Remember when the “Internet of Things” (IoT) was all the rage? The concept was simple: we would put sensors on every physical object imaginable, turning objects from “dumb” to “smart.”

People imagined a world where refrigerators, doors, windows, appliances, lights, baby cribs, and even cats and dogs would all be connected and thereby become part of a worldwide network of things. All of these smart things would constantly be collecting data and communicating with each other to make smart decisions.

For example, your fridge could tell your phone when you were running low on milk. Your lights would use AI to learn your behaviors and automatically adjust your home's lighting settings. Farmers could use smart devices to track soil moisture, level of acidity, temperature, and many other characteristics so that they could control irrigation, make water use more efficient, and more.

You get the point...

Some of the largest enterprises in the world, like Cisco and GE, were making bit bets on IoT.‍

Deloitte, Garner and Forrester put out a ton of bold predictions about how massive the IoT industry would become.

But here we are in 2021, still waiting for the IoT revolution to happen. Though the IoT industry has made some headway, it has not been nearly as ubiquitous as some early predictions suggested.

Why did IoT never take off?

1) Sensationalism in journalism. Part of the problem stems from hype and sensationalism in tech journalism. Journalists are storytellers, not technology experts. While they did their job of writing stories that drove people’s imagination wild, their narratives were a bit overexaggerated.

2) Security. All it takes is one point of entry to be compromised for the entire IoT network to be hacked. This means the engineering of these smart devices has to be pristine, and that takes time.

3) Privacy. We are all well aware of the privacy concerns of devices that track us 24/7. There are ethical concerns of whether the excessive amount of tracking that IoT would enable is a good thing or not.

4) Closed ecosystems. Many of the largest IoT players are large enterprises (e.g. Cisco, GE, Microsoft), and they all operate in closed ecosystems. There are no shared protocols defined for how devices connect both to each other and to a central hub. Consider: if a consumer buys two Google smart devices, three GE smart devices, and two Apple smart devices, without shared standards, these devices cannot communicate with each other.

5) Bad incentives. Consumers haven’t shown much interest in upgrading to smart devices because, frankly, the benefits do not outweigh the costs (i.e. low ROI). Enterprises have not made the effort to distribute and deploy these devices in the real world (high costs, unclear ROI).

These last two are especially important. If there is anything we have learned in the last 10 years of building crypto, it is that open protocols and incentives matter. All of crypto is about achieving a common goal by aligning the incentives of all the stakeholders in the system within an open system. In the case of IoT, the stakeholders are:

1) Users

2) Devices

3) Network operators.

This is where Helium comes in.

What is Helium?

Helium is a decentralized IoT network. The network consists of “hotspots” (devices) that are maintained by “miners” all around the world. These miners earn incentives for maintaining this network of hotspots, and the hotspots communicate and coordinate to provide data services for end users. 

The network is designed to be decentralized—in other words, no central authority is responsible for orchestrating these hotspots and providing data services. Instead, the rules for orchestration and data services are hard-coded into smart contracts that live on Helium’s blockchain.

Helium built its own public blockchain and consensus algorithm called “Proof-of-Coverage,” which incentivizes the creation of this physically decentralized wireless IoT network.

The Helium blockchain was officially launched on July 29, 2019, and it now has close to 25,000 devices and over 10,000 Helium miners across the world. It is now the largest public, decentralized IoT network in the world.

How does the Helium blockchain work?

First, let’s look at the core components of the Helium blockchain. This will make it easier for us to then explain how the blockchain works.

Blocks

Just like Bitcoin, the Helium blockchain stores transactions in blocks. A new block is mined every 60 seconds. The easiest way to see the blocks being mined is with the Helium Blockchain Explorer.

Epochs

Also just like Bitcoin, the Helium blockchain has miners and a consensus algorithm. There are 16 miners who are responsible for driving consensus forward at any period in time. An “epoch” is the target time period for which a given group of miners is elected to serve as the consensus group.

An epoch is roughly 30 blocks (i.e., 30 minutes). After an epoch is completed, a new group of miners is elected to form the next consensus group.

Unlike Bitcoin, which rewards miners every block (i.e., block rewards), the Helium blockchain rewards miners every epoch.‍

Transactions‍

The Helium blockchain currently has 20 native transaction types. For the list of transactions, you can refer to their docs.‍

Accounts, Wallets, and Keys‍

Similar to Ethereum, the Helium blockchain uses the account-based model, which means assets are represented as balances within accounts, similar to traditional bank accounts. This is in contrast to Bitcoin, which uses the UTXO model, where a user’s wallet keeps track of a list of unspent transactions associated with all addresses owned by the user, and the balance of the wallet is calculated as the sum of those unspent transactions.

PS: I explain how UTXO works in depth in Lesson #37 of my free crypto course.

Hotspots and Proof-of-Coverage

Okay, so now that you have a grasp of basic blockchain terminology, we will now delve into how Helium uses a blockchain to maintain this distributed network of hotspots.

The Helium network consists of miners that maintain hotspots all around the world and transfer data packets across the network. Anyone can become a Helium miner. All you need to do is buy a compatible device and set it up. As long as you keep the device on and running, you will earn rewards for being part of the network.

But how do we know that the hotspots are actually in the location where they claim to be? What if a miner buys a device and claims to be in NYC, but he moves to Nebraska and turns the device off?

It would be bad for the Helium network if miners did this because then Helium could not guarantee reliable network coverage for end users who want to use the IoT network. How can we make sure we do not reward malicious users who might take advantage of the system?

To solve this problem, Helium invented a novel consensus algorithm called “Proof of Coverage.” The algorithm is constantly verifying that the hotspots are providing network coverage from the location where they claim to be.

Since we know that...

1) radio frequency travels at the speed of light‍

2) the radio frequency of these devices can only be propagated for a limited distance‍

3) the strength of the radio signal is inversely proportional to the square of the distance from the device

...it is possible to know precisely where a hotspot is located if it emits a radio signal.

By utilizing these three properties of RF, Helium is able to identify exactly where a certain hotspot is located. Brilliant, don’t you think?

Moreover, rather than Helium itself interrogating hotspots for their location all the time, it uses other hotspots in the network to do so. In other words, the network governs itself based on pre-written rules codified on the blockchain.

At any point in time, a hotspot can play three different roles:

1. Challenger: The hotspot that constructs and issues a “challenge.” Hotspots issue challenges approximately once per every 240 blocks.
2. Challengee: This hotspot is the target of the challenge. When it receives a challenge, it transmits the challenge response packets that nearby hotspots can listen to.
3. Witness: These are hotspots that are geographically close to the challengee and are responsible for “witnessing” the packets that the challengee is transmitting in response to the challenger.

Once the challenge is complete, the challenger submits the proof receipt as a transaction to the blockchain so that it can be verified by the current consensus group. Once verified by the current consensus group, the transaction is recorded on the Helium blockchain. In this way, the Helium network is able to constantly generate proof that this distributed network of hotspots is providing wireless coverage.

Besides serving as challengers, challengees, and witnesses, the hotspots are also responsible for routing sensor data through the network (i.e., for end users who are actually using the network).

You’ve probably already asked yourself the next obvious question...what is the incentive for these hotspots to be doing all the work of providing network coverage? Easy! Since we have a blockchain, we can give them tokens for doing so. Duh! ;)

Hotspots earn Helium Token

The Helium blockchain rewards hotspots in Helium Token (HNT) for performing their roles mentioned above.

Every month, the Helium blockchain generates five million new HNT token. This roughly equates to 3425 HNT per epoch. This newly generated HNT is distributed to the hotspots based on the various roles they play:

The rewards are split among the hotspots that fulfilled that role during the epoch. For example, if your hotspot was challenged during an epoch and you successfully responded to the challenge, you will receive part of the 5.31% of rewards that go to challengees (split equally).

If you read the table above carefully, you can see that up to 32.5% of the newly generated HNT are awarded to the hotspots that transfer data across the network. This means that just buying a hotspot and being a challenger, challengee, and/or witness is the bare minimum. A majority of the rewards go to hotspots that are also transferring sensor data across the network (i.e. to meet the data needs of end users who are actually using the IoT network for their needs).

You will also notice in the table above that the Consensus Group members earn 6% of all HNT mined, as well as any transaction fees collected during the epoch. This is in addition to any rewards they receive for performing their roles as hotspots (e.g. challengers, challengees, witnesses, etc).

Another thing worth noting is that 34% of HNT go to security (i.e., the team and development).

Token economics

In addition to serving as an incentive for hotspots to provide a network, HNT also serve the needs of enterprises and developers who actually need to connect to the Helium network and build IoT applications.

This is where it gets a little tricky. But don’t worry; it is not too hard to grasp.

Helium uses something called a “burn-and-mint” token economic model. The simple idea behind it is that the supply of HNT is determined by how much demand there is for the network. The more demand there is, the lower the supply of HNT becomes (and hence, increasing its perceived value).

More specifically, it works like this:

Every time an end user wants to use the network, he purchases data credits using USD. One data credit always costs $0.0001. Or put another way, $1 always buys you 100,000 data credits.

These data credits are created by burning HNT (to “burn” tokens means to remove them from circulation permanently).

So let’s say a user buys $10 worth of data credits (i.e. 1 million data credits). And let’s say the current price of HNT is $2. Then five HNT would be burned to produce those one million data credits ($10 / $2).

The idea (at least in theory) is that at some point in the distant future, once equilibrium is found in the network (i.e., no new data credits are being created), the amount of HNT that exists will remain static month on month.

Supply of HNT

The Helium blockchain currently mines a target of five million HNT per month. This amount is halved every two years until eventually, no new tokens are minted.

If you’ve been paying close attention, you might be wondering...‍

“Wait, if the HNT supply is capped at 223,000,000 AND the network is constantly burning HNT to mint data credits, won’t we eventually run out of HNT?”‍

Good question! 

To solve this conundrum, Helium introduced a new concept called “net emissions.”

Net emissions

Once all HNT is minted in 49 years, the protocol will still mint more HNT, but it won’t mint it on a predefined schedule. Instead, it will mint new HNT based on how many data credits were used in a given epoch. For example, if 100 HNT were burned to generate new data credits in an epoch, then the system would mint 100 new HNT in that epoch.

In this way, the total outstanding supply of HNT will stay constant after all of the tokens are printed. But this eliminates the purpose of the burn-and-mint model of making the tokens deflationary. To mitigate that, the team decided that the amount of HNT that can be burned in any epoch will have a cap. So if the HNT burned exceeds this cap, then the supply will decrease. This allows the system to have the originally intended deflationary effect.

Use cases

Now, all of this is great, but the ultimate question is whether Helium can enable IoT use cases that giants like IBM, Cisco, and GE have thus far not been able to.

The answer is: to be determined.

So far, Helium is mostly still in the technological innovation stage. It is busy building the blockchain and getting miners to deploy these devices all around the world. There are notably a handful of cases for which Helium is being used today:

1) Water Tracking - ReadyRefresh by Nestlé is a customizable beverage delivery service, and was one of the first customers to test the Helium network for water tracking in Connecticut.

2) Agricultural Monitoring - Agulus is an agtech company and uses Helium’s network to automate water distribution based on wireless sensors connecting to the Helium hotspots.

3) Micro-mobility tracking: Lime (the scooter company) uses the Helium network to find lost bikes and scooters.

4) Building & Asset Monitoring: Conserv offers wireless monitoring for art collections in private and public museums and uses Helium to provide information about artwork.

5) Health Monitoring: Careband offers consumers wireless wristbands to monitor the location and temperature of people working in hospital or office environments to help track contacts related to COVID-19. Careband uses Helium to track the locations of wristbands.

6) IoT Innovation: Every year, Salesforce onboards thousands of employees. During that process, employees can get overwhelmed by the number of groups and resources they can leverage. To minimize friction, Salesforce is using Helium to build an IoT program to allow employees access to these resources using their badges.

7) Asset Tracking: Digital Matter is using Helium to provide GPS tracking devices for businesses that want to protect and recover assets.

8) Air Quality Monitoring: Airly uses Helium to track air quality around the globe to help identify concentrations of dangerous airborne emissions.

Overall, it sounds like they are making good headway. But it’s still too early to say that this thing will take off. For example, if you look at the Helium block explorer, you can see that roughly 52 million data credits were spent in the past 30 days (1.175 GB of data). That is miniscule. Basically nonexistent :)

Closing thoughts

As can be seen in this thread, there are a lot of intractable challenges that the IoT has faced in the past decade. Helium has a tough battle to fight, and many challenges lie ahead. You’ve probably identified a few already. For example...

How secure is the Helium LoRaWan network?

How is it dealing with data privacy?

What is its solution for enabling the holy grail: edge computing?

Will Helium open up its platform for developers to build IoT applications on top?

Time will tell whether Helium can make headway in the right direction.