DeWi's first rug pull?
What happened, what went wrong, and what to do about it
Pollen Mobile’s Medium profile reads “Introducing Pollen, the world’s first decentralized mobile network that’s built on the blockchain and owned and operated by its users.”
After the unfortunate events of the last 48 hours, this statement is no longer true.
DeWi (decentralized wireless) may be experiencing its first rug pull, vampire attack, and miner strike all at once.
What happened?
Pollen Mobile launched in February 2022 and quickly became Helium’s most formidable peer in the DeWi space. The team had functional hardware and a working proof-of-coverage model on the market within a month or two of launch, providing some much-needed progress (for the industry) towards the promise of a cellular network built in the (decentralized, crypto-powered) image of Helium’s LoRa network.
Pollen shipped updates at a furious pace and Helium OG’s who understood the power of being “early” to DeWi projects aped hardware, amazed at the janky yet workable functionality of their CBRS radios and Bumblebee “validators.” Payback periods for hardware were measured in days and then even months later, in weeks. The glory days of Helium LoRa mining (circa 2020) were back again. Helium seemed to have lost its year plus head start amidst the complexity of building a neutral host, B2B network with $100B+ MNO’s as customers.
Concerns about the high level of project centralization and value accrual (or lack thereof?) to the PCN (Pollen Coin) token that was used to incentivize network buildout were dismissed as irrelevant under the new DeWi paradigm of more centralization at an earlier stage being better for quick network growth.
And then, on January 23rd, 2023, Pollen Mobile released an innocuously titled Medium post with a subject line that read “The Next Phase for Pollen Mobile: Paid Data.”
What went wrong?
Upon first glance, the post was bullish. A quick update on the roadmap and milestones achieved in the past year, a mention of the network’s fast-approaching “first birthday", and the announcement of a plan to achieve paid data. After all, paid data is the holy grail for DeWi networks (especially in a bear market) as they struggle to retain the speculative premium on their tokens that is necessary to incentivize network buildout. Recent criticisms of the DeWi model have centered around the lack of demand for these networks (no matter how impressive it is that they were built in the first place).
Even the introduction of the good old U.S. dollar as a means to pay for data transfer seemed bullish and sensible. After all, which boomer TradWi (traditional wireless) corporation do you know of that is willing to buy, hold, and sell an illiquid crypto token that trades on one janky DEX to pay for data transfer on a fledgling CBRS network?
Things took a definitive turn for the worse as readers realized that there would be no buy (let alone buy and burn) mechanism to accrue the value of this dollar-denominated data demand to the network’s native token that all the earliest builders of the network had been compensated in! The entire ethos of a decentralized, crypto-powered, community-built wireless network had been thrown out the window.
What to do about it?
Fast-forwarding to the present, it’s safe to say that the community is outraged, accusations of a rug pull abound, and many in DeWi are very disillusioned and disappointed by this decision. The Pollen team has stood firm on this announcement, weathering live criticism in a community call on Monday night and even posting a second Medium article reaffirming their stance.
Vampire attacks (albeit well-intentioned ones) from Helium and XNET (Pollen’s two largest competitors) were launched within hours of the news dropping, providing Pollen hardware owners with the ability to “reflash” their existing hardware over to one of the two networks. This will grow the node count and coverage of these competitors and grant the previously stranded Pollen hardware owners inclusion in (and token rewards from) a new DeWi CBRS network. This seems to be the likely outcome for many Pollen miners.
A second potential avenue for progress is the formation of some kind of “miner’s union.” Initially suggested by a self-proclaimed “top 5 miner” on the network, this move amounts to a miner’s strike. Essentially, “recant these statements, accrue value to PCN, or we turn off our radios.”
A hard fork seems infeasible due to the closed-source nature of Pollen’s codebase.
Pollen still has a chance to recant or update these statements, but that looks increasingly unlikely by the day. I (and the community) hold out hope that some compromise can be reached.
I’ll end this post with a few statements to help temper the (justifiable) anger of the Pollen community, and with a few questions that I believe the Pollen OpCo owes the community an answer to and that may lead to a better outcome than the one we currently face.
Things to think about before grabbing your pitchforks and torches:
Pollen Mobile is a business, made up of fallible humans, like any other. We can’t blame them for acting in their own self-interest. Mistakes can happen and maybe this is one.
The team at Pollen Mobile deserves respect and civility, even if you disagree with their decision.
Any investment carries risk. An investment in expensive telecom hardware to earn illiquid crypto tokens from a fledgling startup is very risky.
Questions that I believe the Pollen Mobile team needs to answer:
Why can’t USD data demand that flows into the system accrue value to the native token of the system, PCN?
Nova Labs (for Helium), Anode Labs (for React Network) and many other crypto teams allow for USD demand into the system (to ease adoption) and then buy back (and/or burn) the equivalent dollar value of their native token so that value is accrued to it. Otherwise, how do you incentivize early adopters to build out your network!? The answer is, you don’t.
Why limit data purchases made in PCN to only 25% of the total bill?
This further cheapens the value of PCN and I believe indicates a lack of belief from the team in their own native token.
Why cap the price of PCN at ten cents?
Allowing for (but not directly influencing) a speculative premium on your token provides a positive flywheel and is likely the most significant contributor to network growth. Helium took advantage of this in the bull market of 2021 with great success. Credit to Multicoin Capital for this one.
Moving forward
Moving forward, I’ll be writing about happenings in DeWi, DePIN (decentralized physical infrastructure networks), and my own life as they come up.
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Disclaimer : As of the date of this publication, Connor Lovely (“Connor”) may hold long, short, or neutral positions in or related to the companies or digital assets described herein. The information in this publication was prepared by Connor, is believed by Connor to be reliable, and has been obtained from public sources believed to be reliable. Connor makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this publication constitute the current judgment of Connor and are subject to change without notice. Any projections, forecasts and estimates contained in this publication are necessarily speculative in nature and are based upon certain assumptions. It can be expected that some or all of such assumptions will not materialize or will vary significantly from actual results. Accordingly, any projections are only estimates and actual results will differ and may vary substantially from the projections or estimates shown. This publication is not intended as a recommendation to purchase or sell any commodity or security. Connor has no obligation to update, modify or amend this publication or to otherwise notify a reader hereof in the event that any matter stated herein, or any opinion, project on, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Following publication, Connor may transact in any digital asset or the securities of any company described herein. This publication is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities. An investment in any strategy, including the strategy described herein, involves a high degree of risk. There is no guarantee that the investment objective will be achieved. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal.