San Jose launches cryptocurrency pilot to close digital divide

The City of San Jose, California, plans to activate 20 wireless hotspots, designed for cryptocurrency mining, across low-income neighborhoods in an effort to further close the city’s digital divide and boost its “internet of things” capabilities, Mayor Sam Liccardo announced Wednesday.

The city plans to use cryptocurrency, mined through devices that connect to the new hotspots, to pay for the broadband service of more than 1,300 households for one year. The city is leading the project through a partnership with Helium, a cryptocurrency company that markets a service it calls “the People’s Network,” and the nonprofit California Emerging Technology Fund. The scheme, which represents San Jose’s first foray into blockchain and cryptocurrency technologies, is a way to “democratize the benefits of emerging technologies for all residents,” Chief Innovation Officer Jordan Sun told StateScoop.

The city’s hotspots run on a long-range, low-power and low-bandwidth protocol, called LoRaWAN, designed for IoT devices — not televisions, phones or laptops that might exchange large amounts of data.

The hotspots — designed by Helium, and purchased for San Jose by the CETF — are designed to connect to smaller devices, like GPS trackers, internet-connected pet collars, motion sensors, air quality sensors and cameras. Sun said the devices can service hundreds of square miles of San Jose, and that each of the hotspots will be hosted by residents and small businesses over the project’s six-month timeline.

Once they’re installed, the hotspots will then use the connected devices to mine HNT, a proprietary cryptocurrency issued by Helium that can be swapped for other cryptocurrencies, like bitcoin or Ethereum, or U.S. currency. CETF will hold the cryptocurrency mined by the hotspots so that San Jose isn’t liable, Sun said, and will periodically exchange the HNT mined by San Jose’s Helium hotspots for U.S. dollars.

Hotspots use no more energy “than an LED lightbulb,” Sun said, compared to the and the transactions are recorded on an HNT blockchain for security, according to the company. The average LED bulb consumes 10 watts an hour, a fraction of the consumption from top-tier Bitcoin mining rigs that can burn up to 3,250 watts an hour.

‘Last-mile considerations’

Once the currency is swapped, CETF will donate it back to San Jose, which will use it to fund prepaid cash cards that eligible low-income households can use to pay for their internet service, Sun said. The city intends to use nonprofits that it already partners with on its other digital inclusion initiatives, he said, such as its Digital Inclusion Fund, to identify and educate qualifying households about the new program.

The goal, Sun said, is to give residents one-time payments of $120, enough to cover a year’s worth of discounted internet service. More than 50% of San Jose residents without adequate at-home internet access cited service affordability as the largest barrier to adoption, and though San Jose has invested heavily into its Digital Inclusion Fund since 2019 to close the digital divide, emerging technologies like cryptocurrencies and blockchain are still very much on the table, Sun said.

“The impetus behind this is taking a hard look at our city and the last-mile considerations that impede residents from accessing broadband,” Sun said.

A review period will follow the pilot, he said. The city will also create an exchange schedule for CETF to follow ahead of time, Sun said, so that the nonprofit and the city don’t have to speculate on the cryptocurrency market’s movements. As of Aug 1., there were 2.5 million HNT tokens minted every month, though Helium plans to cut that number in half every two years.

San Jose isn’t the first city in the country to explore subsidizing essential services with digital currencies. That distinction belongs to the City of Miami, which earlier this month voted to accept donations from a cryptocurrency wallet that now owns a wallet with more than $7 million of a bespoke digital token, called MiamiCoin.