Good morning from San Francisco, where I’ll be moderating at Circle’s Converge, a conference bringing together A-list figures like SBF, Mark Cuban, and (checks notes) Serena Williams and Charlize Theron. It should be a good one.
Today’s headline is a nod to another outstanding exposé by Leo Schwartz, who dug deep into Helium, a buzzy crypto project that has raised $200 million to create new WiFi networks by paying people with crypto tokens. Helium is backed by big VC names and even won plaudits from the crypto-hating New York Times as an initiative with utility for ordinary people.
Alas, the project’s goals have fallen short, to put it mildly. Despite Helium’s grand promise that those who installed hotspots would make a handsome return, Schwartz’s research revealed that its entire network had earned a grand total of $1,150 over the last 30 days. That’s less than chump change for a project valued at $1.2 billion. Meanwhile, an earlier Forbes investigation revealed that Helium insiders vacuumed up a disproportionate portion of tokens in the project’s early days and got rich dumping them on the market.
Helium has responded to this debacle by doubling down and launching yet another hotspot network—this one targeting cell phone users instead of Internet of Things devices (the focus of the original network). It’s far from clear if there is real-world demand for either. And, of course, the new network comes with a token of its own. One skeptic explained the new token by saying, “They need to keep the grift going.”
I’m not ready to conclude the original Helium network was conceived in bad faith. The history of Silicon Valley is littered with grand ideas that failed, often spectacularly. There’s nothing wrong with thinking big. But in the case of Helium, the fiasco does point to a systemic incentive problem with many crypto projects: The ability to issue tokens means too many founders focus on dumping their bags rather than doing the hard work of building a successful product. Traditional startups that build crummy products go broke and fail, but too often in the case of failed blockchain projects, founders and their early investors get to laugh all the way to the bank. If crypto is to have more real-world breakthroughs, this has to change.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
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