The Globe & Stick

Why thinking of Helium as a failure is dangerous

by Nik Hawks, Josh Rosenthal, Max Gold

A common theme Max & I encounter in conversations with DePIN founders is the idea that Helium (the decentralized wireless network that kicked off the modern DePIN ecosystem off) was a failure.

Founders think of Helium as a failure for any number of reasons: How Helium grew so fast and then contracted, how Helium Inc wasn’t able to deliver on promises it didn’t make but was assumed to have made, the stunning ignorance of retail users thinking they were investors and not speculators, or the errors along the Helium path that were mistakes as a function of innovation.

It is useful to help founders reframe and understand what Helium was and wasn’t, the mistakes it made vs the perception of what it is, and ultimately, what you as a founder should take away from the great Helium experiment.

The Globe & Stick Model

One way to understand the importance of what Helium did is to use a “globe and stick” model.  The globe is the core idea itself.  In this case, the core idea Helium had was that a group of strangers could use the blockchain and token incentives to build a physical network of things in the real world.  

Now, imagine a bunch of sticks coming out of that globe.  Each stick represents the full set of possibilities of one expression of the global idea, what you might call the “design space”. 

In this first instance, you can imagine one of the sticks representing the idea of building a LoRaWAN network.  Other sticks can represent WiFi, or CBRS, or mapping imagery, or weather data, etc.

At the near end of the stick is the most normal version of that idea, and at the far end is the most extreme version of the idea. 

The thing with these sticks is that no one knows how long they are until they get to the end and run out of stick.  Especially on the first one, it’s almost entirely uncharted territory.  In order to know how far you can go, you have to get out to the far end and fall off to establish the limit.

Once you know how long they are, what almost always happens is two things.  First, the most useful solution is usually found about two-thirds of the way along any given stick.  Second, most of the sticks for any given globe end up being about the same length.  Still, if you don’t explore the full potential of the design space, you can’t know where that two-thirds mark is.

The very first stick in the globe Helium built was the LoRaWAN network.  Helium ran that out to the extreme and fell off the edge.  They’re now dialing it back.  No one can reasonably argue that they built a perfect network.  What they did do was invent a new globe and plant a few sticks.

The Core Concepts Behind Helium’s Approach

Ok, so now you know the Globe & Stick model.  Let’s define this particular globe a bit more using two fundamental ideas I was introduced to by my co-author Josh Rosenthal over at 6ixth Event | Cataclysmic Capital. These are generative tech and participatory capitalism.  

Generative Tech

Conventionally, new technology never creates a market.  Think about the progression in tech from rolls of film for movies to VHS to DVDs to streaming.  Each new technology was better/faster/cheaper, but none of them made an entirely new market.  They just expanded an old one by serving existing demand in new ways.  

You can think of the progression from horses to cars to electric cars as another demonstration of new tech not creating entirely new markets.

Generative tech is the reversal of the norm; it DOES create new markets.  We’ll use the printing press as our first example.  

Prior to the printing press, almost no one was literate.  The only people who could read were monks, and they created manuscripts by hand (the word manuscript comes from the Latin manus, hand and scriptum from scribere, to write.)  

There wasn’t a market for books, or magazines, or flyers, or print advertising; none of those existed.  The ability to print at scale created an entirely new market.

As if creating a new market isn’t enough, the second order effects of generative tech are enormous.  The market for print creates a market for mass media.  That enables one person to teach at scale through books conveying any number of ideas:  How to build other businesses, or run political campaigns, or create communities (Rachel Carson’s Silent Spring inspired the environmental movement).  All of those radically expanded the first order function of the printing press.

The other thing generative tech does is eat the margins of what it replaces.  When print came out, the margins on manuscripts went from healthy to zero. Monasteries that made money off manuscripts had to find new income streams.

As another example of first and second order effects, the development of human flight dramatically changes travel and  leads to radar, requiring us to eventually organize air traffic and create an entire industry (~ a $9 billion industry in 2021) based on routing planes around the globe. The air traffic control industry and all of its value didn’t exist before radar because the generative tech (flight) didn’t exist.

One more important point about why generative tech is so powerful is that utility goes through the roof.  Think about flying across the country in 5 hours instead of taking a 5 day train, or reading twelve books in a year vs one short manuscript, or looking up one thing per day in an encyclopedia vs looking up 1,000 things per day with the internet.

Now, that’s not to say every book printed will be a best seller or every flight will lead you to the love of your life.  It’s a stick, and really, an experiment.  It’s not the globe.

Once the idea is incepted, many others can come along and plant their own sticks in the globe.  

Generative tech creates utility that cannibalizes the market for the old version and opens up a much bigger market.

A few nuances exist here.

First, generative tech with DePINs can be broken into aspects of how the system is organized and how the information is collected. Typically the second part isn’t really new; dashcams like Hivemapper’s aren’t a new invention, LoRaWAN (Helium) has been around for a decade, weather data (WeatherXM) has been around for centuries.

Most of the power in generative tech in DePINs comes from the “deployed” aspect, where by using a blockchain as the rails and tokens as the incentives, an enormous network can be built that captures far more data much faster at a much lower capital cost to any single entity than previous business models. 

Ok, so generative tech opens up the door to participatory capitalism, but…what the heck do we mean by “participatory capitalism”?

Participatory Capitalism

Let’s go back in time again and talk about access to capital.  We’ll skip through the bartering part of human history, blow past the invention of money, and start our journey with the beginnings of businesses.  

It’s hard to imagine now, but there was a time when you had to BE somebody to run a business, both through some kind of legal requirement (only a lord or landed gentry could run a business) and/or through access to disposable income to take the risk to start a business.  

You also had to know that a business was even possible.

When the printing press came along, it enabled the spread of ideas that shattered the concept that business was only for the landed gentry. Anyone who could read could visit a synthetic world via a book, learn about the idea of a running a business in that synthetic world, and then bring that idea back and  figure out how to apply it to their real world.  

Of course, the idea wasn’t enough.  You also need enough disposable income to participate by starting a business (or for that matter, to invest in someone else’s business.)

Businesses simultaneously represent an enormous risk and the single best way to create the kind of wealth that lifts you way above the day-to-day of putting food on the table and a roof over your head.  

You can’t access that wealth if you can’t participate, and in many cases, you can’t participate unless you have enough money.

Without access to enough money to start on your own, what do you need to get “upside risk exposure”?  The stock market.  

The stock market was a way to take a smaller slice of risk than starting a business and get exposure to the upside of a business without having to know the business owners and be part of the secret-handshake club.  

You didn’t have to bet your life savings to start a business.  You could buy a part of someone else’s business (fractionalized ownership for the econ nerds) and if they did well, you’d crush with them.  If they lost, you’d lose, but you’d only lose a little.  Your downside was capped.

The stock market was the in-between between only rich people owning something to everyone having a piece of the action.  To participate in the stock market, you still had to have enough money.  But what if you didn’t have enough money to make a meaningful bet in the market?

Now we’re finally getting to participatory capitalism, which is the second giant ingredient in the DePIN globe.

Clara Lindh, venture partner over at Norrsken VC, has written about participatory capitalism over on Forbes, examining the idea of the owner economy and how blockchain enables this using Axie Infinity as the example. We think of DePIN as the next generation of that, moving beyond digital pets and into delivering real world utility.  

Let’s start with the problem that participatory capital solves:  If I’m living paycheck to paycheck scraping off batteries second-shift, I don’t have dollars to put into the stock market, and when I use the battery I get nothing out of it.  

However, if, as I use the battery, or offer its use to others through a DePIN network, I can earn tokens by participating.  It doesn’t have to be batteries; it can be wireless signals, the weather, privacy, or any number of utility-delivery vehicles.

Increasing access to owning a part of equity through participation is the evolution of the idea of buying early stage pre-seed shares/SAFE. It allows far more participants to get in early; there are far less permission obstacles. The obvious downside is the risk to unsavvy participants who don’t understand the math mechanics behind venture investing.

The upside counterpoints to that are 1) It’s almost never a bad thing to allow more people to participate in a system, and 2) a good chunk of the “investment” comes from participating, NOT from risking large amounts of cash to buy equity.

Now, especially if I can earn large chunks by getting in early, participatory capital is a giant step forward.

Earning by participating in building and using a network through the deployment of hardware allows anyone to be a venture capitalist.  You can get into deals right now by running a node or using a product. 

While the idea and hope to earn by participating isn’t new, earning by participating has never actually been seen before in capitalism. DePIN is participatory capitalism creating real utility.  It is revolutionary.

Participatory capital and generative tech creates “distributed venture capitalism.”

Whew, that was a lot!  I’ll throw in a mind-blower here: The last time we saw this kind of new capital formation combined with generative tech is the time Western historians refer to as “the Renaissance”.

Now that we’ve unpacked the massively powerful combo of generative tech and participatory capitalism, let’s talk about the common mistakes people point at with Helium and opportunities they miss.

Challenges & Criticisms

“Helium gave away all their tokens too early!” The original plan had no limit for the amount of tokens that should be emitted. It was using the BME (Burn Mint Equilibrium) model pioneered by Factom.  The shift to a max supply was the result of the Helium community thinking that having an infinite supply made the token a joke (this was HIP 20).  In its collective attempt to conform to what crypto people wanted, the community ended up not doing what was best for Helium but what was thought to be the best for crypto projects at that time.

Still, in the early days of any project, you have to over-incentivize people to participate.  

How much you over-reward is a matter of debate, but to think that Helium made a mistake when A) they did it blind, B) you can see that they built (by a factor of more than 10!) the world’s largest contiguous wireless network and C) they did it in about 3 years, well, I’m not sure calling that a mistake is correct.

Heavily rewarding early adopters is part of the formula for building a system.  If you skimp on early rewards you can’t get the flywheel going.  This is a common mistake we see with projects; they create a billion tokens and then are miserly about rewarding the first operators.

“They built something no one used.” This is another common observation that misses the whole point of a DePIN.  DePINs are best used to explore design-spaces where a system has log jams due to capital risk, or there’s institutional atrophy, or capital is being preserved by moats.

The whole point of building a DePIN is to allow for network creation without first solving it by HUGE infrastructure investments or pouring in cash to get to critical demand.

The token is used as a supply side tool. The token doesn’t create demand signal for the service, it just rewards supply.  Yes, you can create a giant network that doesn’t get a lot of use. The mechanism is the important thing here; the mechanism worked.

This is an essential part of the core offering here; capital formation through creating supply without demand, and creating equity by participating.

“I’ll build the same thing, but MY system won’t allow gamers (cheaters).”

Listen, EVERY system that creates value will attract gamers.  Seeing a fault in a system that attracts gamers is like seeing the sparkle of a huge diamond; it’s a part of the system.  The higher the value, the more sophisticated the gamers.  

The key here is to play incentive judo and develop an incentive system that rewards users for doing what’s good for the network.  

Gamers don’t necessarily hurt the network; they help secure it in the early phases.  The “bug bounty” that most projects pay is built in with gamers pursuing token incentives.  Having gamers accelerates the security and robustness of a system.  

In fact, you can think of gamers as showing you all of the inefficiencies in what you’re doing; they’re a useful part of the system. Yes, they’re painful to bear and battle with and lose tokens to, but think of them as mercenary sparring partners; they make you MUCH better.

“Their community is so toxic”

The community that deploys your hardware is your number one business unit.  This is something Helium didn’t understand at first. By the time they did, it was too late to gather everyone back into the fold.  The hard core stayed, but many others went out into the wilderness, starting competing projects or investing their time and effort in new DePINs.

This is one of those mistakes that is so transparent with hindsight but unknowable at the beginning. Helium having temporary high toxicity (especially as the crypto market went through a bear winter) had much less to do with the system than it did with market factors and Donald Rumsfeld’s “unknown unknowns.”

Luckily for every other DePIN project, Helium forged the path on this, showing us that community communication and education is crucial to maintaining long term network health.

By the Numbers

Let’s put a quick bow on this idea that Helium isn’t a failure by taking a look at a few market signals.

In February of 2019, the HNT token wasn’t traded on any exchange, no Helium gateways existed, and there was no global LoRaWAN of any size. In February of 2024, just 5 years later, the token traded at over $7 on multiple exchanges with over 350,000 deployed LoRaWAN gateways, about 17 times the size of the next largest network (TTN with 21.2k gateways).

Additionally, as you can see in the above screenshot (courtesy of Hotspotty, a major player in visualizing DePINs) Helium deployed over 9,000 Mobile (not LoRaWAN) gateways to service cell phones (initially only in the USA).

That is a success by damn near any metric you’re willing to measure.

Lessons Learned 

So, what can you as a DePIN founder learn from Helium?

First, their fundamental discovery was that token incentives can create the supply side of a global network far larger than any other competitor business. This is the single most important thing that Helium did, and outweighs by far any other mistakes they’ve made in terms of overall contribution to the world.

Second, running on blockchain rails with token incentives is incredibly complex. Do not underestimate the effort involved.  Whether directing energy through incentives or just deciding what goes on chain (not everything!), it is no small task to develop a world on your own. Make sure you have a team that can address the known challenges (and save some horsepower for the unknown!)

Third, if you do not think of your community as a valuable business unit that needs to be educated and informed on a regular basis, you risk significant misinformation backlash that will drain efforts from your project and damage your project’s reputation.

Fourth, DePINs allow you to build something before you know if it’ll work.  It’s not Build It And They Will Come, it’s Build It and See What Happens. DePIN is the manufacturing YOLO of the post-industrial age.

The Path Forward

No DePIN, including Helium, has successfully navigated these uncharted waters yet. Of them all, Helium has the largest head start and has made the most headway, launching an international (USA and Mexico) phone plan based on hardware deployed by the community that is processing a significant amount of data.

Hivemapper and DIMO are also excellent examples of using a DePIN to create supply and then focusing tons of effort on finding and servicing demand.

Before you criticize Helium for being a failure, you would do well to understand the world they built, heed all the lessons they’ve taught us, then help the entire system by continuing to build better models we can all benefit from.

LFG!

Gold Hawks & Associates LLC is a consultancy specializing in the DePIN space. We have been featured in Forbes, Fortune, and Messari and have worked with all sizes of projects including Nova Labs, Helium Foundation, Hivemapper, IoTeX, Anode Labs, GEODNET, Eclipse Labs.

We assist with strategy, incentive design, and messaging. Whether you are considering starting a DePIN project or you’d like help managing your success, we stand ready to assist. Please reach out if you’d like our expertise applied to your project.

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