(Very Speculative) Trade Alert: The Helium Network
Even as I am pretty much bearish on most cryptos, like 99% of the crptos that exist right now, I found one I want to get started on. Here is that story.
Long time subscribers have have heard me say hundreds, if not thousands of times that I like to find Revolutionary ideas and invest in them before they become mainstream. Today, I am bringing you another idea that I have invested in my personal account that I consider to have Revolutionary potential but that is quite risky. Before I get into the details let me first make the disclaimer that this idea is more speculative than most of the ideas that I invest in. The risk profile of an investment like this is way different than, say, making Facebook a large position in my portfolio and therefore this investment is a tiny portion of my personal investments.
With that said, the idea that I am bringing you today as an investment in not really a company but a decentralized network. The network is called the Helium Network or “The People’s Network”. The company behind the idea, Helium Inc., was founded in 2013 by Amir Haleem, Sean Carey, and Shawn Fanning (co-founder of Napster) with the idea of building the world’s first peer-to-peer wireless network connecting a variety of devices commonly called the Internet of Things (IOT). The company is private and well funded, having raised over $53 million from high profile venture capital investors such as Khosla Ventures, Union Square Ventures, and Salesforce.com CEO, Marc Benioff.
Like I mentioned earlier, I did not invest directly in the private company, I am investing into the network. Helium does a great job of explaining the network in this short YouTube video. Basically, the company is building a wireless network on the Helium Blockchain that incentivizes people to contribute to the network (operating wireless hotspots) by rewarding them with crypto tokens called Helium (HNT).
The ultimate goal of the company is to connect countless IOT devices to the decentralized network. The use cases are limitless. You know all those annoying scooters you see zooming around every big city? Well, those can be tracked by the network using the Helium LongFi (200x greater range than standard wi-fi network) network. Have you ever lost your dog? Imagine if Spot was wearing a collar with a tracking device connected to a network that blankets the entire city that you live in. How much is that worth? My answer is that it is worth a whole lot more than the fraction of a penny that it costs to use the network. In fact, it is a lot cheaper than using the power hungry cellular network that we are all used to using. To see just some of the use cases, click here and scroll down the left side of the page. These are sensors that are ready for use on the network. The list and use cases are growing steadily and gaining steam as the network is in the very first inning of reaching critical mass. I have purchased a few of these hotspots and I’ve installed just one because they are so backordered that it takes weeks to get them after you order them.
Now on to perhaps the most exciting part of the story. Helium is going to create the world’s first consumer-owned 5G network. Their first equipment vendor partner FreedomFi is already available for preorder, and yes, I’ve ordered a few of the units. This user-generated/wiki-fied model could potentially solve one of the main problems encountered in the build-out of the 5G network. Infrastructure. The 5G network operates on a much shorter wavelength than the previous 4G network. One benefit of this shorter wavelength is that 5G can carry a lot of data much faster than 4G, but at the expense of a much shorter range than a 4G wavelength. 4G wavelengths have a range of about ten miles, much further than 5G’s range of about 1,000 feet. Not only are 5G signals limited on their range, but they also are easily blocked by trees, buildings, etc. To ensure a strong 5G signal, an infrastructure of a lot of antennas and towers are going to need to be built. Mobile Network Operators like AT&T, T-Mobile and Verizon in addition to Mobile Virtual Network Operators like Cricket Wireless, Straight Talk and Metro will all be able to fill in the voids in their 5G networks using Helium 5G without having the huge expenditure of placing antennas and transceivers in almost every window or rooftop.
Just like with their initial focus of the Internet of Things, the Helium 5G Network is going to be able to enable the users of a particular network to help build out the infrastructure of the network that they are using while getting compensated for their contribution to it. The FreedomFi Gateway, scheduled for shipments in the third quarter of 2021, will operate on the Helium network and allow users to mine HNT while helping to provide 5G coverage to its users. This exciting partnership has as much if not more potential as Helium’s initial purpose of connecting the Internet of Things.
One recent development with the network that could accelerate its adoption is that several miners have been experimenting with connecting their Helium miners to SpaceX’s Starlink satellite broadband that they are currently beta-testing. If this pans out, its a game changer. We are talking about the Helium network providing 5G and IOT coverage EVERYWHERE. I could have 5G coverage on my rural New Mexico ranch. Villages in isolated parts of the world could be connected to the rest of the world literally overnight. Wow! Now that is truly Revolutionary.
So how do we invest in the network? Well, I have invested in two ways. The first, as I mentioned is how Helium (the company) incentivizes people to help build the network. This is done by connecting a Helium mining node referred to as a hotspot to your home or business wi-fi network. Once connected to your wi-fi network there are a couple of ways that you are rewarded with HNT tokens. One is called proof of coverage where your hotspot is randomly assigned a test to complete, verifying that it is indeed on the network. Another way to earn tokens is when your hotspot is actually being used to transfer data across the network. As you can imagine, just like you have heard about real estate investing it is all about location, location, location. If your hotspot is sitting in the window of your New York City office, it will be transferring more data throughout the Helium network than mine sitting on my desk in rural New Mexico, thus earning a lot more of the crypto tokens.
The value of the tokens is strictly tied to use case within the Helium network. The purpose of the token is to exchange them into data credits that can be used by customers in the network (owner of the scooter company tracking her scooters or the users of the new 5G network). As the tokens are turned into data credits, the token is “burned” which means it used up and can be replaced with a newly mined token. Those of you that have taken a recent look at your cell phone bill can imagine how valuable those data credits will be if/when the Helium 5G network is fully operational. The number of tokens that will be in circulation like with Bitcoin, is finite. As I type this, about thirty eight percent of the maximum number of tokens have already been created and are outstanding. The value of the tokens have risen exponentially in the last year from pennies last summer to around $12 as I type this (more on exponential valuation explosions in just a minute).
This leads me to the other way in which I have invested in the network. Using Binance.us, which offers HNT trading is unfortunate because I don’t trust it as much as I do Coinbase which does not support HNT trading, I have invested a TINY, tiny bit — and I mean tiny bit of capital — into a few HNT tokens. As the Helium network continues to gain momentum, you can expect to find it trading on other platforms such as Coinbase in a year or two. I am also now actively mining some HNT tokens with my first Helium lowfi hotspot up and running which has already kicked in a handful of tokens over the last few weeks since we got it delivered and set up.
One issue with most cryptocurrencies like bitcoin and which the media has finally caught onto, it seems, is the problem of how much energy consumption is involved in crypto mining. According to the Cambridge Center for Alternative Finance, Bitcoin uses about 110 Terawatt Hours per year, which is about a half a percent of global energy production in the mining of its cryptocurrency. Granted, much of that mining is done at energy generation facilities next to things like waterfalls in China that were purpose-built to mine bitcoin and eventually, those places will likely actually help generate clean electricity for those areas. All that said, it’s HNT that is unlike most every other cryptocurrency that simply wastes electricity in the mining of its coins. The Helium Network “mines” HNT tokens only when it’s providing functionality to the network (and thus the world).
Everywhere you look, watch or read these days you see buzzwords that I have mentioned in this article like decentralized and crypto. Some of the ideas behind these buzzwords are complete junk, scams or frauds. I spend all day, every day going through these ideas and trying to weed out these losers and find a true diamond in the rough. This network has the potential to be one of those rare finds. Like I said earlier, the network is in the early days of gaining critical mass. But, it is growing rapidly and it is based on an idea that is extremely useful and cost effective. That is a great start to becoming something truly successful and truly Revolutionary.
I have previously mentioned one of my all-time favorite books, Information Rules, and in it the authors mention network externalities. They define network externalities as when network participants affect others without compensation being paid. They go on to say that network externalities are what is behind a rule of thumb called Metcalfe’s Law. Metcalfe’s law states that a value of a network goes up as the square of the number of users. It is this exponential growth in the value of a network that has gotten us into long-term winners such as Apple when their ecosystem began growing rapidly just like Google, Netflix or any other company that has seen their market cap swell exponentially with their user base. Even though Helium network participants are kind of being compensated for their involvement, this principal applies here as well. For every new participant in the Helium network, the value of the Helium network grows exponentially. And the network is growing rapidly.
There are currently over 53,000 hotspots worldwide (up from zero in 2019), making up the Helium network. Currently, the biggest hurdle to the network growing is the backlog of orders that the makers of these hotspots are experiencing. In fact there are over five times as many hotspots on backorder as there are in operation. The list of compatible mining hotspots for the Helium network is growing. However, if you click that link you will see that all of the compatible mining hotspots are on backorder. This is both good and bad news. It clearly shows that there is demand for the product and the network, but bad in that you are going to have to wait in line to get involved. I have ordered a few mining hotspots and they are not scheduled to ship until sometime this summer (the semiconductor chip shortage is real). As more manufactures of compatible hotspots begin to relieve the backorders, Helium believes they are well on their way to becoming the world’s largest and fastest-growing network with over 600,000 hotspots projected to be operational in the next eighteen months.
Like I have mentioned a few times, this idea is in the early innings and if they can execute and overcome hurdles like this, they have the potential to really become something big.
I am going to repeat the disclaimer that you have heard me say before on investments like this. This idea is a speculative venture capital like investment that has the potential of going to zero. If you feel that you have room in the speculative portion (very tiny percentage) of your portfolio, this is an idea that I feel has the potential to become mainstream, and as Mr. Metcalfe would predict, very valuable.
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Cory Greak and Piper Adamian helped write this report.
