Hotspot producer Helium is considering a new blockchain. Does it even need one?
Helium, the crypto-powered wireless network, today announced a proposal to transition from its proprietary blockchain to the Solana smart contract platform.
While the proposal cited the potential benefits, including Solana’s broad developer network, it comes amid a contentious period for Helium, casting doubt on the company’s long-term sustainability.
Helium is built around devices called Hotspots, which people can buy for their homes, which provide wireless coverage for Internet of Things-style devices like pet tracking collars and flood gauges. Hotspots cost around $500, but customers are rewarded for setting them up and participating in the network with a crypto token called HNT, which can be traded like most other cryptocurrencies. HNT currently has a market cap of around $670 million, although it peaked at over $5 billion in November 2021.
In early 2022, Helium rose into the air. The company gained a glowing profile in New York Times in February with the tempting headline “Perhaps there is a use for crypto after all”. The next month, it gained unicorn status thanks to a $200 million funding round led by Tiger Global and Andreessen Horowitz.
The hype started to die down in July when Mashable reported that great details of Times the profile was misrepresented. Helium had cited Lime as one of its clients, saying the rideshare company used its network to geolocate scooters — Helium even mentioned Lime on its website. However, according to a Lime executive, the relationship has never existed, apart from an initial product test in 2019.
“Helium has been making this claim for years, and it’s a false claim,” Lime employees told Mashable.
That same month, a viral Twitter thread by angel investor and entrepreneur Liron Shapira further confused the company, citing Helium’s total revenue of just $6,500 per month and sharing customer complaints from the Helium subreddit, where people complained that their revenue dropped from $100 per month to just $20. Shapira compared the Helium debacle to the recent collapse of the pay-to-earn game title Axie Infinity— another Andreessen Horowitz portfolio company that claimed to offer a real crypto use case.
“Skeptics are proven right in a matter of months at the expense of unsophisticated end users who become investors,” Shapira wrote.
HNT’s price has fallen nearly 50% since July, hovering around $5.40 amid the broader crypto bear market.
Today’s proposed shift to Solana demonstrates the ongoing technical challenges the company faces. In July one of Helium’s investors so that the disappointing numbers were true, but he argued that it would take time to build up Helium’s IoT customer base and the network’s technology.
Joe McCann, founder of crypto fund Asymmetric, described the proposal as a win-win. “Helium’s service is inherently mobile, and their use of Solana’s blockchain will not only improve Helium’s performance, but more importantly enable a large new developer audience to build apps for Helium,” he said Fortune.
Shapira was less optimistic. He said Helium’s core problem is that the product itself doesn’t actually require a blockchain. He pointed Times article, which describes how the company switched to a crypto model in 2017 after it ran out of money because it felt people would be more willing to set up hotspots if they could earn cryptocurrency.
While the new proposal admits that its proprietary blockchain doesn’t make sense, it still relies on blockchain technology by moving to Solana.
“Sending all data to a central server is the best architecture,” Shapira said Fortune. “They just don’t want to admit it because they need to keep up the appearance that blockchain is somehow an enabling technology for what they’re doing.”
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