By Alireza Ghods, co-founder of NATIX and NATIX Network, and Leonard Dorlöchter, co-founder of peaq and EoT Labs.
Many grand ideas one day have to come to terms with that pesky little thing called reality. One day, you are decentralizing IoT connectivity and winning all the praise as the poster child of real-life Web3 adoption… But then, it turns out that the actual adoption was not really there due to low network usage. That is the story of Helium, the People’s Network, so far, and for all the snarkiness, there’s more to it than meets the eye. It points at Web3’s actual pathway to real-world adoption — and at the pitfalls to avoid on the journey.
Let’s begin the journey with a closer look at the model underpinning the project. Helium is decentralizing LoRaWAN connectivity services, LoRaWAN being a wireless communication protocol used by Internet of Things devices. Here, you, the connectivity provider, would buy a Helium-compatible hotspot to enable connected devices to communicate between themselves. The network would reward you for the trouble with tokens depending on the actual usage, so if the usage is low, then so are the rewards.
And that’s the crux, really. With its almost 1 million hotspots running as part of a decentralized physical infrastructure network (DePIN, a term recently coined by Messari), Helium has succeeded in building up the supply side using Web3 to provide real-world services. The problem was with the lack of demand, which resulted in online rumbing. Understandably enough: Buying a hotspot, network members expected returns. Now, though, many projects are looking to bring this model to more demand-driven markets, and investors are paying very close attention.
So how does Web3 ride this wave without falling into the gap between grand visions and reality? Both the answer and inspiration for it come from somewhere unexpected — the smartphone industry.
The iPhone strategy
Today, it’s hard to imagine a smartphone as anything other than a sleek slab with a touchscreen and maybe a few physical buttons here and there for good measure. It wasn’t always the case, though, but with the release of the original iPhone, the industry’s future was pretty much sealed.
What’s important is that the iPhone did not really offer the user anything above and beyond the realm of the usual. In 2007, a cell phone needed no introductions, the value of Web access was obvious, and phone cameras had also long been a thing. The iPhone pushed the design forward in many ways, but its level of innovation didn’t make the user feel like they were dealing with alien technology. It reaped the demand that was fundamentally already there and let users do all the same things, but better and with more cool stuff.
Compare this with what Helium did. Let’s leave the demand aside for a second and look at the optics. Providing LoRaWAN connectivity is hardly what you do on a daily basis, so the only reason why you would buy a hotspot is to profit off the services. Without the demand, you get a mismatch between the user’s expectations and experience — and anger at the execution, which we shouldn’t let tarnish the idea.
Granted, there are use cases with an actual demand where doing without custom hardware is impossible. Who knows, maybe Helium’s own story would have been different if there was already more need for LoRaWAN connectivity. But there is one thing that DePIN projects can do to amp their odds of success and set the stage for wider Web3 adoption. As the iPhone allowed people to do more with the existing tech, Web3 must take aim at the connected devices people already have and add extra value on top of those.
Is that a supercomputer in your pocket?
The number of connected devices is not just growing, it’s skyrocketing with every passing year. More and more devices, from cameras to mouse traps, get outfitted with increasingly powerful chips and draw private and business users alike.
This trend becomes evermore obvious if we zoom in on smartphones. An average smartphone packs way more oomph than a supercomputer from a few decades ago. They’re also filled to the brim with sensors — just look at the lidars on the latest iPhones, and count in the gyroscope, the lighting sensors, and the camera. A phone is literally a pocket sensor constellation.
There’s already about 7 billion smartphones out there. Millions of those are already outfitted with AI accelerators, and the figure will only grow alongside the accelerator chip market. Smartphone ownership is growing both in the developed and the developing worlds. These devices make up a decentralized hardware net of an unbelievable scale, which can be leveraged with nothing but a piece of software. Onboarding? A matter of just a few taps. And once those are out of the way, your phone can do anything from decentralized computations to data collection and censorship-resistant communications. And all of that can be perfectly GDPR-compliant: You can properly anonymize the data on the edge device and have it only send out the AI-processed outputs.
On top of all this, the mismatch problem is simply not there in this approach. People don’t buy smartphones to earn crypto, so they won’t be upset with the fact that their DePIN rewards won’t buy them a Lambo on day 1 of usage. The return on investment is already there, whether it’s scrolling through TikTok or playing mobile League of Legends on business calls. The DePIN just adds extra value to that with little to no inconvenience caused. In fact, the dApp itself can offer users the same functions as they already get from Web2 apps, such as navigation, fitness advice, or entertainment, but with the additional revenue as a pleasant bonus. It can also balance out the supply and demand by managing its paying and paid functions. As an example, a navigator dApp can provide navigation free as the basic service, pay users for their anonymized data used to improve this service, and offer extra services for a fee.
The sheer scalability this model offers is unmatched. Founded in 2013, Helium is now at about a million hotspots. Nodle, which dates back to 2017 and leverages smartphones as network nodes, now reports almost 3 million nodes, XYO’s COIN app has about 5 million nodes, and Sweatcoin, a walk-to-earn smartphone app, has 140 million users. This lightning-fast growth would have hardly been possible with custom hardware, and with enough traction, it could even set a new benchmark for a whole host of service sectors. And as users interact with Web3 through the comfort of familiar apps, they likely get more open to further engagement with the space.
The established IoT manufacturers are well-positioned to make use of this gradual change of heart. By prepping their products, from smart fitness trackers to cameras and electric vehicle charging stations, to Web3 integration off the shelf, they can grant their customers more value on top of what’s already provided by the device’s core functionality. Besides that, they unlock new business opportunities and revenue streams for themselves, amping their own income.
But even with some savvy retro-fitting, an entire universe of hardware is already up and running, ready to go full Web3 if their owners get enough of an incentive. This universe is Web3’s best shot at actual real-world adoption — not as something cryptic and shadowy, and not as a speculative Wild West, but as something that gives users extra value on what they already have. From this foothold, it can grow and expand into new industries and sectors, merging decentralized tech with real-world value and outcomes. And that’s how, in the long run, it will bring its vision to life without slipping into the innovation chasm that brought down Facebook’s Metaverse and many other untimely innovations.
About the authors
Alireza Ghods is a co-founder of NATIX Network and NATIX, building AI-powered maps through a crowd-sourced camera network. He is the former lead on Consumer IoT and former co-lead on Blockchain (Europe) at PwC. He holds a PhD in wireless communication from the Jacobs University Bremen.
Leonard Dorlöchter a co-founder of peaq, the Web3 network powering the Economy of Things, and EoT Labs, a software development and incubation organization supporting open-source projects focused on the Economy of Things.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.