This episode unpacks the evolving strategies of DePIN projects like Helium, as they pivot from token-driven hype to building sustainable businesses with real-world revenue and mainstream user adoption.
Santi's DePIN Roundtable Recap & Market Observations
- Santiago (Santi) Santos shared his experiences from a DePIN roundtable at the Proof of Talk conference in Paris, which he described as high-quality and dense.
- He highlighted Austin Federa from LayerZero, praising his crisp explanations on how the internet wasn't designed for monetization and lacks priority lanes. Santi noted, "He just drops truth bombs."
- LayerZero: An omnichain interoperability protocol that allows decentralized applications (dApps) to communicate across different blockchains.
- The panel also included the founder of Peaq (a DePIN-focused Layer 1 blockchain) and an individual working on tradable energy credits, relevant to Jason Badeaux's work.
- Santi mentioned a report by Nick G at Breed VC, noting that 199 entities collectively hold 3 million Bitcoin (approx. $300 billion, or one-seventh of the total supply), indicating a rapidly accelerating trend of digital asset treasury accumulation.
Public Market Strategies for Crypto Entities
- Mahesh Ramakrishnan commented on the current market environment, noting an increase in "crazy irrational things" on the stock market, mirroring crypto's historical behavior, particularly with new crypto-related public vehicles. He expressed long-term skepticism but short-term interest due to untapped retail excitement.
- Santi, while acknowledging the irrationality, pointed to MicroStrategy's sustained premium even after Bitcoin ETF launches. He attributed this to Michael Saylor's unique persona and MicroStrategy's strategy of "recursive leverage" and negotiating favorable debt terms.
- Santi: "There's only one Michael Saylor."
- Jason Badeaux observed that these public vehicles are like "TradFi speedrunning the Olympus experiment," referring to Olympus DAO's bonding and staking mechanics. He emphasized the importance of understanding the debt structure, noting Michael Saylor's elegant use of convertible notes, which offer downside protection by converting to equity, versus potentially riskier term debt.
- Olympus DAO: A decentralized reserve currency protocol that pioneered bonding mechanisms to acquire its own liquidity and treasury assets.
DePIN Projects: Public Market Potential and Cash Flow Focus
- Jason Badeaux suggested that DePIN (Decentralized Physical Infrastructure Networks) projects generating significant cash flows could be compelling candidates for public market strategies, especially if the "L1 premium" diminishes.
- DePIN: Networks using token incentives to bootstrap and operate real-world physical infrastructure like wireless networks or sensor arrays.
- He pondered whether entities like Nova Labs (Helium) might go public or use other structures to acquire more of their native tokens, leveraging their revenue streams.
- Mahesh Ramakrishnan discussed the challenge for DePIN projects in capturing investor attention compared to more easily understood Layer 1 narratives or "sexy" AI theses. He noted DePIN companies often get "penalized for going after building business models as opposed to building games."
- Jason reiterated his conviction in the importance of cash flows for DePIN projects, a factor he believes will ultimately drive value.
- Strategic Implication: Crypto AI investors should scrutinize DePIN projects for demonstrable cash flow generation or clear paths to it, as this may become a key differentiator for public market viability and long-term sustainability.
DePIN Product-Market Fit and Real-World Adoption
- The discussion highlighted recent DePIN successes, such as Helium/XNET partnering with AT&T, and Hivemapper signing Grab and Lift as customers.
- Santi expressed strong confidence that DePIN has achieved product-market fit, citing Hivemapper's achievement of mapping a significant portion of the world's roads cost-effectively and rapidly.
- Santi: "You best believe if you're at Google Maps... they're looking at that and saying, 'Wow, like it's very powerful.'"
- He distinguished between the robustness of DePIN networks (often bootstrapped despite tokenomics flaws) and the companies utilizing them. The key barometer for product-market fit, according to Santi, is the network producing reliable, utilized data for real industry.
- The panel acknowledged that while networks like GEODNET show promise for precise RTK (Real-Time Kinematic) data, skeptics might point to revenue figures lagging behind traditional competitors like Trimble.
- RTK (Real-Time Kinematic) positioning: A satellite navigation technique enhancing the precision of position data from systems like GPS, crucial for applications like robotics and agriculture.
- Actionable Insight: Researchers should track the adoption rates and revenue generation of DePIN services by traditional enterprises as key indicators of sustained product-market fit beyond initial network bootstrapping.
Rethinking DePIN Tokenomics
- The conversation touched upon criticisms of DePIN tokenomics stability, with praise for models like Worldcoin that issue tokens primarily for net new network growth.
- Santi referenced Austin Federa (LayerZero) again, highlighting their contribution-based tokenomics, similar to Filecoin's model, where rewards are not programmatically codified but based on actual value provided to the network.
- Santi: "If I were a DePIN project today, I'd be looking at how LayerZero is doing it."
- A challenge raised was the scalability of such contribution-based models to consumer DePIN networks with potentially millions of nodes, like Helium, where attributing individual contributions becomes complex.
- Strategic Consideration: DePIN projects should explore dynamic, usage-based, or contribution-based tokenomic models to better align incentives and ensure long-term network health, moving away from purely programmatic issuance.
Amir Haleem on Helium's Revenue and Strategic Shifts
- Amir Haleem, CEO of Nova Labs, joined the discussion and clarified Helium's recently reported revenue surge to $2.7 million per month. This primarily stems from Helium Mobile subscribers (a combination of subscriber fees and some hardware sales), not just Data Credit (DC) burns.
- The motivation for highlighting this broader revenue was to provide a fuller picture of the Helium ecosystem's growth and to begin discussions on integrating this "off-chain" revenue in an on-chain manner, especially as the regulatory environment evolves.
- Amir acknowledged the potential misalignment between Nova Labs equity holders and Helium token holders, stating a desire to "get everyone rowing in the same direction."
Converging Off-Chain Revenue with On-Chain Value for Helium
- Amir discussed potential pathways to merge Helium's off-chain (Nova Labs) and on-chain (Helium network) value.
- Options include tokenized equity, though challenges exist with ATS (Alternative Trading System) licenses for trading securities on crypto platforms. Coinbase and Kraken hold such licenses but face limitations.
- ATS License: A regulatory license for platforms matching buyers and sellers of securities, not registered as national exchanges.
- Another path is the token buying out the equity, potentially turning the corporation into a PBC (Public Benefit Corporation) or non-profit, as seen with Morpho.
- PBC (Public Benefit Corporation): A for-profit entity legally incorporating societal or environmental benefits alongside profit.
- Amir Haleem: "There was a big difference between what the optimal path for the company to have taken and what the optimal path for the network to have taken would have been." He cited forgoing billions in potential revenue from being the sole hotspot seller to allow the network to grow faster through third-party participation.
- Strategic Implication: DePIN projects with significant off-chain revenue face complex decisions in aligning corporate and network incentives. Investors should monitor how these projects navigate tokenization of equity or other merger strategies.
Helium's Evolution: Learnings from Recent Growth
- Amir agreed with Jason that Helium's last 12 months offer significant learnings, characterized by a shift from product focus to distribution focus.
- Amir Haleem: "First time founders focus on the product and second time founders focus on distribution."
- This phase involves the "grind" of optimizing customer acquisition and less on "sexy" tech announcements, which he believes has less tangible value. Helium Mobile is approaching 300,000 signups.
- This pragmatic approach, shared by Amir, underscores a maturation in strategy, prioritizing sustainable growth mechanics over hype cycles.
Understanding Helium's Daily Active Users (DAU)
- Amir explained that Helium's reported ~900,000 to 1 million DAU (Daily Active Users) metric refers to unique handsets connecting to Helium hotspots within a 24-hour period.
- DAU: A metric for unique individuals engaging with a service daily.
- This includes Helium Mobile subscribers and users roaming from other carriers like AT&T, facilitated by Passpoint technology for seamless Wi-Fi authentication.
- Passpoint: A Wi-Fi Alliance protocol for automatic discovery and authentication to Wi-Fi hotspots.
- DAU is reported daily because Android and iOS cycle unique device identifiers at least every 24 hours to protect user privacy, making longer-term unique user tracking difficult.
- The data consumption on the Helium network is paid for, currently flowing through Nova Labs, which then buys or burns tokens, converting fiat revenue into protocol revenue.
The Value Proposition: Owning the User vs. Commoditizing Connectivity
- Amir Haleem believes the cost per gigabyte of data will inevitably trend towards zero if Helium is successful.
- A typical roaming user session might generate minimal revenue (e.g., 12 cents for 300-400MB at $0.50/GB). In contrast, a Helium Mobile subscriber generates "significantly double-digit dollars" in ARPU (Average Revenue Per User).
- ARPU: A measure of revenue generated per user, typically monthly.
- This disparity led to the strategic decision for Helium Mobile to "own the user" relationship, where most value resides, rather than solely focusing on commoditized connectivity.
- Actionable Insight: DePIN projects should evaluate whether their primary value capture lies in raw network provision or in building direct, higher-margin relationships with end-users.
Cloud Points: Abstracting Crypto for Mass Adoption
- Helium Mobile introduced Cloud Points in its app, moving away from direct crypto rewards for new users.
- Amir Haleem: "When you focus on tokens you get a very fickle user base... they're not even there for the product at all." He cited DIMO's challenges in converting supply-side token earners into actual product consumers.
- The initial Helium Mobile launch, which offered direct crypto rewards, suffered from extensive gaming. Moreover, the team found that the "vast consumer user base thinks crypto is a scam."
- The current strategy is a crypto-powered backend, with a user-facing product (like a free mobile plan) whose value proposition isn't crypto itself, but rather a desirable service uniquely enabled by crypto. This has led to better product-market fit.
User Base Analysis: Crypto-Natives vs. Mainstream Consumers
- Santi inquired about the crypto savviness of Helium's user base. Amir confirmed early adopters were crypto-focused.
- However, the newer, rapidly growing user base is largely not crypto-adjacent. For these users, wallet functionality and crypto jargon have been removed from the app to reduce confusion.
- Amir Haleem: "The retention curves of a crypto user base is... worse than a traditional user that is now joining the Helium MVNO." This is because traditional users join for the service, while crypto users often join for token rewards, leading to churn when token values fluctuate or rewards diminish.
- Strategic Implication: For mainstream adoption, Crypto AI projects may need to abstract complex crypto elements and focus on delivering clear, non-crypto-centric value propositions to attract and retain a broader, more stable user base.
Aligning Company and Network: The Role of Token Accumulation
- For services like location mapping on free plans, Nova Labs effectively receives the token rewards and offers users Cloud Points, a more stable and understandable derivative.
- Jason Badeaux pointed out this model has two benefits: it provides users a stable reward and positions Nova Labs as an accumulator of HNT tokens, rather than just a seller, creating better alignment between the company and the token.
- Amir Haleem: "We're trying to build a real business that we don't have to sell tokens all the time or really ever to generate cash flow." This ability to fundraise via equity, based on building a "real thing," provides flexibility.
- Insight for Investors: The strategy of a core entity accumulating its own network's tokens through providing user-facing services can create a powerful flywheel, aligning incentives and supporting token value.
Drivers of Helium Mobile's Rapid Growth
- Helium Mobile has seen significant growth, around 40% month-over-month, adding approximately 100,000 new subscribers monthly.
- Amir attributed this to a combination of factors ("the answer is just yes"): paid marketing, the compelling free plan, brand visibility campaigns (like the NYC subway ads for social proof), and word-of-mouth.
- He emphasized that finding product-market fit is a "grind" of constant adjustment in pricing, messaging, and targeting.
- Amir Haleem: "Products don't sell themselves." Marketing is crucial, even for well-known brands like Apple.
Most Effective Marketing Campaigns for Helium
- Reflecting on past successes, Amir cited the initial IoT hotspot advertisements on Facebook and Instagram as highly effective in introducing many people to crypto, not just Helium.
- Currently, the varied marketing efforts around the free plan (digital, live events, experiential campaigns) are all contributing, making it hard to pinpoint a single most effective channel.
- He also noted that signup rates can fluctuate due to ongoing experiments with onboarding requirements, such as testing the need for government ID, as they refine user acquisition strategies.
- Amir's candid discussion on marketing highlights the often-underestimated effort required to bring crypto-enabled products to a mass audience.
Conclusion
DePIN's path to maturity hinges on tangible utility and sustainable economics, not just token incentives. Investors and researchers must prioritize projects demonstrating real-world revenue and user adoption, moving beyond speculative models to identify long-term value in the evolving Crypto AI landscape.
