An internet-of-things (IoT) startup founded in 2013 is
adding tokens to its business model with the backing of two of crypto’s
best-known funders.
Helium
announced Wednesday a $15 million Series C co-led by Union Square
Ventures and Multicoin Capital. Investors will acquire equity in Helium
as well as a share of the tokens that will accrue to the company over
the next several years as they are minted, after its bespoke blockchain
goes live, according to a spokesperson.
Previous investors that participated in the latest round included Khosla Ventures, GV (formerly Google Ventures), FirstMark Capital and German reinsurance giant Munich Re. The new round brings Helium’s total funding so far to just under $54 million.
Helium was founded to create a low-cost data network that IoT devices
could access using consumer WiFi as its backend. The company sees
current ways of getting IoT data back to firms that need it as too
expensive. By driving down those costs, Helium says its network could
challenge traditional telecommunications infrastructure.
But the company has come to see tokens as a necessary ingredient for spurring adoption.
“When we started the business in 2013, the goal was always to try to
build this big broad network that everybody could use,” Helium CEO and
founder Amir Haleem told CoinDesk, adding:
“We arrived at this conclusion a few years ago that crypto was the best model for what we’ve been building.”
Last year, Helium released a white paper
for a decentralized wireless network that uses publicly available radio
frequency to solve the last-mile problem of connecting IoT devices and
the public internet.
Haleem founded the company alongside peer-to-peer pioneer Shawn
Fanning (of Napster fame, also an investor in Uber and Square) and Chris
Bruce (who sold an IoT company called Sproutling to Mattel).
The company sells its Helium Hotspot for $495. The device connects to
users’ existing home WiFi networks and serves as a hub for IoT devices
in the area to feed data back to Helium’s databases. By using low-power
radio waves, the device provides a low-cost way to feed small amounts of
data back to a central database.
Several initial partners will be using the product. Lime, the e-bike
and scooter company, will use it for tracking its devices, Agulus will
use it to collect agricultural sensor data and Nestlé will use it to
track inventory in vending machines.
According to telecommunications giant Ericsson, there are over 1 billion
connected devices in the world as of 2018, with that number projected
to quadruple in less than a decade. Most of these connected devices rely
on the lowest-level cellular connection, 2G.
“Everyday things that we use shouldn’t need cellular plans,” Haleem said in a press release.
For Multicoin, it’s the Austin-based venture firm’s largest
investment to date. Tushar Jain, a Multicoin co-founder, told CoinDesk:
“I think Helium is the most ambitious and interesting vision I’ve seen in the blockchain space since ethereum itself.”
Token model
The Helium blockchain actually has two tokens: helium and data credits.
Data credits are only earned by burning helium. Once created, data
credits can never leave the wallet that created them, except to be spent
on the Helium network for transferring data. The cost of sending a data
packet will always be the same in data credit terms, according to
Haleem.
Helium hotspots mine helium tokens in various ways, such as by
performing operations that secure the network and also by providing
useful services. These operations include: proving that nodes are all
located where they claim to be, proving the sequence in which data is
transferred and proving the location of devices using it.
Helium also uses a delegated proof-of-stake (DPoS) structure where
the nodes proven to be the most reliable over time verify blocks and
earn some portion of inflation for doing so. Helium declined to estimate
how long it might take for a hotspot owner to recoup the cost of a
hotspot.
There’s no pre-mine and no supply cap on helium, according to the
company. For the first several years, a diminishing piece of the monthly
supply will go to Helium as the “founder’s reward,” and the company can
use some portion of this as a supply for its first customers. The
portion starts at 10 percent and diminishes annually.
Some 50,000 new tokens are minted every month but in order to use the
network helium also has to be burned – so the supply will continuously
be contracted, provided it has users. Haleem foresees a future where,
when the network is mature, it should reach something like an
equilibrium state where tokens are burned each month at roughly the
point they are created.
“The usage of the network is what creates the economics,” Haleem said.
Lime will be an early partner, allowing the company to accurately track the location of its bikes. (Photo courtesy of Helium)
How it works
To join the network, a user needs to buy the Helium Hotspot, which is on sale now.
“We have limited quantity of these things going on sale,” Haleem
said. “If you’re an early participant in the network, your rewards are
outsized.”
The hotspot connects to a user’s wireless router. It then sends and
receives data from IoT devices in the area. Each hotspot has a
considerably greater range than a WiFi node, but the tradeoff is that it
can’t carry as much data. That’s fine, though, for devices that just
need to send small packets of data occasionally.
The company estimates that 50 to 100 hotspots can cover an entire
city. Helium says it has good coverage on a current beta test in San
Francisco with around 10.
As explained in the Helium white paper, the network operates in the
unlicensed sub-gigahertz spectrum. The basic technology to send and
receive this kind of signal is well-established and mature, with
multiple vendors providing compatible equipment.
All communications use public key encryption. Helium’s protocol is
purpose-built for its use case. All transactions occur on-chain and
settle quickly thanks to its DPoS architecture. There’s no smart
contracting language to create additional chaos on the network.
Nestlé’s ReadyRefresh product will use Helium to monitor beverage machines. (Photo courtesy of Helium)
The fight ahead
Asked if Multicoin would also be buying any hotspots, Jain said, “Let’s just say: Austin is covered.”
He went further, adding:
“The thing that I’m really excited about here is the
connectivity being permissionless. You don’t need to create an account
with anyone.”
If an IoT device is associated with a helium wallet, it can use the
network anywhere it exists in the world, which Jain pointed out makes
hardware creation much easier than the status quo, where different
products have to be designed for different telcos everywhere a company
wants to use them.
In fact, Haleem very much sees his company as taking aim at the
telecommunications giants. Once it proves out the IoT use case, Helium
wants to pursue others.
“This is like a blueprint for how you might deploy an LTE network or a
5G deployment,” he said. “You providing your neighbor with 5G makes
more sense than the telcos doing it.”
Helium is not alone in this market, however.
Telecommunications giants have their Narrowband IoT products, for example.
France’s Sigfox is arguably the best-known startup for IoT devices with low data demand. It’s raised €277 million, according to CrunchBase, and similarly relies on public radio spectrum. Open Garden also allows users to share their internet access with neighbors in exchange for small, automated payments.
Helium sees a competitive advantage in its architecture, however,
allowing the market to determine where to deploy and permitting users to
send data with per-packet pricing, as needed.
Haleem said:
“We view our pricing model as something like 1,000 times better than what the cell companies are offering.”
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