How Helium provides the trust and incentives necessary to create a decentralized wireless network

Messari hosted a public AMA with Amir Haleem, CEO of Helium, in the Messari community group. Below is a transcript of the conversation.

You can find all of Messari's historical AMA's here

Messari: We have received a lot of great questions from the community but before we start off could you give a quick background on yourself and Helium?

Amir: absolutely. Helium’s mission is to build alternative wide area wireless networking. we believe there should be an alternative to cellular for low power low data rate devices, and that the economics of building this kind of infrastructure in a traditional way are not feasible. me - I spent a long part of my career in the videogame industry and have worked on games like Battlefield 1942, I was a former esports pro back before that was really a thing, and I’ve been working on Helium since 2013

Messari: Awesome, thanks for sharing! Our first question touches on the basic mechanics of the helium network infrastructure

• What does a helium hot spot do? How does the token work on the network?

Amir: Hotspots have two functions: 1) they act as miners on the network, participating in challenges (can get into that separately), submitting proofs, and forming transactions into blocks and adding them to the blockchain, 2) they are a long range wireless access point for a wireless protocol that we call LongFi. this protocol is designed for devices that require very low cost, low power, low data rate access to the internet. sensors are a good example of that kind of application. Hotspot operators are rewarded with Helium tokens (HNT) for doing both of those things

Messari: So hotspots perform similar services to a bitcoin miner but rather than calculating computationally expensive hashes they are performing valuable work for a wireless network. And now stepping back a bit.

• Why is a blockchain and token needed for this project? Why not a centralized service with monthly Paypal payments to node operators.

Amir: a few answers to this. firstly, our experience in the IoT world has shown us that companies (especially larger ones) have a hard time trusting startups with infrastructure that is going to be difficult to replace. some of this is a privacy/security issue, some a dependency problem, and hardware makes this much more complicated than a pure software play. building the network with as little of a dependency on Helium Inc as possible - which means that any entity could run their own Hotspots, routers, etc - helps a lot with this. one way we use our blockchain is as a shared routing table among all Hotspot operators, which means that any sensor data can be routed to any router without ever needing to come to Helium Inc or anyone else first. secondly, we believe that the network operators who are running Hotspots should be much more long-term aligned with the success or failure of the network than simple flat monthly payments from Helium Inc. if the network succeeds in a huge way, you should be rewarded in a huge way for helping making that happen. tokens are a great way to enable a new type of capital formation that is tied to the value put in, and the long term success. the design of the system also provides an outsized incentive to the earliest participants, which is helpful for overcoming the cold start problem most of these networks have. paying out a flat monthly fee reminds me a little bit of the Oculus kickstarter - I'd be at least a little pissed that I funded a $3bn exit but only got a VR headset out of it. and lastly, having a non-fiat payment method allows the network to offer per-packet payments, even for tiny amounts of data, with no minimums and no contracts

Messari: That makes a lot of sense so it essentially boils down to trust and incentivization. I had a follow up about potentially using stablecoins but the incentivization part answers that pretty well

Amir: we have a sort-of stablecoin inside the system already called a Data Credit, which is a fixed cost (in USD) token that is used to pay for wireless data on the network. This link has some info on how that works

Messari: Got it, and so you mentioned companies don't want to trust startups with this kind of infrastructure but what if a tech giant wanted to create a mesh network?

• What's stopping Amazon from building out a similar network with Alexa devices? What benefit does decentralization bring?

Amir: Amazon announced recently a plan to do something just like this, called Sidewalk. we don’t know much about it yet, so it’s hard to really say much that isn’t pure conjecture. I’d be curious to understand their incentive model - for example why would I let anyone else use my network? do I have the option to turn it off? in terms of Echo devices specifically, where people put their Echo’s is typically not conducive to good network coverage. mine is in a corner next to my toaster in the kitchen, and probably would have a range of dozens of feet at best given where it is

Messari: So the native blockchain comes in to help bootstrap the supply side whereas otherwise it could be difficult to incentive people to provide quality coverage

Amir: I’m certain Amazon could make something happen, given their distribution and scale, but I do think there are serious privacy and incentive considerations that are difficult to solve in a centralized way

Messari: Good point! So you mentioned the stablecoin-like system called Data Credits (DCs), could you briefly touch on the mechanics there?

Amir: in the Helium network the only way to pay for wireless data is to use DCs. each DC entitles you to send 24 bytes of data, and is pegged to a value of $0.00001. the only way to acquire DC is to “burn” HNT - which is to completely remove those HNT from circulation. the exchange rate between HNT and DC is calculated by taking the market price of HNT at that time, and the fixed cost of DC ($0.00001). for example, if HNT was trading at $1 then burning 1 HNT would return 10,000 DC. DC are non-exchangeable and non-transferrable, they are tied to their first and only owner and can only be used for sending and receiving LongFi data over the network. our investors Multicoin Capital have an excellent writeup on the mechanics of this system (called Burn and Mint Equilibrium) here

Messari: Seems like a creative accounting measure to abstract the token volatility from the actual cost of using the network.

Amir: yes, it accomplishes a few things that we like. it’s a good way to control inflation of HNT in a way that is tied to actual utility of the network, and it allows users of the network to have predictability and stability in cost without having to worry about the value of a volatile cryptocurrency. it also helps with the velocity problem that most utility token networks will have

Messari: Related to DC

• What are the biggest factors being taken into account surrounding the timing of data credits launching?

Amir: there's a little bit of a disbelief factor that a network like this actually exists, and works. in general, the biggest challenge we face is that hardware sales cycles are long and complicated, and the complete product that the customer wants often involves several components from several sources (sensor from one company, dashboard from another, etc). we are about to announce support for LoRaWAN devices in LongFi which will help, as there's a pretty decent ecosystem of existing sensors out there which will become immediately useable on the network

Messari: Thats actually a great lead-in for our next question.

• Are companies hesitant to connect to the network because of uncertainty around the crypto aspect of it?

Amir: we rarely run into this, primarily due to the Data Credit design. companies can think of DC’s more like AWS compute credits or airline miles, which make them easier to account for and safe from a regulatory point of view

Messari: Oh interesting, so for our most upvoted question then

• What is the biggest pushback you've gotten in your sales efforts to get devices on the network?

Amir: there is some technical work that needs to be completed, but the primary delay is that the network has to somehow figure out what the market price of HNT is. there are no exchanges carrying HNT, so that’s challenging right now

Messari: Staying on the business side for another

• Any updates on the go to market on the demand side of the network would be very helpful.

Amir: we have a pretty big pipeline of potential companies and users, and we’ve been working closely with partners who are helping fuel those efforts. as I mentioned the cycle times for these things are just long, so even the fastest deal is likely to take 90 days+. aside from B2B sales efforts we’re also about to get very active in building and fostering a developer community and will have some exciting announcements about some of that work soon. the Helium team are huge developer advocates and I’m personally most excited to see what the community ends up building on top of the network

Messari: That's good to hear!

• When do you think Helium network will start propagating some real data through its network for its clients?
• How far away is Helium from that?

Amir: 2019 was focused pretty much entirely on getting Hotspots into the wild. it takes a lot of work to market and sell as many as we did, given how little we could say about them at the time. 2020 is all about demand-side usage, and that’s all we’re focused on. the more the community involves itself the better, and we know of some Hotspot owners who are already very actively working with various companies to bring sensors online in their coverage areas

Messari: So we have a few more miscellaneous questions that I'll fire off and then we can wrap up

• What integrity does the chain have if the consensus group is being elected by cheating their score? The BOM for custom nodes is $70 - cheating will be rampant

Amir: tough to answer this one without knowing what “cheating their score” means. I don’t think you could build a custom node for $70, but I get the point being made. providing acceptable security for the network while allowing DIY Hotspots to participate is ongoing work for us - right now there is no way for DIY Hotspots to join the network, so we don’t have this problem in the short term

Messari: Got it. Combining these two because of the similar nature

• you earn more by locating a hotspot near existing hotspots rather than in new uncovered areas. doesn't this disincentives coverage expansion.
• Why would it be advantageous to run a hotspot in a more rural or less populated area? Rewards tend to favor those clustered in cities.

Amir: for a single Hotspot, this is probably true. not really much we can do there as without neighboring Hotspots there isn’t really a way to prove that the lone Hotspot is providing any value to the network at all (could just be sitting in a closet for example). but there’s a huge opportunity to be had in uncovered areas by being the first group of Hotspots in that area - you’re likely to be the beneficiary of every single PoC challenge that targets that new area. we’ve seen some Hotspot owners either buy multiples, or get to work on incentivizing their friends and neighbors to participate

Messari: Makes sense, and looking at the network map it seems people haven't shied away from being the first outside a city as the coverage is pretty spread out so far

• When will HNT trade on an exchange? While all other top crypto projects listed their tokens what is stopping Helium from listing theirs?

Amir: unfortunately this is one that we as a company can’t really say or do much about due to the regulatory environment. we’re seeing a great following and active userbase on the network, so we’re hopeful that exchanges will notice this and take action. Helium is already the largest public low power wide area network in the country, and 3000+ full blockchain nodes is extremely impressive. I think that’s almost half of Ethereums full node count already

Messari: No worries! Well we're running a little over the hour mark so I'll let you go. Thanks so much for joining us Amir, this has been super insightful. If you could just let us know the best ways for people to keep up with the project that would be great!

Amir: no worries at all, thanks for having me. we have an active community chat, @helium on Twitter, Github for code, engineering blog, and of course the store to buy a Hotspot!