Helium’s Latest Announcement Is the First of Its Kind, But I’m Not Buying Just Yet

Helium (HNT -0.90%), a cryptocurrency that aims to leverage blockchain technology to expand wireless internet coverage, is trying to prove that it is truly still “the people’s network.”

The Helium network is made of hotspots set up by users who earn small rewards in its native cryptocurrency, HNT, for contributing to the network and running a node. To participate, you have to set up a hotspot connected to Wi-Fi, which other peoples’ devices can access, expanding internet coverage and capacity.

While all of that sounds great in theory, there have been some mishaps since its founding in 2019 that the blockchain is trying to remedy. Through some investigative journalism by Forbes, it was reported that around half of all the HNT was mined and sent to just 30 wallets within the first three months of the network’s launch. Those wallets were owned by friends and family of Helium’s creators and were worth as much as $250 million when Helium peaked last year.

It isn’t completely uncommon for founders and creators of a blockchain to own some of the cryptocurrency they created. For example, some 38% of ApeCoin, the cryptocurrency made by the creators of the Bored Ape Yacht Club NFTs, is concentrated in the hands of select individuals. Despite being kind of the norm, the practice still doesn’t make for great publicity. 

In the wake of these disclosures, it seems that Helium is trying to save face and is taking on a new business — 5G. Originally, Helium’s network was solely focused on providing connectivity for internet of things (IoT) devices like sensors and trackers. Among the businesses that have established partnerships with Helium’s IoT network are Volvo, Cisco, Schneider Electric, and Dish Network. Yet arguably the most important partnership in Helium’s history was revealed within the last few weeks.

Teaming up with the nation’s No. 3 wireless provider

On Sept. 20, Helium said that it has partnered with T-Mobile (TMUS -0.35%) to create a new 5G wireless service called Helium Mobile. It will work in a similar fashion to Helium’s existing business model, with users setting up nodes to expand the network’s coverage. By partnering with Helium, T-Mobile will be able to expand its 5G coverage in a cost-effective way since it won’t have to invest as much in capital expenditures to build out infrastructure. Instead, user-run hotspots will provide the 5G access. 

The agreement between the two companies is set to run for five years, and the network is scheduled to launch in the first quarter of 2023. Once it’s operational, T-Mobile customers will be able to take advantage of two new benefits. First, their access to 5G coverage will increase substantially. The plan is for phones on the T-Mobile network to alternate between 5G provided by T-Mobile’s existing infrastructure or Helium’s user-run nodes, depending on which signal is the strongest. In addition, not only will 5G node operators earn the new crypto token MOBILE, but customers will be able to earn rewards as well for agreeing to share data about the network’s performance.  To make things a little sweeter, cellphone plans are set to start at only around $5 per month.

Proceed with caution

As with any project of this scale, there will likely be some challenges when it comes to implementation. At the top of the list — growing its 5G network. Currently there are only about 5,000 5G node operators. It’s estimated that for the blockchain-based business model to work, that number needs to get closer to 50,000. But there is reason to be at least slightly optimistic.

In February, the IoT network hit a milestone when it reached a half-million hotspots. Since then, growth has continued and is nearing the 1 million mark.

Helium is in a position to capitalize on the ever-expanding presence of the internet in our daily lives. Its existing network, which supports the internet of things, is a novel idea, and the 5G plan is surely innovative. But it’s slightly dubious past is difficult to ignore. 

Investors should exercise caution when it comes to adding Helium to portfolios. There is definitely some potential, but that doesn’t come without increased risk. Let’s wait and see how the rollout of 5G goes before making giving the final verdict on Helium and its new MOBILE token.