Multicoin Capital

WRITING

The Helium Flywheel

BY TUSHAR JAIN
March 17, 2021 | 5 minute read

Helium is a new crypto-economic protocol that underpins a new

business model deploying and managing wireless networks at
about 100x lower cost than traditional top-down telecom
business models. The rst wireless technology supported by
Helium is LoRaWAN, a popular technology for IoT devices.
Multicoin Capital co-led the Series C round in Helium Inc in 2019
along with USV.

We invested in Helium before the network launched. Now there

are over 22,800 hotspots deployed across the world, and growth
is accelerating. The network’s growth has been primarily
bottlenecked by hardware production. The Helium community
recently approved new hardware manufacturers who will ship
tens of thousands of hotspots within the next several months.

The growth of the Helium Network is driven by a positive

feedback loop or ywheel. Let's explore some numbers. There are
currently approximately 22,800 hotspots on the network,
meaning that the average hotspot earns 145 HNT per month, or
4.82 HNT per day. There is an ecosystem of hotspot
manufacturers, and hotspots are available for as little as $350.
Mining rates vary signi cantly between different hotspots based
on location and quality of coverage. On average, at the current
$6.92 market price for HNT, a new hotspot pays for itself in about
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10 days, as shown below.

Mining HNT gets more dif cult as more hotspots join the
network. When we started mining Helium in Austin in August
2019, hotspots could regularly mine 100 HNT per day! So how
much will the average hotspot mine in the future? Let’s do the
math.

Following the passage of HIP-19 in late January, new third-party

manufacturers have begun offering differentiated hardware that
can serve the Helium Network. Since then, these manufacturers
have elded enormous inbound demand. This means that over
the next 90 days the Helium network is going to grow
signi cantly.
In short order, the network will have at least 30,000 hotspots.
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AssumingCapital
that the network growth does not increase HNT price,
this would mean a new hotspot will pay for itself in about 14
days on average.

This average payback period is very attractive, and that is why

the network is growing so fast. Moreover, hotspots costs are
falling. The rst hotspots we purchased in 2019 were $500.
Today new hotspots cost $350. Based on conversations with 3rd
party manufacturers, we expect that hotspots will be $150 within
a year.

What if we assume the network grows to 100,000 hotspots in

2021? Then the average hotspot would earn 1.1 HNT per day.
Assuming a at HNT price, a new hotspot would pay for itself in
about 6 weeks.
Multicoin Capital

Let’s stop to visualize what this network growth means. Right

now the coverage map looks like this:
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This network growth would mean the map at the end of 2021
probably look something like this:
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We believe it is reasonable to assume the HNT price will be

higher in the world of the second map as the Helium Network
gains more awareness and becomes more useful. This higher
price will mean better ROI for Helium hotspot owners, which will
further drive network growth. If we assume the price of HNT
doubles while the network grows to 100,000 hotspots, the
payback period for a new hotspot becomes just 23 days.
Multicoin Capital

Network growth means more economies of scale for hotspot

manufacturers, which drives lower costs for hotspots. We believe
it’s reasonable to estimate that the lower bound for hotspot costs
is about $50, which would bring the payback down to 3 days
even with 100,000 hotspots already on the network.
Multicoin Capital

And so this is the economic ywheel that fuels the growth of the
Helium Network: