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Mobile communication has become an indispensable infrastructure in modern life, but the traditional operator model is facing bottlenecks and innovation stagnation. With the development of Web3 technology, Decentralization SIM (DeSIM) as a new mobile virtual network operation mode has emerged.

Article author: Shigeru, Satou

Article Source: CGV

Mobile communication has become an indispensable infrastructure in modern life, but the traditional operator model is facing bottlenecks in rise and innovation stagnation. With the development of Web3 technology, Decentralization SIM (DeSIM) as a new mobile virtual network operator model has emerged. This article will analyze the development status and future prospects of DeSIM from the following aspects:

Explore the market structure and pain points of the traditional mobile communication industry, and analyze the development opportunities of DeSIM.
Analyze the evolution of SIM card technology and interpret the technical principles and implementation methods of DeSIM.
Through user profiling and business model analysis, explore the market positioning and rise path of DeSIM.
Compare and analyze project cases such as Helium Mobile, Depinsim, XPIN, and summarize industry development experience
In-depth discussion of the challenges DeSIM faces in terms of decentralization and token economics
Outlook DeSIM and the integration prospects of emerging fields such as car networking, star chain communication, metaverse, etc.

Origin: Perfect communication infrastructure and fierce market competition

Communication is the eternal need of human beings. With the evolution of technology, the ways of communication are also gradually increasing. From images to language and then to text, information continues to condense; from printing to telephones and then to the internet, information continues to expand.

In 1969, ARPANET laid the foundation for the Internet, and in the 1990s, the emergence of the World Wide Web, Netscape, and Amazon brought about a truly public Internet. Around 2010, the iPhone sparked the smartphone revolution, with the widespread adoption of 3G/4G, and 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 worldwide had subscribed to mobile services, accounting for 69% of the global population. This number was only 1.6 billion 8 years ago, with an average rise rate of 31.25% per year. In terms of segmentation, the mobile user penetration rate in Greater China is 88%, in North America it is 89%, and in Europe it is as high as 91%. Such a high penetration rate indicates the improvement and popularization of communication infrastructure, while also implying limited room for rise. According to GSMA's estimation, the average annual rise of the global mobile user number from 2023 to 2030 is about 1.7%, and the growth rate is significantly slowing down.

Out of consideration for anti-monopoly, each country and region is usually served by multiple mobile operators, typically maintained at 3-4, with a relatively balanced market structure. For example, the major operators in North America are AT&T, Verizon, T-Mobile; in Europe, they are Deutsche Telekom, Vodafone, Telefonica; while in China, the main players are China Mobile, China Unicom, and China Telecom. Despite the relative independence of mobile operators between each country and region, internal market competition remains fierce.

As important infrastructure and livelihood projects, telecommunications operators have high industry entry barriers, heavy asset investment, significant economies of scale and scope effects. The important manifestation of economies of scale is that for a given physical infrastructure, the marginal cost of adding new service users is low, while the revenue is high, so the core competitiveness of operators usually lies in the scale of users. However, for the sake of livelihood considerations, countries usually do not allow mobile operators to engage in price wars. At the same time, in order to avoid actual monopolies between several operators, stagnant innovation, Mobile Virtual Network Operators (MVNOs) have emerged.

MVNO does not build network infrastructure, but directly uses existing network resources, cooperates with traditional operators to obtain more users through differentiated services and price competition, provides flexible services in a light-asset operation mode, and also provides additional income with low marginal costs for traditional operators to increase network utilization.

DeSIM is a form of application for MVNO, which attracts traditional users to contact the Web3 industry while serving cryptocurrency practitioners through the global payment system of Web3, differentiated services, and tokenized diversified gameplay.

Transformation: Evolution of SIM technology and the possibilities of DeSIM

When we communicate over mobile networks using mobile devices, the complete link will go through a lot of network devices collaboration.

Inside the mobile device, the application generates data, which is then processed by the TCP/IP protocol stack in the application processor (AP) and passed to the baseband processor (BP) through the driver interface.
BP interacts with SIM, reads identity information, performs identity verification, generates session key, and establishes encrypted channel
The radio frequency module (RF) performs analog-to-digital conversion and transmits the signal to the base station through the antenna.
The base station receives the signal and processes it, performs resource management and mobility management, and sends it to the Mobile Switching Center (MSC).
MSC performs route selection and roaming management, and submits packets to the core network
The core network communicates through optical fiber, and is transmitted to the Internet through components such as gateways and location registers.

Except for SIM, users have almost no room for independent choice. SIM plays a role in identity verification and security in mobile communications. The centralized monopoly of SIM will lead to centralized risks in identity privacy and information security, so we need DeSIM.

In the era of physical SIM cards, the implementation of DeSIM faces many obstacles. Operators rely on physical SIM cards to sign long-term contracts with users, thus binding users. When technologies such as eSIM, vSIM, iSIM, etc. emerge, DeSIM has the opportunity to develop.

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 the method of embedding a physical chip into the device, equipped with a dedicated security unit, supports remote configuration management, and fully complies with GSMA standards. Its architecture includes components such as hardware secure zone storage, profile management system, OTA update mechanism, etc., and supports multiple profiles coexistence. In terms of security, eSIM has implemented mechanisms such as hardware-level encryption, secure boot, integrity verification, anti-tampering protection, and key isolation. Currently, eSIM has gained wide support from mainstream terminal manufacturers and operators, and is mainly used in high-end smartphones, smartwatches, tablets, and other devices.

vSIM adopts a completely different technological route, implementing SIM functionality through software virtualization, relying on cloud-based configuration management and parameter downloads, and supporting dynamic identity simulation. Its features include cloud-based profile storage, real-time configuration deployment, 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 to be improved, and it is currently mainly used in scenarios such as IoT devices and shared devices.

iSIM represents a higher level of hardware integration, integrating SIM functions directly into SOC, sharing hardware security units with processors, and storing data in dedicated secure storage areas. This solution has advantages such as ultra-small size, extremely low power consumption, and hardware-level security protection, making it particularly suitable for ultra-small IoT devices, wearable devices, and other scenarios. Its advantages lie in saving PCB space, improving production efficiency, and enhancing system integration.

Soft SIM is the lightest solution that fully implements SIM functionality through software, running on a general-purpose processor and simulating a secure environment through software without the need for dedicated hardware support. This solution has a completely open architecture, highest flexibility, and lowest deployment cost, but relatively weaker security. It is mainly used for experimental projects, specific industry applications, and development testing environments. Due to the difficulty in ensuring security and compliance issues, it currently has limited support from operators.

With the support of the aforementioned SIM technology solutions, DeSIM can access a large number of mobile operators through the Decentralization system, reduce the centralization risk for users during mobile communications through minimal-cost automatic switching, reduce usage expenses, and improve network utilization.

Breakthrough: Finding target users and the rise flywheel

In the market with numerous operators, how does DeSIM use the advantages of Web3 to provide differentiated services? Analyzing the successful experience of MVNO, we can roughly attribute success to three categories 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 differentiate itself from other operators:

Unified Cryptocurrency Payment: Supports globalized business
Privacy Protection: No KYC required, terminate at any time.
Lower early customer acquisition costs: Token incentives are expected to attract early users and reduce actual user expenses.

Based on the feature analysis, it is easy to draw the user portrait of DeSIM. One type is the cryptocurrency practitioner who frequently travels globally, pays attention to privacy protection, and has strong payment ability; the other type is the price-sensitive speculator, hoping to obtain income through token incentives or reduce communication expenses.

The collaborative diversification drive aims to expand existing businesses into the field of mobile communications. The Web3 industry already has many examples of business expansion, which essentially involve better integration of the cryptocurrency system with real-world businesses. Businesses such as public chains, exchanges, social applications, etc., can be combined with DeSIM to achieve higher user adoption and commercialization.

For example, Solana launched the Saga mobile phone as early as 2023, and public chains such as Aptos and Sui have followed suit. The combination of DeSIM and mobile phones seems very reasonable; major exchanges have launched their own payment cards, making it convenient for users to use cryptocurrency for fiat currency payments. DeSIM can enable users to pay mobile phone bills with cryptocurrency; social applications such as Telegram and Line have already introduced various mobile communication services for sale, creating super apps in the communication field.

Finally, technology-driven represents the business built on the characteristics of specific technology. Just like Cubic Telecom's MVNO is built on the IoT business, DeSIM can cooperate with almost all DePIN products to provide mobile network connection, which is a prerequisite for DePIN. DePIN devices are diverse and can be used in various aspects such as geography, electricity, computing, and storage. However, in order to synchronize data between networks composed of nodes, DePIN devices must be connected to the Internet. The built-in DeSIM in the device can perfectly solve the networking problem and support global mobility of the device. The cooperation between the two parties can also provide multiple benefits to users.

Case Study: Mature Applications and Early Opportunities

Since the rise of the mobile internet, SIM cards have long been a mature application that people cannot live without in their daily lives. The SIM card is like a key, without which mobile devices cannot prove their identity, and therefore cannot access the operator's network. It is the foundation of the entire mobile communication security system. The SIM card is not only the gateway for users to access internet data traffic, but also the gateway for merchants to access user traffic. Now, with the blessing of Web3, this mature application, SIM card, has ushered in a new development - DeSIM.

Since the concept of DePIN exploded in 2023, the DeSIM project has emerged in the market, and some of them have successfully stabilized until now. With the rise of Telegram's ecological applications, entrepreneurs have also tried to combine DeSIM with Telegram's ecology to gain higher user traffic. Below, we will select some early projects for a brief introduction.

Helium Mobile

Helium started as an IoT service and entered the blockchain field in 2017, establishing the Helium Network. It uses cryptoeconomics to incentivize users to provide node coverage for wireless networks, and is one of the early success stories of DePIN.

In August 2023, Helium launched the world's first encrypted operator, Helium Mobile, in cooperation with the largest 5G network T-Mobile in the United States. By integrating Helium's network infrastructure and adopting a dynamic coverage model, it combines the network coverage of traditional mobile operators with the locally built Helium hotspots network, providing users with a more Decentralization mobile communication community solution.

As more users join Helium Mobile, the $Mobile token captures value, and more users will actively provide local network coverage, improve coverage and enhance user experience, attract more users to join the network, build a cryptographic flywheel, and gradually reduce dependence on traditional mobile operators, and improve the degree of decentralization.

In traditional mobile communication, users' data is transmitted wirelessly to signal towers/base stations. In order to further break free from the limitations of heavy infrastructure, Helium Mobile has launched the Hotspot hardware and Carrier Offload plan, where each Hotspot can serve as a mini signal tower for mobile phones. Deployers of Hotspots can receive rewards based on the processed traffic, while mobile operators can purchase traffic from Hotspots, allowing them to expand their coverage without building signal towers and enhancing their own networks. Essentially, this reduces the cost of centralized infrastructure through Decentralization, achieving cost reduction and efficiency improvement through community participation.

In terms of specific usage, the service form of Helium Mobile is a $20 monthly package, with unlimited data, messaging, and call services, which has a significant price advantage compared to other carriers' plans at the time. Helium uses the highest standard of eSIM for identity verification and provides additional privacy and security layers on top of the eSIM to prevent SIM Swap attacks.

Helium Mobile captures token value in multiple ways, promoting the rise of the flywheel:

Mining: Using the Mobile network can earn $Mobile rewards
Task: You can get $Mobile through the Mapping task.
Mall: Users can use $Mobile to purchase packages, hotspots, and phones in the built-in mall in the application

In addition to the $20 monthly package in the US, for overseas travel needs, Helium Mobile has launched a global roaming service, which includes 1GB of data, 60 minutes of calls, and 100 text messages for $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 Decentralization mobile communication project launched in 2024, based on the TON blockchain, providing global roaming services for users through Telegram.

To address the shortcomings of traditional telecommunications networks and digital identity systems, the Depinsim protocol introduces a powerful, scalable, and user-centric framework. The protocol includes three types of roles:

Data consumers: enjoy free traffic data, gas-free encrypted payment services, and secure encrypted communication services
Data provider: that is, the operator network, sells data traffic through blockchain quotations

3, data sponsor: purchase data traffic, and distribute traffic to consumers through tasks or advertisements, etc.

To support a large number of network interactions, Depinsim adopts the DPoS consensus mechanism to ensure highly scalable and low-latency efficient network operations. By migrating traditional data service contracts, digital identity management, payment functions, etc. onto the chain, 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, so eSIM is more flexible. eSIM technology has now been adopted by a large number of mainstream terminal manufacturers, supported by most operators in most parts of the world, with a high degree of standardization and a mature ecosystem.

With Depinsim's Decentralization eSIM technology, users can download the operator's eSIM configuration file and security parameters through the Decentralization blockchain network, and complete network registration. During the communication process, Depinsim uses end-to-end encryption, giving users full control over data and interactions, even mobile operators cannot access specific data, minimizing the risk of privacy leakage and asset theft.

For C-end users, Depinsim integrates eSIM with DID, wallet, and mining machines, grasping the entrance to the encrypted world. For B-end users, Depinsim provides a reliable and flexible communication solution, which can achieve globally scalable and provide traffic acquisition channels for enterprises through the task system.

In specific business, DePINSIM covers more than 200 countries and regions, adopts a pay-as-you-go billing model, and the lowest data fee is as low as $2/GB. Users can choose eSIM or physical SIM cards, both of which support all Web3 functions of the project. To enhance user stickiness, the project has designed diversified revenue models: users can sell idle data traffic on the P2P market, provide connection services for peripheral IoT devices to earn profits, or earn tokens by completing positioning tasks, watching location-based advertisements, etc.

In terms of token economics, the project maintains ecological balance through the mechanism of "consumption - staking - burning": users consume data to generate continuous demand; unused traffic can be staked to earn points; meanwhile, transaction fees are regularly burned to control inflation. In addition, the project has also launched Premium membership services, providing more exclusive benefits for heavy users.

Another feature of Depinsim is the fixed number mechanism, which ensures the stability of user identity verification on various platforms and effectively avoids the security risks caused by the easy loss of traditional numbers. This design makes Depinsim not only a communication tool, but also a digital identity carrier for users.

XPIN

XPIN is committed to building a multi-level, comprehensive Internet of Things platform, consisting of the XPIN cloud-based service system and the XPIN Decentralization protocol.

The XPIN cloud infrastructure service system provides an innovative vSIM (virtual-SIM) solution, which allows users to complete mobile network communication without physical SIM cards through fully software-based virtual SIM cards. The configuration management of vSIM is implemented in the cloud, downloading security parameters in real time and performing dynamic identity management, thus enabling flexible identity switching. The deployment cost of vSIM is extremely low, and it has great application scenarios in IoT, shared devices, and other fields.

Among them, cloud configuration management is implemented by the XPIN cloud system, providing network access services. All IoT devices that comply with the XPIN communication protocol standard can access, collect, process, and analyze data through the XPIN cloud platform, achieving efficient data management and application. XPIN's intelligent vSIM and subnet, because there are no hardware restrictions, are fully implemented by software, so they have the highest flexibility and can support multiple network communications, such as 4G/5G, SDWAN, WiFi, LPWAN, and satellite networks, providing users with the highest connectivity guarantee.

The XPIN Decentralization protocol builds a consensus mechanism for communication among 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 the vSIM service, and each device has a unique on-chain DID for local identity verification. This enables trusted, traceable data exchange and data sharing among devices.

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

The project ensures sustainable development through diversified revenue models, including vSIM package sales, hardware sales, and game props. In terms of user incentives, a 'mine while connect' mechanism has been designed, allowing users to obtain token rewards by providing network services. Tokens can be used for paying service fees, staking for mining, participating in governance, and other scenarios.

XPIN's target users include global travelers, digital nomads, Web3 projects, and other groups. The project redefines the future form of mobile communication through Decentralization infrastructure and blockchain-driven economic models.

AISIM

TonSim (later renamed "AISIM") is a Web3 Internet of Things infrastructure project built on the TON ecosystem, aiming to create the world's first Web3 IoE (Internet of Everything) ecosystem. In order to address issues such as 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.

STP protocol is a communication protocol independently developed by TonSim, as the core component of the ecosystem, realizing three key functions:

IoT Device Translation Layer: Provides modular, layered translation API interfaces to support direct access to the network for devices from different vendors and different technical standards.

Encryption Data Transmission Center: Using P2P and cryptographic techniques such as zero-knowledge proof to ensure the data privacy of peer-to-peer communication between devices.

Resource Allocation Center: Users provide computing power, bandwidth, storage and other resources through the DePIN client, and obtain incentives based on consensus mechanism.

Through the STP protocol, TonSim is able to support the unified connection and data transmission of IoT devices, build consensus among network nodes, and allocate incentives.

The DID system is built according to the W3C DID standard, supporting cross-platform, 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, Decentralization, and interoperable digital identity management, ensuring user privacy and information security.

The privacy engine adopts a hybrid scheme of ZK-SNARKs and ZK-STARKs, utilizing the scalability of ZK algorithms to meet the efficient verification needs of a large number of 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 processes.

The intelligent SIM card supports various SIM forms such as standard physical card, vSIM, and eSIM, allowing users to choose freely between usability, flexibility, and reliability. Cardholders obtain a unique DID account and become distributed physical nodes to jointly build a permissionless trusted communication network alliance, enabling them to associate and use multiple operator network services with a single DID. At the same time, TonSIM integrates MVNO functions, supports fiat and virtual currency top-ups, and provides global roaming services.

The TonSim project plans to deploy smart contracts using the zkEVM solution to protect transaction details and participant privacy. In the future, it will introduce cryptographic solutions such as MPC and FHE to support more IoE scenarios. For users, TonSim not only meets basic communication needs, but also provides a rich variety of network application scenarios, including interconnection of IoE devices, remote office, Web3 community, smart home, smart city, etc. Through DID and encrypted 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 the TST token 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 a share of ecosystem network revenue, including network service fees, SIM card fees, and other income.

One of the main features of TonSim is its complete IoT solution. By implementing the STP protocol, it enables direct access for devices from different manufacturers and with different technical standards, combining the DID system and privacy engine to ensure both peer-to-peer communication between devices and data privacy security, providing fundamental support for applications such as smart homes, industrial IoT, and smart cities.

Challenge: Decentralization and Token Economics

Despite being named DeSIM, current Web3 mobile operators still face significant challenges in Decentralization. The upfront cost of network infrastructure is extremely high, and it is almost impossible to build from scratch through Decentralization, which means that the DeSIM project must inevitably rely on existing network infrastructure, which is also the solution adopted by the vast majority of projects at present. On this basis, how to 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

2, reduce operating costs

Protect user privacy

4, Improve network efficiency

When DeSIM can support automatic switching between different operators, even different network types, the conditions for Decentralization seem to be met. The network lines and base stations between different operators are usually built separately, and users can also perceive the signal differences between different operators when using them.

When there is a signal abnormality from a single operator, DeSIM can automatically switch to other networks to improve fault tolerance;
A large amount of settlement data can obtain price advantages in operators, reducing the cost of user usage;
The switch between networks makes it impossible for a single operator to obtain all data, protecting user privacy, and the encryption of the SIM card can further protect communication content;
Automatically detect the signal strength of the base station, access the nearest one to reduce network latency, and greatly improve network efficiency;

Compared to Decentralization, the design of token economics seems to be more perplexing for DeSIM entrepreneurs. Based on extensive project experience, the following suggestions are available for reference.

Token utility design: strive for diversification, can be used for payment of service fees, operation node deposits, and transaction media in the traffic trading market
Inflation control: Set the upper limit of liquidity mining and the unlocking method to encourage long-term staking to lock the circulating supply.
Incentive model: Basic income of traffic mining as a subsidy, and the progressive increase of staking income to increase the staking ratio

In order to avoid falling into a death spiral of mining-selling, the key is to balance the value storage, circulation, and governance functions of tokens, and form a healthy token economic cycle.

Outlook: Internet of Vehicles, Star Chain, and Metaverse

The transformation of human communication is accelerating, and the DeSIM project not only improves the service experience but also explores the possibilities of the future. By deeply integrating with the Internet of Vehicles, Starlink communication, and next-generation communication technology, DeSIM is expected to redefine the future form of global communication networks.

In the field of vehicle networking, DeSIM is expected to play a role as a core infrastructure. With the maturity of autonomous driving technology, the demand for real-time and reliable data transmission in vehicles has increased sharply. Traditional centralized communication networks may face bandwidth bottlenecks and latency issues when faced with massive vehicle networking data. DeSIM's Decentralization architecture can effectively address these challenges. Vehicles in motion are no longer just users of the network, but participate in network construction as mobile base stations, creating a dynamically scalable mesh network. This "vehicle follows network" mode can not only provide better network coverage, but also encourage vehicle owners to contribute bandwidth resources through token incentive mechanisms. At the same time, DeSIM can also deeply integrate with the charging pile network, providing high-speed network services while charging electric vehicles, and realizing automated charging payments through smart contracts.

In the field of space communication, the combination of DeSIM with satellite networks such as Starlink will open up new possibilities. Low-orbit satellite communication networks are reshaping the infrastructure of the global Internet, and DeSIM can become a key link connecting ground networks and satellite networks. Through intelligent routing technology, user devices can automatically select the optimal network link based on actual conditions, whether it's a ground station or a satellite signal. This integrated ground-space communication network can not only cover the most remote corners of the earth but also provide reliable emergency communication support in extreme situations such as natural disasters. Low-orbit satellites are expected to be integrated into DeSIM's token economy, and satellite operators can earn token rewards by providing communication services. This economic model helps drive the continuous development of space communication infrastructure.

In the metaverse, DeSIM can not only provide 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 distribution network can significantly reduce data transmission latency and provide a smoother immersive experience. At the same time, DeSIM can also promote interoperability between different virtual worlds, laying the foundation for the openness of the metaverse.

CGV Research believes that as a new generation of Decentralization communication infrastructure, DeSIM is standing at a critical juncture where multiple cutting-edge technologies converge. With the recent rise in the secondary market token of the DePIN sector, the DeSIM track is expected to attract more market attention and further drive the adoption of a large number of users. The mobile operator of Web3 may be able to take the lead in opening the next generation of communication.

Please note: This article is a CGV research report, not a recommendation for any investment, for reference only.

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