XNET (or, The Road Less Traveled)
XNET's differentiated approach may provide DeWi with early product-market fit
For more XNET-related content, check out my recent podcast interview with XNET CEO, Rich DeVaul.
Brief overview
XNET is a DeWi CBRS protocol, similar to Helium Mobile, Pollen Mobile (the jury’s still out here, see my recent post), and Karrier One. If you don’t know what DeWi CBRS means or want to quickly learn more, I wrote a great primer on the space for my previous company called the Decentralized Wireless Manifesto.
Anyways, back to XNET. The project was founded in 2022 by Richard DeVaul (CEO), Tom Beirith (CCO), and Donal O’Brien (COO). The team’s unofficial motto has been “pioneers get shot, settlers get rich” as they look to actualize their second mover advantage behind industry leader Helium.
XNET is looking to be the first DeWi protocol to capture significant amounts of paid data (real-world demand!). Given their TradWi backgrounds, focused business model, and differentiated tech stack, I believe they can accomplish this goal and then some as the team that provides early product-market fit and the potential “killer use case” for DeWi CBRS: MNO (mobile network operator) offloading.
Top three reasons to invest
A team that’s done this before and learned from its past mistakes
Rich co-founded Project Loon while at Google. Loon was an incredibly ambitious attempt to provide cellular connectivity down to users on the ground via balloons floating in the stratosphere. The idea took years of intense engineering effort and hundreds of millions of dollars of funding to get off the ground, but ended up working quite well. The only problem was that the technology they had built was for a data-only network, not a full mobile network with voice calls, SMS texting, etc. The team went on a roadshow around the world, talking to large MNOs and governments, NONE of which wanted to work with them given the data-only nature of their network and its lack of native interoperability with their existing infrastructure. Rich likens this experience to trying to sell veggie burgers at the national beef convention.
Co-founders Tom and Donal also have telco experience, having recently built Point Dume, a roaming mobility business based in Hong Kong. The XNET team has as much TradWi expertise (or maybe even more than) any other DeWi company in the space today, which you’d think would be important when trying to build a wireless network that’s dependent on TradWi integration for success (at least in the short to medium-term).
Differentiated tech stack (mobile core)
Rich’s experience with Project Loon directly informed his choice to use a non-Magma mobile core that’s “natively interoperable with MNO infrastructure.” This could be the single defining choice that “wins” XNET the DeWi CBRS industry for years to come. Their choice of core is currently secret, but is likely either an off-the-shelf, TradWi solution or a combination of that and some proprietary, DeWi-originated code.
Helium has chosen to use the open-source Magma core (developed by Meta and later granted to the Linux Foundation for upkeep). It’s designed for data-only networks and for providing FIXED WIRELESS connectivity (say, from satellites to a building on the ground). It’s still in development, has trouble with handoffs (when a user moves and their phone connects to a different radio), and many telco executives question its scalability. Pollen Mobile started out using a Magma core and has since announced their decision to switch to a different tech package.
Even if an MNO did reluctantly agree to offload data onto a data-only network, Rich claims that the price per GB paid from the MNO to the offloading partner would be meaningfully higher (2-5x+) for offloading onto a full mobile network vs. just a data-only one.
The DeWi CBRS mobile core debate is far from over however. Nova Labs has raised hundreds of millions of dollars and has the resources, market cap, and runway to make important acquisitions (FreedomFi) and hire an army of developers to give them a fighting chance at pushing Magma beyond its current limitations and towards a truly workable solution for their vision of DeWi CBRS.
Best-in-class deployment and incentivization strategy for building DeWi CBRS-based cellular networks
The massive, rapid success that Helium had with building out its IoT network was partially due to the fact that building such a long-range, low power network is effectively DeWi on “easy mode.”
When a $200 tissue box sized device that takes ten minutes for anyone to set up can provide coverage for miles (even from inside a building on a windowsill), it’s OK to incentivize deployment anywhere and everywhere. Especially in a bull market when payback periods for said hardware vary between a few days and a few months! These two factors (along with a global supply crunch that limited supply and increased FOMO) contributed to the massive retail virality and growth of the Helium IoT network through late 2020 and into early 2022.
CBRS-based, cellular networks have very different needs and constraints and their rollout should not be incentivized in the same manner. There are a few main differences affecting the buildout of a CBRS network: range, bandwidth, and penetration ability. In general, radios broadcasting on higher spectrum (3.55 GHz for CBRS vs. 915 MHz for IoT) can transfer more data at once (stream Netflix vs. receive IoT sensor temperature data), but at shorter ranges, and with less penetration ability through obstacles.
Taken together, these differences mean that DeWi CBRS deployments need to be more numerous, CLUSTERED (to provide the requisite density for the network to function), and installed in higher-quality locations with less obstruction.
XNET’s location-restricted, cluster-based strategy for establishing beachheads of real, usable coverage in current MNO soft spots makes much more sense than Helium’s current implementation of proof of coverage (PoC) rewards. After all, wouldn’t a network built out first in areas with subpar MNO coverage be more valuable than coverage built out anywhere else? Helium’s PoC model was spawned in the golden era of IoT network buildout and is now being applied to a very different networking problem. I’ve heard that there is a HIP (Helium Improvement Proposal) in the works to add a clustering or density factor to PoC rewards but haven’t seen anything announced publicly yet. Keep an eye out here.
Top three things that will keep me up at night
Lack of tokenomic expertise/crypto native backgrounds on the team
The important thing to note about DeWi that I feel many people forget is that NONE of this works without good tokenomics that incentivize valuable behavior, promote buy-in from participants, and accrue value to the incentive token itself. This is just par for the course when you’re trying to build anything (especially in the real world) in a DEcentralized way.
While it’s not entirely fair to judge the XNET team based on their seemingly limited tokenomic expertise (after all, crypto is 14 years old, DeWi is just 3 years old), it is a minor concern of mine that they don’t seem to have been deeply involved with the designing of sustainable tokenomic systems in the past (even in other areas of crypto).
A related metric to judge the team by is how crypto-native they seem. In many cases a team that’s more crypto-native will have a better idea for how to build community, launch a project, and can use the best tokenomic designs they’ve seen in other areas of crypto as inspiration for their own project. The XNET team doesn’t seem to have that much crypto-native experience, but this is counterbalanced by their extensive TradWi and tech experience at companies like Google, Apple, etc.
Building on this theme, the project’s launch last year was rough. From starting out as a fully anon team to (initially) granting FAR lower rewards to early miners than Helium and Pollen (both on a token and $ basis), XNET was swiftly met with a large amount of pushback from the hardened DeWi veterans who were still around in this bear market.
However, since then, I’ve been pleasantly surprised to see the speed and responsiveness with which the XNET team has engaged the community and implemented their feedback. The team has doxxed themselves and seems committed to building out their network in a community-centric way. They’ve increased rewards for early miners significantly (while also maintaining their “more sustainable” token reward structure, which I believe is fair and merited). Also, market dynamics have changed. DeWi mining rewards from other projects have continued to decrease (both due to network growth and token price declines). Pollen Mobile’s PCN token is now potentially worthless given their unfortunate decision a few weeks ago to divorce value accrual from their incentive token. All of this is to say that XNET has recovered from their shaky launch and is picking up momentum given the mass exodus of Pollen miners from that network over to Helium and XNET (Pollen hardware can be “reflashed” over to either of the other DeWi networks fairly easily).
Building in bear markets is hard
Exactly what the sub-title above says. Building out a token-incentivized network when your token incentives are worth ~1/10th of what they were before is hard. The large decrease in the speculative premium attached to an incentive token means there is far less demand for individuals and deployment companies to build out your network. This means slower network growth, fewer iterative opportunities, a lower chance to have the infrastructure built out to support real demand, etc.
This is a difficulty faced by all DePIN and DeWi projects, but one that must be outlasted and overcome nonetheless.
Successfully navigating the tightrope of centralization vs. decentralization
This is another DePIN-wide obstacle to overcome, but one that has XNET-specific implications as well. There is a VERY fine line between too much centralization and not enough in DePIN and the industry is still figuring out what makes the most sense. The answer will likely be industry-specific (DePIN energy networks vs. DeWi vs. DePIN sensor networks) or maybe even project-specific.
Generally, projects need to start fairly centralized (without the core devs having an idea and working to jumpstart it, nothing gets done). Trending towards decentralization (or at least credible neutrality) over time is important. XNET’s approach has been to start off highly centralized while decentralizing what they need to (community-built infrastructure) and also what they ought to (a clear plan to accrue value to the PCN token). They mention a trend towards decentralization in their whitepaper, with the XNET foundation/DAO (decentralized entity) potentially even buying or merging with XNETMNO (centralized entity) at some point in the future.
I’m supportive of XNET’s current level of centralization and their plan to decentralize over time and think it makes perfect sense when taken in the context of their effort to build a TradWi-compatible, yet next-gen decentralized wireless network.
Bottom line
The XNET team has impressive experience in TradWi and tech. I think their initially centralized approach, clustered deployments, choice of mobile core, and business model focused on MNO offloading all make sense and provide a healthy contrast to Helium’s current model. While there are many obstacles to overcome, I believe the team is nimble and community-focused enough to outlast this bear market and build a truly great decentralized wireless network.
The primary mistake made at Project Loon by Rich and others there (building a data-only network) directly informed his decision to take the road less traveled in DeWi…and that might make all the difference.
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.
Click the subscribe button below to stay up to date (it’s free)!
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.