then nodes can earn LINK as a reward for providing accurate data; conversely, if nodes provide incorrect data or service errors occur, their staked LINK may be deducted.

Helium could completely model itself after Chainlink, providing high-quality incentives and collaborating with multiple blockchain applications. Unlike many other crypto projects, Helium's advantage at the time was that it had a large number of real users actively using its products, with participants being more interested in creating a decentralized wireless network rather than being mere speculators. This demographic is highly attractive for every crypto application.

Secondly, when it comes to location-based PoW mining, the first thing that comes to mind is the recently popular Move to Earn game StepN. StepN attracted a large number of users with its unique core concept, allowing users to earn while exercising, and its unique incentive measures and core philosophy drew many users to actively participate, making it a leader in the GameFi space since 2022, boasting strong user retention and community.

As mentioned earlier, most of Helium's developers are in Europe and the United States, with almost no developers in Asia paying attention to or contributing. In recent years, due to regulatory issues, the crypto industry has gradually begun to develop "from West to East." StepN has excelled in this regard, fully leveraging the vast Web3 user base in Asia. Both projects involve location-based PoW mining, and while StepN was rising, Helium was also enjoying its glory. The overlapping concepts and user bases could mutually promote each other, with Helium users concentrated in the West and StepN having the Eastern market, each with its own advantages.

Helium has a weak application layer, while StepN has a strong application layer. For Web3 project teams, these two are undoubtedly the most suitable projects in the entire market for collaboration.

However, Helium neither emulated Chainlink nor established a partnership with StepN to leverage its momentum; they seem to be less concerned about the Web3 application layer. This has been evident for some time, with an obscure programming language and EVM incompatibility. As a crypto project, Helium does not seem to have a deep understanding of the crypto market and its users; they merely ventured into creating a decentralized wireless network that supports cryptocurrency payments, lacking the essence of a pure crypto team, thus failing to attract quality on-chain developers and applications.

Shift to Solana, Heavily Impacted by the FTX Collapse

On April 20, Helium announced that it had completed its migration to the Solana network, sparking considerable discussion within the community. The decision to migrate Helium to Solana is quite "interesting" and will have implications for both projects.

Aside from the previously mentioned lack of quality applications in the Helium ecosystem and its inability to attract quality developers, migrating to another network was a likely outcome. But why choose Solana, which was significantly impacted by the FTX collapse? Perhaps it was for higher performance and scalability?

Solana is known for its high throughput and low latency, and migrating to Solana could help improve Helium's transaction processing speed, better meeting the growing demand. Previously, the Helium community had been overloaded with numerous events, such as consensus rule updates, issue fixes, and on-chain governance. There are already many Layer 1 blockchains available, and rather than investing significant time and effort to maintain Helium, it might be more beneficial to leverage existing market resources.

Solana's transaction fees are relatively low, and it integrates a large number of developers and applications, which could broaden Helium's collaboration scope and potentially help reduce transaction costs on Helium. More developers and applications may be willing to integrate Helium, promoting wider adoption and recognition, and aiding the development of its application layer to compensate for its lack of applications. Solana's security has also been recognized in the industry, and Helium's migration to Solana could enhance its overall security, which is crucial for a project dedicated to providing reliable IoT connectivity.

While there are many benefits, there are also potential downsides. Helium's choice to migrate to the Solana network may involve some inherent risks. The migration requires time and resources for technical development, testing, and deployment, which could lead to increased short-term development costs and delays in project progress. Additionally, migrating to the Solana network may necessitate Helium to re-integrate with existing partners, developers, and users, potentially causing communication and coordination issues.

However, Solana is still a relatively new blockchain platform (compared to Ethereum, etc.), so there may still be certain technical risks, such as potential vulnerabilities, instability, or compatibility issues with existing technologies.

Migrating to the Solana network may affect the acceptance of Helium within its existing community. Those community members who were dedicated to "decentralized wireless networks" may have concerns and objections, potentially leading to community fragmentation or user loss.

There are already many other projects and applications on the Solana network, and Helium may face greater competitive pressure within this ecosystem. This could impact Helium's market share and development speed. Additionally, there may be regulatory issues, as different blockchain networks may be subject to different regulatory policies. Migrating to the Solana network could expose Helium to new regulatory risks, such as legal requirements regarding data privacy and cross-border data transmission.

Of course, Helium has successfully migrated to Solana and has indeed made some changes to its existing technology, which is a benefit of the migration, but potential issues have yet to surface.

Conclusion

As Helium previously stated, it was not initially a crypto company but attempted to build a remote, P2P wireless network in a traditional manner. Later, due to funding issues, crypto became an incentive tool, and Helium turned to crypto technology to build a decentralized network, initially receiving praise and many loyal users, which is why Helium had a strong start.

However, the move to "turn to crypto" led Helium, which did not fully understand the crypto field, to miss many opportunities to change its situation: a large number of professional miners unable to enter, allegations of false advertising with partners, exposure of cheating behaviors within the system, difficulties for developers due to the obscure programming language, lack of market understanding leading to no application ecosystem, and migration to a public chain heavily impacted by the FTX collapse.

Helium ventured into the crypto space but did not deeply understand crypto (cryptocurrency, users, ecosystem, market, narrative), and its team does not fully belong to the cryptocurrency team. While similar projects soared, Helium did not choose to collaborate or learn, which may be a reason for its current situation. Helium's "decline" seems to be justified. It can be said that Helium's story holds lessons for all public chains…

Fortunately, in the week following its migration to the Solana network, Helium's new token IOT surged over 380%. Like HNT, IOT is also mined through Helium hotspot devices. These tokens are supported by the original HNT and can ultimately be converted into HNT.

Whether Helium can seize this opportunity to regain its initiative in the market is something everyone is eagerly anticipating.