Helium’s IoT crypto network is barely keeping up in Lebanon

“It’s actually one of the most difficult forms of mining,” says Abu Daher, 22, an architecture graduate and operator of a crypto mining pool. “Of course you need decent internet, reliable power, but the height of the position is very important.”

The box is a helium hot spot. It transmits a long-distance Wi-Fi signal and forms, together with hundreds of thousands of other hot spots, a global decentralized network designed for the Internet of Things. In return for installing and running it, Abu Daher receives a cryptocurrency called HNT. Looking out over the lush hillsides as the sound of a geriatric diesel engine sputters in the distance, it’s hard to imagine what “things” the little gray box can communicate with.

Lebanon’s economic freefall in recent years, combined with a relatively high level of technological competence and a mass culture, has made the country a kind of crucible for testing the utility of crypto-assets. Stablecoin use has boomed as people attempt to circumvent a basket case in a banking system. A community of ingenious miners continues to scrape profits out of the dilapidated electricity grid, and some clever speculators have even managed to recover the savings they lost in the collapse of the banking system. Many turned to Helium.

On Helium Explorer, a dashboard showing the location and activity of hot spots globally, Lebanon appears as an intense constellation of luminous green dots surrounded by near-empty space. The Hotspotty app, which shows the state of the Helium network, records approximately 6,500 hot spots installed across Lebanon. In the rest of the Middle East, only the United Arab Emirates comes close to Lebanon’s adoption levels, with around half that number.

Helium’s promise to become the backbone network for smart devices (and delivery of breakfast burritos by drone) has little to do with its appeal in Lebanon. Lebanese citizens, many of them struggling as the country’s economy slumped, simply saw the financial dividends from the network’s hot spots as an easy way to make hard currency. However, as the value of HNT tokens has fallen, many people have seen their money depleted and stuck holding on to elegant but rather useless hardware.

At the headquarters of God of Mining, a mining pool on the outskirts of Beirut, CEO Joe Manih sighs as he gestures toward 30 or so hot spots of various brands stacked on a table. “We just disconnected them last week,” he says. “They weren’t worth the effort, and now we can’t even sell them.”

Helium was founded in 2013 by Shawn Fanning, the co-founder of Napster, and Amir Haleem under the somewhat ominous name of Skynet Phase 1. Initially, there was no crypto element to the project, and despite attracting VC investment, it struggled to gain traction time. In 2019, the founders came up with the idea of ​​using blockchain tokenization to incentivize participation in the network. In principle, anyone can buy a Helium hotspot for $400 to $500, connect it to an Internet connection and power source, and become a node. In return, the user receives Helium’s native HNT tokens, which can be traded on the open market.

It was initially hailed as one of the few crypto projects with a clear utility. More devices were connected to the internet, and Helium was to be the infrastructure for them. It would tell farmers when to water their fields, help track down stolen e-scooters and keep track of air quality in cities. It would even find your dog when it got lost. Early in 2022 New York Times ran a piece about Helium with the headline “Perhaps there is a use for crypto after all”.

Where other cryptocurrencies derived their value mostly from market forces – they were worth whatever anyone would pay for them – Helium should be able to sell access to its network to companies that needed to use its infrastructure, giving it a more predictable and robust source of income . “As usage grows across networks, the value of the HNT ecosystem increases,” Helium’s chief operating officer, Frank Mong, wrote in a September 2022 blog post.

Helium did not respond to a request for comment.

Moe Saleh, who ran several hot spots in Lebanon and helped many others install and configure theirs, says he was drawn to Helium because he “saw that this project had a physical, technical aspect. Not like other crypto projects.”

During the 2021 crypto bull market, HNT reached a high of $50 per token, and hot spot operators could expect to receive more than decent returns. Abu Daher, who claims to have programmed over a thousand Helium hot spots for Lebanese clients, says that at the time a properly installed hotspot returned about $50 per day. The $500 cost of the machine could quickly be recouped, then it would begin to generate a healthy dollar income.

For thousands of Lebanese mired in economic crisis, this was an attractive proposition. Between 2018 and 2022, the Lebanese economy went through a contraction that the World Bank called one of the “worst economic crises globally since the mid-19th century.” One statistic captures the profound effect this had on the average Lebanese citizen: In 2018, 18 percent of Lebanese households earned less than $400 per month. Just three years later, the figure was 92 percent. Hyperinflation ravaged the Lebanese lira, destroying over 95 percent of its value. Banks imposed draconian capital controls, leaving customers to watch their savings disappear while the lira soared. The state shrunk and withdrew from most people’s lives. Traffic lights stopped working, making every intersection on Lebanon’s already difficult roads a hair-raising stretch. The national grid delivered at best one hour of electricity per day. The value of police and military monthly wages dropped from $800 to less than $100, and many stopped showing up for work when the gas they used to get there cost more than they earned.

“In Lebanon,” says Saleh, “any opportunity people see to continue living, they take it.”

The promise of a machine that could be wired to generate more income than most people in the country could earn was irresistible. Many took the money they could scrape together and paid the sky-high black market prices for hot spots.

Demand for hot spots in Lebanon increased (as it did globally), and the subsequent order backlog meant that some Lebanese customers had to wait up to a year to receive their machines. Used hot spots, or those that enterprising importers had managed to bring in early, sold for several times their value. At God of Mining, Manih says one of his clients was so desperate to start mining helium that she paid $6,000 for a hot spot from someone who had simply bought some in Europe and brought them back in their luggage.

Around the end of 2021, Lebanese customs began blocking imports of hot spots, citing vague concerns about military radio frequencies. The telecommunications minister did not respond to a request for comment. However, a ministry engineer who wished to remain anonymous as they were not authorized to speak to the media said Helium hot spots were banned until “frequency usage conditions were assessed.”

This did little to stop imports, and simply made hot spots more expensive. An importer, who wished to remain anonymous, told WIRED, “We get our machines through customs using other channels.” The other channels tended to be expensive.

The Helium website states that “mining of HNT is done by installing a simple device on your home or office window. That’s it. Seriously.”

In practice, it is far more complicated. A quick look at any Helium Telegram group or Discord server reveals endless discussion about radio frequencies, IP addresses, firmware updates and the correct placement of hot spots. These factors and more will all affect the amount of HNT that a hot spot will extract. “You can do everything perfectly and it still seems like luck,” says Manih. “We tried different cables, IP addresses, connection types. It’s impossible to know what this machine wants.”

The complexity of running a hot spot was beyond many who had believed Helium’s marketing and thought they were buying some kind of plug-and-play money printer. Even its popularity was a problem. One of the many factors that affect the profitability of hot spots is their density in a given area. Too few means less return. For many, this also means less return. “All kinds of people bought,” Saleh said. “Investors got involved and bought 50 or 100 machines to make farms. They made it harder for everyone.”

That meant that many people in Lebanon could not match the profits of the early adopters of Helium. The rewards issued to each hot spot come from a fixed amount pool. As more and more hot spots came online, the fixed reward pool was spread ever thinner. Many people had bought hot spots around or after the top of the crypto bull market, and got them online when the price of HNT fell along with the rest of the crypto market. From a bull market of $50 per token in 2021, HNT fell to less than $3.

The network also does not generate large revenues for Helium. In January, Helium’s total demand-side revenue (ie the fees paid by companies to actually use the network) was just under $14,000. In September, tax revenue was just $1,150.

The network and token have also come under growing criticism for tokenomics being heavily skewed in favor of insiders. In the early stages of the project, Helium employees and their collaborators reportedly collected more than a quarter of all HNT tokens mined, giving them a huge windfall, although the rewards declined for new users.

The zero point period on hot spots, previously measured in weeks, is now measured in years. Marcel Younes, who tried running a couple of hot spots despite some initial skepticism, sums up the feelings of many hot spot owners. “It’s an obvious scam,” he says. “Only created to enrich the first investors.” He has since unplugged his machines, judging them not to be worth the very small amount of electricity they consumed.

Some people still cling to hope that their investments will recover. Although it will be years before a Helium-powered drone delivers any burritos in Beirut – if it ever does – Saleh says he still has some faith in the project: “If it’s not Helium that manages to create this network, someone else will.” And he says there’s even still some demand for hot spots, though this is mostly because “the aftermarket has gotten so cheap. You can get one for $100 now.”