Mobile communications have become an indispensable infrastructure for modern life, but the traditional operator model is facing growth bottlenecks and stagnant innovation. With the development of Web3 technology, decentralized SIM (DeSIM) has emerged as a new mobile virtual network operation model.
Article author: Shigeru, Satou
Source: CGV
Mobile communications have become an indispensable infrastructure for modern life, but the traditional operator model is facing growth bottlenecks and stagnant innovation. With the development of Web3 technology, decentralized SIM (DeSIM) has emerged as a new mobile virtual network operation model. This article will deeply analyze the development status and future prospects of DeSIM from the following aspects:
1. Discuss the market structure and pain points of the traditional mobile communication industry, analyzing the development opportunities for DeSIM.
2. Analyze the evolution of SIM card technology, interpreting the technical principles and implementation methods of DeSIM.
3. Through user profiling and business model analysis, explore DeSIM's market positioning and growth path.
4. Comparative analysis of project cases such as Helium Mobile, Depinsim, and XPIN, summarizing industry development experience.
5. In-depth exploration of the challenges faced by DeSIM in terms of decentralization and token economics.
6. Look forward to the integration prospects of DeSIM with emerging fields such as the Internet of Vehicles, Starlink communication, and the Metaverse.
Origin: Perfect communication infrastructure and intense market competition.
Communication is an eternal need for humanity. With the evolution of technology, communication methods are gradually increasing. From images to language to text, information is constantly being refined; from printing to telephony to the internet, information continues to expand.
In 1969, ARPANET laid the foundation for the internet. The emergence of the World Wide Web, Netscape, and Amazon in the 1990s brought about a truly public internet. Around 2010, the iPhone triggered a smartphone revolution, and the widespread adoption of 3G/4G led to the rise of mobile internet.
Today, mobile internet has become an indispensable part of ordinary people's lives. By the end of 2023, 5.6 billion people globally subscribed to mobile services, accounting for 69% of the global population. Eight years ago, this figure was only 1.6 billion, with an average annual growth rate of 31.25%. Specifically, the mobile user penetration rate in Greater China is 88%, North America is 89%, and Europe is as high as 91%. Such high penetration rates indicate the improvement and popularization of communication infrastructure while also suggesting a lack of growth space. According to GSMA estimates, the average annual growth of global mobile users from 2023 to 2030 is about 1.7%, with a significant slowdown in growth rate.
For antitrust considerations, each country and region usually has multiple mobile operators providing services, typically maintaining between 3-4 operators, resulting in a relatively balanced market structure. For example, the main operators in North America are AT&T, Verizon, and T-Mobile, in Europe, Deutsche Telekom, Vodafone, and Telefonica, while China mainly features China Mobile, China Unicom, and China Telecom in a tripartite structure. Although mobile operators between different countries and regions are relatively independent, internal market competition remains very fierce.
As an important infrastructure and livelihood project, telecom operators have high industry entry barriers, heavy asset investments, and significant economies of scale and scope. The importance of economies of scale lies in the fact that for a given physical infrastructure, the marginal cost associated with adding new service users is very low, while the revenue is very high, so the core competitiveness of operators is typically reflected in user scale. However, for the sake of public welfare, countries usually do not allow price wars among mobile operators. At the same time, to avoid forming actual monopolies among several operators, thus stifling innovation, mobile virtual network operators (MVNOs) emerged.
MVNOs do not build network infrastructure but directly utilize existing network resources, collaborating with traditional operators to gain more users through differentiated services and price competition, providing flexible services through a light-asset operating model while also offering traditional operators additional income at low marginal costs, thus improving network utilization.
DeSIM is a form of application for MVNO, serving cryptocurrency practitioners while attracting traditional users to engage with the Web3 industry through Web3's global payment system, differentiated services, and tokenized diverse gameplay.
Transformation: The evolution of SIM technology and the possibilities of DeSIM.
When we communicate via mobile network through mobile devices, the complete link will undergo substantial collaboration among numerous network devices.
1. Inside mobile devices, applications generate data, and the TCP/IP protocol stack in the application processor (AP) processes it before passing it to the baseband processor (BP) through the driver interface.
2. BP interacts with SIM to read identity information, perform identity verification, generate session keys, and establish encrypted channels.
3. The RF module (RF) performs analog-to-digital conversion, transmitting signals through antennas to the base station.
4. Base stations receive signals, process them, manage resources and mobility, and send them to the mobile switching center (MSC).
5. MSC performs routing selection and roaming management, submitting data packets to the core network.
6. Core networks communicate via fiber optics, passing through gateways and location registers, and transmitted to the internet.
Among them, apart from the SIM, users hardly have any room for independent choices. The SIM plays a role in identity verification and security assurance in mobile communications, and the centralized monopoly of SIMs can lead to centralized risks regarding identity privacy and information security, which is why we need DeSIM.
In the era of only physical SIM cards, the realization of DeSIM faced many obstacles, as operators relied on physical SIM cards to sign long-term contracts with users, thus binding them. With the emergence of technologies such as eSIM, vSIM, and iSIM, DeSIM welcomed its development opportunity.
SIM card technology has undergone multiple generations of evolution, developing different technical solutions such as eSIM, vSIM, iSIM, and Soft SIM from traditional physical SIM cards, each with its own characteristics.
eSIM, as the most mature next-generation SIM technology, adopts a physical chip embedded in devices, equipped with a dedicated secure element, supports remote configuration management, and fully complies with GSMA standards. Its architecture includes hardware security zone storage, profile management systems, OTA update mechanisms, and supports multiple profiles coexisting. In terms of security, eSIM achieves 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 route, achieving SIM functionality through software virtualization, relying on the cloud for configuration management and parameter downloads, and supporting dynamic identity simulation. Its characteristics include cloud-based profile storage and real-time configuration delivery, building a secure environment at the software level and supporting flexible identity switching. Security mechanisms include software encryption, TEE protection, dynamic keys, and communication encryption. The standardization of vSIM on mobile devices still needs improvement, and it is currently mainly applied in scenarios such as IoT devices and shared devices.
iSIM represents a higher degree of hardware integration, directly integrating SIM functionality into the SOC, sharing hardware security units with the processor, and using dedicated secure areas to store data. This solution offers advantages such as ultra-small size, ultra-low power consumption, and hardware-level security protection, particularly suitable for ultra-small IoT devices, wearables, and other scenarios. Its advantages include saving PCB space, improving production efficiency, and enhancing system integration.
Soft SIM is the lightest solution, completely implementing SIM functionality through software, running on general-purpose processors, using software to simulate a secure environment without specialized hardware support. This solution has an entirely open architecture, the highest flexibility, and the lowest deployment cost but relatively weaker security, mainly used in experimental projects, specific industry applications, and development testing environments. Due to security concerns and compliance issues, current operator support is limited.
With the support of the aforementioned SIM technology solutions, DeSIM can access a large number of mobile operators through a decentralized system, minimizing centralized risks during user mobile communication through automated switching with minimal cost, reducing usage expenses and improving network utilization.
Breakthrough: Finding target users and growth flywheel.
In a market landscape filled with operators, how can DeSIM leverage the advantages of Web3 to provide differentiated services? Analyzing the successful experiences of MVNOs, we can attribute success to three types of value propositions: 'audience-driven', 'collaborative diversification-driven', and 'technology-driven'.
Audience-driven refers to providing services for specific target users. The following features of DeSIM enable it to compete differentiably with other operators:
1. Unified payment for cryptocurrency: Supports global business.
2. Privacy protection: No KYC, cancel at any time.
3. Lower early customer acquisition costs: Token incentives are expected to attract early users while reducing actual spending.
Based on characteristic analysis, it is easy to derive the user profile of DeSIM: one category includes cryptocurrency practitioners who frequently travel globally, emphasizing privacy protection and having strong payment capabilities; another category consists of price-sensitive speculators who hope to earn rewards through token incentives or reduce communication expenses.
Collaborative diversification-driven aims to expand existing businesses into the mobile communication field. The Web3 industry already has many business expansion cases, essentially integrating the cryptocurrency system with real-world businesses. Public chains, exchanges, social applications, etc., can all be combined with DeSIM to achieve higher user adoption and commercialization.
For example, Solana launched the Saga phone as early as 2023, and public chains like Aptos and Sui have also followed suit, making the integration of DeSIM with mobile phones seem very reasonable; major exchanges have launched their own payment cards to facilitate users in making fiat payments with cryptocurrencies, while DeSIM can enable users to pay mobile bills with cryptocurrencies; various mobile communication services have already appeared on social applications like Telegram and Line, creating super applications in the communication field.
Finally, technology-driven represents that the business is built on specific technological characteristics. Just as Cubic Telecom's MVNO is established on IoT business, DeSIM can provide mobile network connections for nearly all DePIN products, as network connectivity is a prerequisite for DePIN. DePIN devices are diverse and can be used in geography, power, computing, storage, and other areas, but to synchronize data between networks formed by nodes, DePIN devices must be connected to the network. The built-in DeSIM can perfectly solve the networking problem, supporting global mobility of devices, and the collaboration between both parties can also provide multiple benefits to users.
Case: Mature applications and early opportunities.
Since the rise of mobile internet, the SIM has long been an indispensable mature application in people's daily lives. The SIM is like a key; without it, mobile devices cannot prove their identity and thus cannot access operator networks. It is the foundation of the entire mobile communication security system. The SIM is both the gateway for users to access internet data traffic and the doorway for merchants to acquire user traffic. Today, this mature application is ushering in new development under the endorsement of Web3—DeSIM.
Since the DePIN concept exploded in 2023, DeSIM projects have begun to emerge in the market, with some successfully operating to this day. Along with the rise of the Telegram ecosystem applications, some entrepreneurs have also attempted to combine DeSIM with the Telegram ecosystem to gain higher user traffic. Below, we will select some early projects for a brief introduction.
Helium Mobile.
Helium started with IoT services, entering the blockchain field in 2017 and establishing Helium Network, incentivizing users to provide node coverage for wireless networks using cryptoeconomics, making it one of the early successful cases of DePIN.
In August 2023, Helium launched the world's first encrypted operator, Helium Mobile, in collaboration with the largest 5G network in the U.S., T-Mobile. Combining Helium's network infrastructure with a dynamic coverage model, it integrates the network coverage of traditional mobile operators with the locally built Helium hotspot network, providing users with a more decentralized mobile communication community solution.
As more users join Helium Mobile, the $Mobile token captures value, and more users actively provide local network coverage, increasing coverage and enhancing user experience, attracting more users to join the network, building a crypto flywheel, and gradually reducing dependence on traditional mobile operators, enhancing decentralization.
In traditional mobile communication, users' data is transmitted wirelessly to signal towers/base stations. To further escape the limitations of heavy infrastructure, Helium Mobile launched Hotspot hardware and Carrier Offload plans, where each Hotspot can serve as a mini signal tower for phones. Deployers of Hotspots can earn rewards based on the amount of processed traffic, while mobile operators can purchase traffic from Hotspots, allowing operators to achieve greater coverage without building signal towers, thus enhancing their networks. Essentially, this reduces the costs of centralized infrastructure through decentralization, allowing the community to achieve cost reduction and efficiency enhancement.
Specifically, Helium Mobile's service format offers a $20 monthly plan with unlimited data, SMS, and call services, significantly advantageous in price compared to other operator plans at the time. Helium uses the most standardized eSIM for identity verification and provides an additional layer of privacy and security on top of eSIM to prevent SIM swap attacks.
Helium Mobile captures token value through various methods, promoting the rise of the flywheel.
1. Mining: Using the Mobile network can earn $Mobile rewards.
2. Task: Obtain $Mobile through Mapping tasks.
3. Mall: Users can use $Mobile in the built-in mall of the application to purchase packages, hotspots, and phones.
In addition to the $20 monthly plan for the U.S. market, Helium Mobile has launched global roaming services for overseas travel needs, including 1GB of data, 60 minutes of calls, and 100 text messages for every $15.
After more than a year of development, Helium Mobile has over 120,000 users, 27,000 hotspots, and has transmitted over 4PB of mobile data.
Depinsim
Depinsim is a decentralized mobile communication project launched in 2024, built on the TON blockchain, providing global roaming services to users through Telegram.
To address the drawbacks of traditional telecom networks and digital identity systems, the Depinsim protocol introduces a powerful, scalable, and user-centric framework. The protocol includes three types of roles:
1. Data consumers: Enjoy free data traffic, gasless encrypted payment services, and secure encrypted communication services.
2. Data providers: Operator networks that sell data traffic through blockchain pricing.
3. Data sponsors: Purchase data traffic and distribute it to consumers through tasks or advertisements.
To support a large number of network interactions, Depinsim adopts the DPoS consensus mechanism to ensure high scalability and low latency in efficient network operation. By migrating traditional data service contracts, digital identity management, and payment functions onto the blockchain, communication services achieve decentralization and automation.
To achieve flexible switching of communication networks, Depinsim adopts eSIM (embedded-SIM) technology. eSIM supports remote configuration management, unlike physical SIM cards which are configured at the factory, thus offering higher flexibility. eSIM technology has been adopted by numerous mainstream terminal manufacturers, receiving support from operators in most regions globally, with high standardization and a mature ecosystem.
Using Depinsim's decentralized eSIM technology, users can download the operator's eSIM configuration files and security parameters through a decentralized blockchain network and complete network registration. During the communication process, Depinsim employs complete end-to-end encryption, allowing users full control over their data and interactions. Even mobile operators cannot access specific data content, minimizing the risk of privacy breaches and asset theft.
For C-end users, Depinsim integrates eSIM with DID, wallets, and mining machines, capturing the entry point into the crypto world. For B-end users, Depinsim provides reliable and flexible communication solutions, achieving high scalability globally and providing traffic acquisition channels for enterprises through a task system.
In specific operations, DePINSIM covers over 200 countries and regions, adopting a pay-as-you-go billing model, with data rates as low as $2/GB. Users can choose either eSIM or physical SIM cards, both supporting all of the project's Web3 functions. To enhance user stickiness, the project has designed diverse revenue models: users can sell idle traffic on the P2P market, provide connection services for nearby IoT devices to earn income, or earn tokens by completing location tasks, watching location-based advertisements, and more.
In terms of token economics, the project maintains ecological balance through a 'consume - stake - destroy' mechanism: user consumption generates continuous demand; unused traffic can be staked to earn points; and transaction fees are regularly destroyed to control inflation. Additionally, the project has launched a Premium membership service, providing more exclusive rights for heavy users.
Another feature of Depinsim is the fixed number mechanism, which ensures the stability of user identity verification across various platforms, effectively avoiding the security risks associated with the invalidation of traditional numbers. This design makes Depinsim not just a communication tool but also a carrier of the user's digital identity.
XPIN
XPIN is committed to building a multi-layered, comprehensive IoT platform, consisting of the XPIN cloud basic service system and the XPIN decentralized protocol.
The XPIN cloud basic service system provides an innovative vSIM (virtual-SIM) solution, allowing users to complete mobile network communication without a physical SIM card. The configuration management of vSIM is realized through the cloud, dynamically downloading security parameters for identity management, enabling flexible identity switching. The deployment cost of vSIM is extremely low, providing significant application scenarios in IoT, shared devices, and more.
Among them, cloud configuration management is realized by the XPIN cloud system, providing network access services. All IoT devices that meet the XPIN communication protocol standards can access, collect, process, and analyze data through the XPIN cloud platform, achieving efficient data management and applications. XPIN's smart vSIM and subnet have no hardware limitations and are completely implemented by software, thus offering the highest flexibility, supporting communication across various networks such as 4G/5G, SDWAN, WiFi, LPWAN, and satellite networks, providing users with the highest connectivity assurance.
The XPIN decentralized protocol builds a consensus mechanism between IoT devices, providing a secure, transparent, and efficient unified data interaction platform for IoT devices. Each IoT device in the XPIN network communicates between blockchain nodes through vSIM services, with each device having a unique on-chain DID, capable of local identity verification, achieving trustworthy and traceable data exchange, and enabling data sharing.
In product design, XPIN adopts a phased development strategy. The first phase launches global eSIM services, covering over 200 countries and regions, supporting automatic switching between multiple operators. The second phase will release the XPIN smart power bank, integrating WiFi hotspot and mining functions, while laying out XPIN Box home routers and base station equipment to form a complete hardware ecosystem.
The project ensures sustainable development through diverse revenue models, including vSIM package sales, hardware sales, gaming items, etc. In terms of user incentives, a 'connection equals mining' mechanism is designed, allowing users to earn token rewards by providing network services. Tokens can be used for paying service fees, staking for mining, participating in governance, and more.
XPIN's target users include global travelers, digital nomads, and Web3 project parties. The project redefines the future shape of mobile communication through decentralized infrastructure and a blockchain-driven economic model.
AISIM.
TonSim (later renamed 'AISIM') 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 issues like data security, privacy protection, and interoperability in traditional IoT, TonSim has designed a complete technical architecture.
Core technology components include: STP protocol, DID system, privacy engine, and smart SIM card.
The STP protocol is a communication protocol independently developed by TonSim, serving as a core component of the ecosystem to achieve three key functions:
IoT device translation layer: Provides modular, layered translation API interfaces, supporting direct access of devices from different manufacturers and technical standards to the network.
Encrypted data transmission center: Adopts P2P methods and cryptographic technologies such as zero-knowledge proofs to ensure data privacy in point-to-point communication between devices.
Resource allocation center: Users provide computing power, bandwidth, storage, and other resources through the DePIN client, receiving incentives based on consensus mechanisms.
Through the STP protocol, TonSim can support unified connection and data transmission of IoT devices, building consensus among network nodes and distributing incentives.
The DID system is constructed according to the W3C's DID standard, supporting cross-platform and cross-chain identity authentication. Users and devices can independently create and manage DID without relying on centralized institutions. Combined with the zero-knowledge proof technology in the privacy engine, the DID system achieves secure, private, decentralized, and interoperable digital identity management, ensuring the personal privacy and information security of users.
The privacy engine adopts a hybrid solution of ZK-SNARKs and ZK-STARKs, utilizing the scalability properties of ZK algorithms to meet the efficient verification needs of a large number of small devices while ensuring the high security and scalability requirements of large ecosystems. Privacy protection is implemented in identity verification, data transmission, and smart contract execution.
Smart SIM cards support various forms of SIM such as standard physical cards, vSIM, and eSIM, allowing users to freely choose between ease of use, flexibility, and reliability. Cardholders receive a unique DID account, becoming distributed physical nodes to jointly build a trusted communication network alliance that requires no permission, allowing them to relate and use various operator network services with a single DID. At the same time, TonSIM integrates MVNO functionality, supporting fiat and virtual currency top-ups, providing global roaming services.
TonSim plans to deploy smart contracts using the zkEVM solution to protect transaction details and participant privacy. In the future, cryptographic solutions such as MPC and FHE will be introduced 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 office, Web3 communities, smart homes, and smart cities. Through DID and cryptocurrency wallet functions, TonSim cards become the hub connecting users with multiple service providers (SP) and content providers (CP).
In terms of incentive mechanisms, TonSim uses TST tokens for ecological governance, with a total of 1 billion tokens, of which 70% is used for mining output (PoW + PoS). Users holding DID physical nodes can receive revenue sharing from the ecosystem network, including network service fees, SIM card fees, and other income.
One of TonSim's key features is its complete IoT solution. It enables direct access for devices from different manufacturers and technical standards through the STP protocol, combined with the DID system and privacy engine, ensuring both point-to-point communication between devices and data privacy security, providing foundational support for applications such as smart homes, industrial IoT, and smart cities.
Challenges: Decentralization and token economics.
Although named DeSIM, current Web3 mobile operators still face significant challenges in decentralization. The initial investment costs for network infrastructure are extremely high, making it nearly impossible to build from scratch through decentralization, meaning that DeSIM projects must inevitably leverage existing network infrastructure, which is a solution adopted by the vast majority of projects. Based on this, how can we improve the level of decentralization?
Returning to first principles, why do we need decentralization? The reasons can roughly be divided into the following points:
1. Improve fault tolerance.
2. Reduce usage costs.
3. Protect user privacy.
4. Improve network efficiency.
When DeSIM can support automatic switching between different operators and even different network types, the conditions for decentralization seem to be met. The network lines and base stations between different operators are usually constructed separately, and users can also perceive signal differences between different operators.
1. DeSIM can automatically switch to other networks in the event of abnormal signals from a single operator, improving fault tolerance.
2. A large amount of settlement data can gain price advantages among operators, reducing user costs.
3. Switching between networks prevents a single operator from accessing all data, protecting user privacy, while encryption at the SIM end can further safeguard communication content.
4. Automatically detect the strength of base station signals, access nearby to reduce network latency, and significantly improve network efficiency.
Compared to decentralization, the design of token economics seems to trouble DeSIM entrepreneurs more. Based on extensive project experience, the following suggestions may be helpful.
1. Token utility design: As diverse as possible, usable for paying service fees, operating node deposits, and as a trading medium in the traffic trading market.
2. Inflation control: Set limits and unlocking methods for traffic mining to incentivize long-term staking to lock in circulation.
3. Incentive model: Basic income from traffic mining serves as a subsidy, with progressive staking income increasing staking rates.
To avoid falling into the death spiral of mining - selling - selling, the key is to balance the token's value storage, circulation, and governance functions, forming a healthy token economic closed loop.
Outlook: Internet of Vehicles, Starlink, and the Metaverse.
The transformation of human communication forms is gradually accelerating. The DeSIM project not only practically enhances service experience but also explores upcoming possibilities. Through deep integration with the Internet of Vehicles, Starlink communication, and next-generation communication technologies, DeSIM is expected to redefine the future shape of global communication networks.
In the field of the Internet of Vehicles, DeSIM is expected to play a role as core infrastructure. With the maturity of autonomous driving technology, the demand for real-time, reliable data transmission from vehicles has sharply increased. Traditional centralized communication networks may face bandwidth bottlenecks and latency issues when dealing with massive IoV data. DeSIM's decentralized architecture can effectively address these challenges. Moving vehicles are no longer just users of the network but participate in network construction as mobile base stations, creating a dynamically expanding mesh network. This 'vehicle follows network movement' model can not only provide better network coverage but also incentivize vehicle owners to contribute bandwidth resources through a token incentive mechanism. At the same time, DeSIM can deeply integrate with charging pile networks, providing high-speed network services while charging electric vehicles, and implementing automated charging payments through smart contracts.
In the field of space communication, the combination of DeSIM with satellite networks like Starlink will open up new possibilities. Low Earth orbit satellite communication networks are reshaping the global internet infrastructure, and DeSIM can become the key link connecting ground networks and satellite networks. Through smart routing technology, user devices can automatically select the optimal network link based on actual conditions, whether from ground base stations or satellite signals. This integrated communication network can cover even the most remote corners of the earth and provide reliable emergency communication guarantees in extreme situations such as natural disasters. Low Earth orbit satellites are expected to be incorporated into DeSIM's token economic system, where satellite operators can earn token rewards by providing communication services. This economic model helps promote the continuous development of space communication infrastructure.
In the Metaverse field, DeSIM can provide not only high-speed, low-latency data transmission but also solve key issues such as digital identity authentication and virtual asset rights confirmation through customized SIM and DID. In AR/VR applications, DeSIM's distributed content delivery network can significantly reduce data transmission latency, providing a smoother immersive experience. At the same time, DeSIM can promote interoperability between different virtual worlds, laying the foundation for the openness of the Metaverse.
CGV Research believes that DeSIM, as a new generation of decentralized communication infrastructure, stands at a critical juncture of multiple frontier technologies. With the recent rise of tokens in the DePIN market, the DeSIM track is expected to attract more market attention, further driving user adoption. Web3 mobile operators may be able to take the lead in opening the curtain on the next generation of communications.
Note: This article is a CGV research report and does not constitute any investment advice, for reference only.
