CGV Research ｜ Who Will Be the Web3 Network Operators?

Produced by: CGV Research

Author: Shigeru & Satou

Mobile communications have become an indispensable infrastructure in modern life. However, traditional operator models are facing growth bottlenecks and innovation stagnation. With the development of Web3 technology, decentralized SIM (DeSIM) has emerged as a new mobile virtual network operation model. This article will analyze the current development and future prospects of DeSIM from the following aspects:

1. Examine the market landscape and pain points of the traditional mobile communications industry, analyzing the development opportunities for DeSIM

2. Analyze the evolution of SIM card technology, interpreting DeSIM's technical principles and implementation methods

3. Explore DeSIM's market positioning and growth path through user profile and business model analysis

4. Compare and analyze project cases like Helium Mobile, Depinsim, and XPIN to summarize industry development experiences

5. Deeply examine the challenges faced by DeSIM in terms of decentralization and tokenomics

6. Envision DeSIM's integration prospects with emerging fields like IoV, satellite communications, and metaverse

Background of TON Teleport BTC

Origins: Complete Communication Infrastructure and Intense Market Competition

Communication is a perpetual human need. As technology evolves, communication methods continue to increase. From images to language to text, information continues to be refined; from printing to telephone to internet, information continues to expand.

In 1969, ARPANET laid the foundation for the internet. The 1990s saw the emergence of the World Wide Web, Netscape, and Amazon, bringing the true public internet. Around 2010, the iPhone triggered the smartphone revolution, and 3G/4G became widely available, leading to the rise of mobile internet.

Today, mobile internet has become an essential part of ordinary people's lives. By the end of 2023, 5.6 billion people subscribed to mobile services, accounting for 69% of the global population, up from just 1.6 billion eight years ago, with an average annual growth rate of 31.25%. Specifically, mobile user penetration rates reached 88% in Greater China, 89% in North America, and 91% in Europe. Such high penetration rates indicate the completeness and universality of communication infrastructure while suggesting limited room for growth. According to GSMA estimates, the global mobile user count will grow at an average annual rate of about 1.7% from 2023–2030, showing significantly slower growth.

For antitrust considerations, each country and region typically has multiple mobile operators providing services, usually maintaining 3–4 operators with a relatively balanced market structure. For example, North America's main operators are AT&T, Verizon, and T-Mobile; Europe has Deutsche Telekom, Vodafone, and Telefonica; while China primarily has a three-way competition between China Mobile, China Unicom, and China Telecom. Although mobile operators between different countries and regions are relatively independent, internal market competition remains intense.

As crucial infrastructure and public welfare projects, telecommunications operators are characterized by high industry entry barriers, heavy asset investment, and significant economies of scale and scope. The importance of economies of scale is reflected in the fact that for given physical infrastructure, new service users bring very low marginal costs but high returns, thus operators' core competitiveness usually manifests in user scale. However, for public welfare considerations, countries typically don't allow mobile operators to engage in price wars. Meanwhile, to prevent several operators from forming effective monopolies and stagnating innovation, Mobile Virtual Network Operators (MVNOs) have emerged.

MVNOs don't build network infrastructure but directly utilize existing network resources, cooperating with traditional operators to acquire more users through differentiated services and price competition. Using an asset-light operation model to provide flexible services, they also provide additional low marginal cost income for traditional operators and improve network utilization.

DeSIM is an application form of MVNO that serves cryptocurrency practitioners while attracting traditional users to contact the Web3 industry through Web3's global payment system, differentiated services, and tokenized multiple gameplay.

Evolution: SIM Technology Development and DeSIM Possibilities

When we communicate through mobile devices using mobile networks, the complete link goes through numerous network devices working together:

1. Within mobile devices, applications generate data, which is processed by the TCP/IP protocol stack in the Application Processor (AP) and passed to the Baseband Processor (BP) through driver interfaces

2. BP interacts with SIM to read identity information, perform authentication, generate session keys, and establish encrypted channels

3. The Radio Frequency (RF) module performs digital-to-analog conversion and transmits signals to base stations through antennas

4. Base stations receive and process signals, manage resources and mobility, and send to Mobile Switching Centers (MSC)

5. MSC performs routing selection and roaming management, submitting data packets to core networks

6. Core networks communicate through fiber optics, transmitting to the internet through gateways and location registers

Among these components, users have almost no choice except for SIM. SIM plays the role of identity authentication and security assurance in mobile communications. The centralized monopoly of SIM leads to centralized risks in identity privacy and information security, hence the need for DeSIM.

In the era of physical SIM cards only, there were many obstacles to implementing DeSIM, as operators relied on physical SIM cards to sign long-term contracts with users to bind them. With the emergence of eSIM, vSIM, iSIM, and other technologies, DeSIM has found its opportunity for development.

SIM card technology has gone through multiple generations of evolution, developing from traditional physical SIM cards to different technical solutions like eSIM, vSIM, iSIM, and Soft SIM, each with its own characteristics.

eSIM, as the most mature new-generation SIM technology, adopts physical chips embedded in devices, equipped with dedicated security units, supporting remote configuration management, and fully complying with GSMA standards. Its architecture includes hardware secure storage, Profile management system, OTA update mechanism, and other components, supporting multiple coexisting Profiles. In terms of security, eSIM implements hardware-level encryption, secure boot, integrity verification, tamper protection, and key isolation mechanisms. Currently, eSIM has gained widespread support from mainstream terminal manufacturers and operators, mainly applied in high-end smartphones, smartwatches, tablets, and other devices.

vSIM adopts a completely different technical approach, implementing SIM functions through software virtualization, relying on cloud configuration management and parameter downloads, supporting dynamic identity simulation. Its characteristics include cloud Profile storage and real-time configuration deployment, building security environment at the software level, supporting flexible identity switching. Security mechanisms include software encryption, TEE protection, dynamic keys, and communication encryption. vSIM's standardization level on phone devices still needs improvement, currently mainly applied in IoT devices and shared device scenarios.

iSIM represents a higher degree of hardware integration, directly integrating SIM functionality into SOC, sharing hardware security units with processors, using dedicated security zones for data storage. This solution has advantages like ultra-small size, extremely low power consumption, and hardware-level security protection, particularly suitable for ultra-small IoT devices and wearable devices. Its advantages lie in saving PCB space, improving production efficiency, and enhancing system integration.

Soft SIM is the most lightweight solution, implementing SIM functions entirely through software, running on general processors, using software-simulated security environments, requiring no dedicated hardware support. This solution has a completely open architecture, highest flexibility, lowest deployment cost, but relatively weakest security, mainly used for experimental projects, specific industry applications, and development testing environments. Due to security concerns and compliance issues, it currently receives limited operator support.

Breaking Through: Finding Target Users and Growth Flywheel

How can DeSIM leverage Web3 advantages to provide differentiated services in a market filled with operators? Analyzing successful MVNO experiences, we can broadly attribute success to three value propositions: "Audience-driven," "Synergistic Diversification-driven," and "Technology-driven."

Audience-driven refers to serving clearly defined target users. DeSIM's following characteristics enable it to compete differentially with other operators:

• Cryptocurrency unified payment: Supporting global operations

• Privacy protection: No KYC required, contract cancelable anytime

• Lower early user acquisition costs: Token incentives attract early users and reduce actual user expenditure

Based on these characteristics, DeSIM's user profiles are easily identified:

1. Cryptocurrency practitioners who frequently travel globally, value privacy protection, and have strong payment capabilities

2. Price-sensitive speculators hoping to gain returns or reduce communication expenses through token incentives

3. Synergistic Diversification-driven aims to expand existing businesses into mobile communications. The Web3 industry already has many business expansion cases, essentially better integrating cryptocurrency systems with real businesses. Blockchain platforms, exchanges, social applications, and other businesses can all combine with DeSIM to achieve higher user adoption and business monetization.

For example:

• Solana launched the Saga phone in 2023, with Aptos, Sui, and other public chains following suit

• Major exchanges have launched their payment cards to facilitate cryptocurrency-to-fiat payments

• Social applications like Telegram and Line have already introduced various mobile communication service sales

Finally, Technology-driven represents businesses built on specific technological characteristics. Just as Cubic Telecom's MVNO is built on IoT business, DeSIM can cooperate with almost all DePIN products to provide mobile network connectivity, a prerequisite for DePIN. DePIN devices are diverse, usable for geography, electricity, computing, storage, and other aspects, but DePIN devices must connect to networks to synchronize data between node-constituted networks. Built-in DeSIM can perfectly solve networking issues, support global device mobility, and cooperation between both parties can provide multiple benefits to users.

Case Studies: Mature Applications and Early Opportunities

Since the rise of mobile internet, SIM has become a mature application inseparable from daily life. SIM acts like a key - without it, mobile devices cannot prove their identity and cannot access operator networks. It is the foundation of the entire mobile communication security system. SIM is both an entry point for users to access internet data traffic and for businesses to acquire user traffic. Today, this mature application has embraced new development - DeSIM - enhanced by Web3.

Since the DePIN concept explosion in 2023, DeSIM projects have appeared in the market, with some successfully operating until now. With the rise of the Telegram ecosystem, entrepreneurs are also trying to combine DeSIM with the Telegram ecosystem to gain higher user traffic. Below we'll introduce some early projects:

Helium Mobile

Helium started with IoT services, entered the blockchain field in 2017, established Helium Network, and incentivized users to provide node coverage for wireless networks using cryptoeconomics, becoming one of DePIN's early success stories.

In August 2023, Helium launched the world's first crypto operator, Helium Mobile, partnering with America's largest 5G network T-Mobile. Combining Helium's network infrastructure and adopting a dynamic coverage model, it combines traditional mobile operator network coverage with people's self-built Helium local hotspot network coverage, providing a more decentralized mobile communication community solution.

As more users join Helium Mobile, $Mobile tokens capture value, more users actively provide local network coverage, improving coverage rates and user experience, attracting more users to join the network, building a crypto flywheel, and gradually reducing dependence on traditional mobile operators during the process, increasing decentralization levels.

In traditional mobile communications, user data is wirelessly transmitted to signal towers/base stations. To further break free from heavy infrastructure limitations, Helium Mobile launched Hotspot hardware and Carrier Offload programs, where each Hotspot can serve as a mini signal tower for phones. Hotspot deployers receive rewards based on processed traffic volume, while mobile operators can purchase traffic from Hotspots, enabling operators to achieve greater coverage without building signal towers, enhancing their networks. This essentially reduces centralized infrastructure costs through decentralization, using communities to achieve cost reduction and efficiency improvement.

In terms of specific usage, Helium Mobile offers a $20 monthly plan with unlimited data, text, and voice services, providing a significant price advantage compared to other carriers' plans at the time. Helium uses the highly standardized eSIM for authentication and provides additional privacy and security layers on top of eSIM, capable of preventing SIM Swap attacks.

Helium Mobile captures token value through multiple approaches, promoting the upward momentum of its flywheel:

• Mining: Users can earn $Mobile rewards by using the Mobile network

• Tasks: $Mobile can be earned through Mapping tasks

• Marketplace: Users can use $Mobile in the app's built-in marketplace to purchase plans, hotspots, and phones

Beyond the $20 monthly plan for the U.S. domestic market, Helium Mobile launched global roaming services for international travel needs, offering 1GB of data, 60 minutes of voice calls, and 100 text messages for $15.

After more than a year of development, Helium Mobile has achieved over 120,000 users, 27,000 hotspots, and transmitted more than 4PB of mobile data.

Depinsim

Depinsim is a decentralized mobile communication project launched in 2024, built on TON blockchain, providing global roaming services to users through Telegram.

To solve traditional telecom networks' and digital identity systems' shortcomings, the Depinsim protocol introduces a powerful, scalable, and user-centric framework. The protocol includes three roles:

1. Data consumers: Enjoy free data traffic, gas-free crypto payment services, and secure encrypted communication services

2. Data providers: Operator networks selling data traffic through blockchain quotes

3. Data sponsors: Purchase data traffic and distribute it to consumers through tasks or advertisements

To support large network interactions, Depinsim adopts DPoS consensus mechanism, ensuring highly scalable, low-latency efficient network operations. Through migrating traditional data service contracts, digital identity management, and payment functions to blockchain, communication business achieves decentralization and automation.

To achieve flexible communication network switching, Depinsim adopts eSIM (embedded-SIM) technology. Unlike physical SIM cards that are configured at manufacturing, eSIM supports remote configuration management, offering greater flexibility. eSIM technology has now been widely adopted by mainstream device manufacturers, gained support from operators in most global regions, and achieved high standardization with a mature ecosystem.

Using Depinsim's decentralized eSIM technology, users can download operators' eSIM configuration files and security parameters through decentralized blockchain networks and complete network registration. During communication, Depinsim employs complete end-to-end encryption, giving users full control over their data and interactions. Even mobile operators cannot access specific data content, minimizing the risk of privacy leaks and asset theft.

For individual users (C-end), Depinsim integrates eSIM with DID, wallet, and mining capabilities, securing the gateway to the crypto world. For business users (B-end), Depinsim provides reliable and flexible communication solutions, achieving global scalability and offering traffic acquisition channels through its task system.

In terms of specific services, DePINSIM covers over 200 countries and regions, adopting a pay-as-you-go model with rates as low as $2/GB. Users can choose between eSIM or physical SIM cards, both supporting all Web3 functions of the project. To enhance user stickiness, the project designed diverse revenue models: users can sell idle traffic in P2P markets, earn income by providing connectivity services to nearby IoT devices, or earn tokens by completing location-based tasks and viewing geo-targeted advertisements.

Regarding tokenomics, the project maintains ecosystem balance through a "consume-stake-burn" mechanism: user data consumption generates continuous demand; unused traffic can be staked to earn points; and transaction fees are regularly burned to control inflation. Additionally, the project launched Premium membership services, providing more exclusive benefits for users.

Another distinctive feature of Depinsim is its fixed number mechanism, ensuring stability in user identity verification across various platforms and effectively avoiding security risks associated with traditional number expiration. This design makes Depinsim not just a communication tool but also a carrier of users' digital identity.

XPIN

XPIN is dedicated to building a multi-level, comprehensive IoT platform, consisting of XPIN cloud infrastructure service system and XPIN decentralized protocol.

XPIN cloud infrastructure service system provides innovative vSIM solutions where users can complete mobile network communications through completely software-implemented virtual SIM cards without physical SIM cards. vSIM configuration management is implemented through cloud, downloading security parameters in real-time, performing dynamic identity management, thus enabling flexible identity switching. vSIM has extremely low deployment costs and has great application scenarios in IoT and shared device fields.

Cloud configuration management is implemented by the XPIN cloud system, providing network access services. All IoT devices compliant with XPIN communication protocol standards can achieve efficient data management and application through the XPIN cloud platform for data access, collection, processing, and analysis. XPIN's smart vSIM and subnets, being completely software-implemented without hardware limitations, offer maximum flexibility and support various network communications, including 4G/5G, SDWAN, WiFi, LPWAN, and satellite networks, providing users with the highest connectivity assurance.

The XPIN decentralized protocol establishes a consensus mechanism between IoT devices, providing a secure, transparent, and efficient unified data interaction platform. Each IoT device in the XPIN network implements communication between blockchain nodes through vSIM services. Each device has a unique on-chain DID, capable of local identity verification, enabling trusted and traceable data exchange between devices, achieving data sharing.

In product design, XPIN adopts a phased development strategy. The first phase launches global eSIM services, covering 200+ countries and regions, supporting automatic switching between multiple operators. The second phase will release XPIN smart power banks integrating WiFi hotspot and mining functions, while simultaneously deploying XPIN Box home routers and base station equipment to form a complete hardware ecosystem.

The project ensures sustainable development through diversified revenue streams, including vSIM package sales, hardware sales, and gaming items. For user incentives, it designed a "connect-to-mine" mechanism where users can earn token rewards by providing network services. Tokens can be used in multiple scenarios such as paying service fees, stake mining, and participating in governance.

XPIN's target users include global travelers, digital nomads, and Web3 project teams. Through decentralized infrastructure and blockchain-driven economic models, the project redefines the future form of mobile communications.

TonSIM

TonSim is a Web3 IoT infrastructure project built on the TON ecosystem, aiming to create the world’s first Web3 IoE (Internet of Everything) ecosystem. To address traditional IoT issues such as data security, privacy protection, and interoperability, TonSim designed a complete technical architecture.

Core technical components include: STP protocol, DID system, privacy engine, and smart SIM card.

The STP protocol is a communication protocol independently developed by TonSim. As the ecosystem’s core component, it achieves three key functions:

1. IoT Device Translation Layer: Provides modular, layered translation API interfaces, supporting direct network access for devices from different manufacturers and technical standards

2. Encrypted Data Transmission Center: Uses P2P methods and cryptographic technologies like zero-knowledge proofs to ensure data privacy in device-to-device communications

3. Resource Allocation Center: Users provide resources like computing power, bandwidth, and storage through DePIN clients, receiving incentives based on consensus mechanisms

Through the STP protocol, TonSim can support unified connection and data transmission of IoT devices, build consensus between network nodes, and allocate incentives.

The DID system is built according to W3C’s DID standards, supporting cross-platform and cross-chain identity authentication. Users and devices can independently create and manage DIDs without relying on centralized institutions. Combined with zero-knowledge proof technology in the privacy engine, the DID system achieves secure, private, decentralized, and interoperable digital identity management functions, protecting users’ personal privacy and information security.

The privacy engine adopts a hybrid solution of ZK-SNARKs and ZK-STARKs, utilizing ZK algorithms’ scalability to meet efficient verification needs of numerous small devices while using zero-knowledge properties to ensure high security and scalability requirements of large ecosystems. Privacy protection is implemented in identity verification, data transmission, smart contract execution, and other aspects.

Smart SIM cards support multiple SIM forms including standard physical cards, vSIM, and eSIM, allowing users to freely choose between usability, flexibility, and reliability. Cardholders receive unique DID accounts, becoming distributed physical nodes, collectively building a permissionless trusted communication network alliance, capable of associating and using multiple operator network services with a single DID. Meanwhile, TonSIM integrates MVNO functionality, supports fiat and cryptocurrency top-ups, and provides global roaming services.

TonSim plans to deploy smart contracts using zkEVM solutions to protect transaction details and participant privacy. Future plans include introducing cryptographic solutions like MPC and FHE to support more IoE scenarios. For users, TonSim not only meets basic communication needs but also provides rich network application scenarios, including IoE device interconnection, remote work, Web3 communities, smart homes, and smart cities. Through DID and crypto wallet functions, TonSim cards become hubs connecting users with multiple service providers (SPs) and content providers (CPs).

Regarding incentive mechanisms, TonSim uses TST tokens for ecosystem governance, with a total supply of 1 billion, of which 70% is used for mining output (PoW+PoS). Users holding DID physical nodes can receive ecosystem network revenue sharing, including network service fees and SIM card fees.

A major feature of TonSim is its complete IoT solution. Through the STP protocol, it enables direct access for devices from different manufacturers and technical standards. Combined with the DID system and privacy engine, it ensures both device-to-device communication and data privacy security, providing fundamental support for application scenarios such as smart homes, industrial IoT, and smart cities.

Challenges: Decentralization and Tokenomics

Despite being named DeSIM, current Web3 mobile operators still face significant challenges in decentralization. The initial investment cost of network infrastructure is extremely high, making it almost impossible to build from scratch through decentralization. This means DeSIM projects must inevitably utilize existing network infrastructure, which is the solution adopted by most current projects. On this foundation, how can we increase the level of decentralization?

Returning to first principles, why do we need decentralization? The reasons can be roughly divided into the following points:

• Improve fault tolerance

• Reduce usage costs

• Protect user privacy

• Increase network efficiency

When DeSIM can support automatic switching between different operators and even different network types, the conditions for decentralization seem to be met:

• DeSIM can automatically switch to other networks when a single operator’s signal is abnormal, improving fault tolerance

• Large settlement data can obtain price advantages among operators, reducing user costs

• Network switching prevents single operators from obtaining all data, protecting user privacy, while SIM-end encryption can further protect communication content

• Automatic detection of base station signal strength and nearby access reduces network latency, significantly improving network efficiency

Compared to decentralization, tokenomics design seems to trouble DeSIM entrepreneurs more. Based on extensive project experience, the following suggestions are provided for reference:

Token Utility Design:

• Diversify as much as possible

• Can be used for service fee payments

• Node operation deposits

• Trading medium in traffic markets

Inflation Control:

• Set traffic mining caps and unlock methods

• Incentivize long-term staking to lock circulation

Incentive Model:

• Basic returns from traffic mining as subsidies

• Progressive staking returns to increase staking rates

To avoid falling into the mine-withdraw-sell death spiral, the key is to balance token value storage, circulation, and governance functions to form a positive token economic loop.

Outlook: Internet of Vehicles, Starlink, and Metaverse

The transformation of human communication forms is gradually accelerating. While DeSIM projects are substantively improving service experiences, they can also explore upcoming possibilities. Through deep integration with IoV, satellite communications, and next-generation communication technologies, DeSIM has the potential to redefine the future form of global communication networks.

In the IoV field, DeSIM is poised to play a core infrastructure role. As autonomous driving technology matures, vehicles’ demand for real-time, reliable data transmission is increasing dramatically. Traditional centralized communication networks may face bandwidth bottlenecks and latency issues when dealing with massive IoV data. DeSIM’s decentralized architecture can well address these challenges. Moving vehicles are no longer just network users but participate in network construction as mobile base stations, building a dynamically expanding mesh network. This “vehicle-network synergy” model not only provides better network coverage but also encourages vehicle owners to contribute bandwidth resources through token incentives. Meanwhile, DeSIM can deeply integrate with charging pile networks, providing high-speed network services during electric vehicle charging while achieving automated charging payments through smart contracts.

In space communications, the combination of DeSIM with satellite networks like Starlink will open new possibilities. Low-orbit satellite communication networks are reshaping global internet infrastructure, and DeSIM can become a key link connecting ground networks and satellite networks. Through smart routing technology, user devices can automatically select optimal network links based on actual conditions, whether ground base stations or satellite signals. This integrated ground-space communication network can not only cover Earth’s most remote corners but also provide reliable emergency communication in extreme situations like natural disasters. Low-orbit satellites are expected to be incorporated into DeSIM’s token economic system, where satellite operators can receive token rewards by providing communication services. This economic model helps promote the continuous development of space communication infrastructure.

In the metaverse field, DeSIM can not only provide high-speed, low-latency data transmission but also solve key issues like digital identity authentication and virtual asset confirmation through customized SIM and DID. In AR/VR applications, DeSIM’s distributed content delivery network can significantly reduce data transmission latency, providing smoother immersive experiences. Meanwhile, DeSIM can promote interoperability between different virtual worlds, laying the foundation for metaverse openness.

CGV Research believes that DeSIM, as a new generation of decentralized communication infrastructure, stands at a critical junction of multiple cutting-edge technologies. With the recent rise of DePIN sector tokens in the secondary market, the DeSIM track is expected to receive more market attention, further promoting mass user adoption. Web3 mobile operators might be the first to open the prelude to next-generation communications.

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About Cryptogram Venture (CGV):

CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan’s Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club in Tokyo, Japan.

Disclaimer:

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