Embattled crypto company Helium is trying a different course of action as users flee and revenue plummets

A friend had told him about the service, where people set up radio devices in their homes to spread a decentralized wireless network that connected Internet of Things products like air quality monitors and barrel trackers. In exchange for transferring data across the so-called “People’s Network”, miners would receive a crypto token called HNT.

When Gold installed his first Helium hotspot, he was working for an offshore drilling company, but he was laid off in May 2021 and decided to focus on Helium full time. As he learned from his own prime location, the Helium units produced more HNT at higher altitudes, so he would connect hotspot owners with ISPs who already had access to different types of towers, and take a cut of the profits. At the peak of his business, which he called Hotspot Rescue, Gold said he was in the mid-six figures.

Helium has become one of the most notorious companies in crypto – a kind of weather vane for the industry’s rollercoaster ride. In February, when hotspot owners like Gold brought in revenue, the New York Times published a scathing profile of the company, describing it as one of the rare crypto projects that has “normative utility.” The following month, the company behind Helium confirmed a $200 million funding round and renamed itself Nova Labs.

As the overall crypto market plummeted, Helium’s outlook fell in tandem. ONE Mashable the July report found that Helium had misled the public about its clients, calling into question the practicality of the technology. In the previous month, IoT companies had only spent about $6,500 on data transfer using the Helium network—not a promising number for a company valued at $1.2 billion. Meanwhile, Helium’s HNT token fell over 90%.

ONE Fortune analysis has found that the entire Helium network has only received about $1,150 in revenue from demand for IoT devices over the past 30 days—a figure confirmed by the nonprofit Helium Foundation.

Meanwhile, as the likes of Gold saturated the hotspot market and the token price fell, adoption fell. Fortune found that only about 15,000 hotspots have been installed so far in September, down from a peak of over 90,000 in November 2021. Gold’s hotspot, the one that originally put in about $16,000 in HNT a month, is now producing about $10 a month .

Considering the miners’ profits and installations, Nova Labs is now trying a different course of action. After hinting at building a 5G network last year and buying hardware companies, Helium announced it would launch its own mobile network in June, powered by a different type of hotspot and a new crypto token called MOBILE.

The question, as Nova Labs pushes into 5G, is whether the company can pull off one ambitious new project while the other is mired in turmoil. For critics like Nicholas Weaver, a researcher at Berkeley’s International Computer Science Institute, Helium Mobile is not a new attempt to create a decentralized wireless network, but a distraction.

“They’ve tried to keep the fraud going by making a shift to a model where there’s mobile connectivity, because people can understand it better,” he said. “They have to keep the grief going.”

“The People’s Network”

Amir Haleem, a game designer, started Helium with Napster co-founder Shawn Fanning in 2013. Despite funding from major investors such as Khosla Ventures, the company struggled to find its footing and was hemorrhaging before moving to crypto in 2017. The decentralized IoT -focused network launched in 2019.

ONE Forbes research published this month found that Helium insiders profited handsomely in the early days of the network, setting up hotspots and mining half of all Helium tokens in the first three months – a practice usual among blockchain projects, albeit contrary to the principles of decentralization.

Consumers like Gold also rushed into the project, snapping up about $500 million worth of hotspots. Instead of manufacturing the devices themselves, Helium relied on third-party manufacturers, resulting in varying degrees of quality and longer lead times.

“I think from [Helium’s] perspective, they didn’t want to say, “We’re manufacturing and selling you these overpriced Raspberry Pis that are picking up our token,” Gold said.

This allowed secondary markets to proliferate. Gold’s first miner came from a company called Emrit, who sent him a free hotspot in exchange for 80% of the earnings. He would later apply elements of that transactional model to his own business.

Although the network spread across the United States—and the world—through people setting up devices, its capabilities didn’t make much sense from an economic standpoint. IoT could transfer data across the network through “data credits”, which were used to purchase HNT. Helium singled out major customers such as electric scooter company Lime as using the network, although Lime later denied working with Helium beyond an initial test. (Nova Labs COO Frank Mong told Fortune that Helium had a pilot with Lime.)

Today, Mong said Helium has hundreds of clients using the network. Nevertheless, most of the income comes from other fees, such as the introduction of new units. As Fortune found, only about $1,150 generated in the past month came from actual data transfers.

In an interview with FortuneHaleem, Helium’s CEO, explained that the IoT network is still in its infancy.

“For Helium to succeed over a decade-long window on the IoT network, there would need to be hundreds of millions of devices using the network globally,” he said. “There’s no other way to divide the answer to that question than there has to be a lot of traffic.”

He declined to estimate how many devices are currently using the network.

Weaver, the Berkeley researcher, expressed skepticism that such an IoT network could attract enough companies to be sustainable. First, he explained, because the network relies on a decentralized network of hotspots, it will always be patchwork. For IoT companies looking for consistent data transfer, Helium would not offer the most reliable service.

“[IoT Companies] also want to pay in actual money, he said Fortune. “You’re not going to want to cash in a stupid third-party token that bounces up and down in value.”

Go to Helium Mobile.

“Get as many lottery tickets as you can”

Haleem explained that Nova Labs as a company does not collect revenue from people paying for new hotspots or IoT companies paying for data transfers, which instead goes to third-party manufacturers or the blockchain protocol that powers the Helium network. Instead, the company is looking towards other projects.

“We are now entering a phase where we will focus in terms of revenue,” he said. “Helium Mobile is an example of that.”

The project has echoes of the IoT network, with people setting up hotspots in their homes or elsewhere and mining a crypto token as a reward. The big difference is that the biggest customers for the network will not be IoT companies, but everyday mobile users.

The main challenge is, of course, coverage – for a mobile network to work, it cannot be a patchwork. Hotspots are priced around $2,000 to $3,000. Currently, there are only about 5,000 Helium Mobile hotspots in operation, and over two-thirds of them are “indoor radios,” meaning they would have questionable reception outside the buildings they’re housed in. An August report from PCMag criticized the hotspots’ technology. — powered by Nova Labs-owned software company FreedomFi — and questions whether it can scale.

Haleem explained that Helium is dealing with the limitations of operating in unlicensed spectrum, admitting that the hotspots could never compete with cell towers. “You’re not trying to make that apples-to-apples comparison,” he said.

Instead, he argued that most mobile use happens indoors, which would be the goal of the network, helping to provide coverage through hotspots to places where mobile service struggles, such as rural areas or crowded places. “We’re not trying to compete with big telecom operators,” he said Fortune. “This is a mobile network that’s going to exist in places where traditional networks either can’t exist or don’t exist.”

To help with the rest of the coverage, Helium recently announced a deal with T-Mobile where when Helium Mobile customers can’t access the Helium network, their devices automatically revert to T-Mobile’s. Wong, Helium’s COO, said the price point will be $5 per month for 1 gigabyte of data usage. No other plans are priced out. The company’s targeted launch date is early next year.

“We believe Helium Mobile is pursuing a very nascent and exciting market segment,” Dan Thygesen, T-Mobile’s senior vice president of wholesale, said in a statement. “T-Mobile is excited to support Nova Labs’ innovation in this new crypto-powered space.”

Weaver described Helium Mobile as a run-of-the-mill MVNO, or mobile virtual network operator, that does not offer its own infrastructure but instead leases a network from a larger operator.

“As a service, they don’t offer anything over consumer mobile networks,” he said.

Gold, the IoT hotspot mogul, has scaled back its Helium IoT hotspot business, focusing on other decentralized wireless projects such as rival crypto-powered cellular network Pollen. Instead of taking in new IoT hotspots, he’s focusing on governance issues within Helium, hoping that will push his HNT holdings back up. He also founded the People’s Antenna brand, a popular platform for goods and equipment in the Helium community.

Gold sees Helium Mobile the same way as Weaver. “They call it a crypto carrier, but it’s an MVNO,” he told me Fortune. “It’s a way for them to start earning actual dollars to support their billion dollar valuation.”

That didn’t stop him from buying a hotspot – two in fact. One is indoors and the other is outside his apartment covering Minute Maid Park in his hometown of Houston.

“There’s so much luck involved with this that it just spreads out into different projects, and get as many of these lots as you can,” he said.