OTTAWA — Vancouver-based Spexi Geospatial wants to build a commercial database of detailed, regularly updated aerial images for real estate, insurance, safety and investment uses.

The problem: Those images are expensive. Spexi’s solution is to ask drone owners to contribute their own photos in exchange for a bespoke Spexi crypto token that, if all goes well, will increase in value as the database does.

“If the city is big enough, there may even be tens of thousands of people that, weekly, are going out there inspecting buildings or inspecting telephone poles or looking at manhole covers,” said Adam Killam, Spexi’s chief marketing officer, in an interview with The Logic. Satellite images aren’t detailed or current, so all those people have to drive around and look at things.

Spexi hopes squadrons of small private drones, operated by people who are paid for their contributions in Spexi tokens, will shoot the gazillions of photos it would take to substitute for many of those trips.

It’s a risk. This idea, whose basic structure is called a “token-incentivized physical infrastructure network,” has not triumphed in some other formats, and it’s not obvious whether that’s because it’s fundamentally flawed or just hasn’t been applied quite right. The premise is to take a product or service that has large network effects—where the more participants are involved, the more valuable it is, like an early telephone system or a modern social-media network—and entice the first contributors with the prospect that they’ll get outsized shares of its future value.

Spexi’s new venture, called Spexigon, is an offshoot of an existing platform it offers for shooting aerial photos for customers’ own use, for which it charges regular dollars. Spexigon is backed by US$5.5 million in seed funding, raised last fall from investors led by Blockchange Ventures and including Canadian participants IndDro Robotics, Fort Capital and Dapper Labs—Spexigon is to use Dapper’s Flow blockchain. It’s to launch with a beta test this summer.

“Imagine being able to sit at a laptop or even on your phone, anywhere, and zooming in on a project that you’re responsible for and you have fresh, recently collected imagery,” Killam said.

The first people to contribute images to the Spexigon database and accept payment in Spexi tokens will benefit the most—if the service takes off, millions of customers will need those tokens to buy access to the image collection. The more customers buy tokens, the more those tokens will be worth.

“If we build the system correctly, then as we bring on more companies that will purchase and use the data, the value ideally will flow into the tokenomics system, so that people who contributed early will probably benefit more,” Killam said.

That is not a pledge, he stresses, for even in the greyer areas of crypto regulation it is very bad to guarantee that anything resembling an investment is sure to increase in value. But it is, broadly, the idea.

Helium is the canonical example of this way of funding a project with large network effects. It’s an American attempt to build a wireless network mainly for Internet-of-Things products, backed by Andreessen Horowitz and Tiger Global.

Participants buy an antenna (with dollars, the way Spexigon pilots would buy a drone) that creates a wireless hotspot. Customers who want to use a Helium hotspot pay have to buy special Helium tokens to do so. If you have a Helium hotspot, you get paid in Helium tokens when people connect through it. The more people use the network, the more those tokens will be worth.

The price of a Helium token peaked at US$52.70 on Nov. 14, 2021; these days, one costs about US$3. Hotspot owners have complained they’re hardly making anything.

Another U.S. company, called Pollen, was to build a consumer cellphone network using similar principles. Its transactions were to use a bespoke PollenCoin token—until late January, when Pollen announced it was all but switching to U.S. dollars before even launching its service. A PollenCoin was worth nearly US$0.40 last June; these days it’s worth about four cents.

A Pollen competitor, Xnet, which is also not yet offering service, invited disaffected operators of Pollen antennas to switch to its network if their equipment was compatible with Xnet’s systems, promising them bonus payments of its own token.

Some Pollen antennas could work on Xnet’s network because they’re both made by the same Canadian company, Blinq Networks, which announced partnerships with each of them in the fall.

Blinq’s vice-president of sales and marketing, Patrick Buthmann, said it has potential agreements with other upstart telcos trying to use the model, too. With the U.S. and Canadian governments forbidding telecom providers to use gear from Chinese suppliers such as Huawei (or threatening to), domestic vendors like Blinq are in demand, he said.

“Given the current political climate, one of the things that a lot of players are looking for is a North American vendor that they can look to to fulfill their equipment needs,” he said.

Blinq has previously specialized in networking gear for small rural telecom providers and large private installations such as education campuses. But the “distributed wireless” market served by companies like Pollen and Xnet has taken off in the past year, and Blinq is expecting to draw 30 to 50 per cent of its gross revenue from those customers in 2023, Buthmann said.

The Markham, Ont., company has about 100 employees now and is planning to add as many as 70 to keep up with demand, he said.

What’s changed is that Pollen, Xnet and others are aiming to build large-scale networks, with participants installing multiple antennas to cover wide areas.

Pollen’s decision to shift away from its crypto-token model isn’t Blinq’s affair, Buthmann said, though he acknowledged it’s “caused a lot of heartache.” But as a supplier, he trusts that using dollars instead of PollenCoins is the right move if Pollen wants to bring in more people to build out a big system.

“I think the investment community is saying, ‘Hey, if we want to invest in this thing, it needs to be something that actually has the potential of succeeding, and for that you need paying customers.’”

Failed attempts with the token-incentivized model aren’t surprising, given the tepid interest most people have in fussing with crypto technology, said Chang Lu, research manager at the Blockchain@UBC research group in Vancouver. Marketing plays with non-fungible tokens like unique digital artwork were all the rage for a short time, but have mostly crashed and burned, he pointed out.

“Those who will really be incentivized right now are probably going to be seasoned crypto players. They know how to play the game and are crypto gamblers or opportunistic people who want to get rich quick,” Lu said. “Ordinary people that you will meet in supermarkets or on the streets, they don’t get motivated by tokens.”

A company relying on tokens for its business model restricts its market to people who are both interested in what it sells and willing to deal with crypto’s technical hurdles. That thin sliver of overlap could get bigger, Lu said, but serious growth will likely require some changes: A revolution in user-friendliness for crypto products, stronger regulation to snuff out crypto scams, and a wider understanding of the blockchain technology.

“It’s not that I’m talking negatively on this idea,” Lu said. “I think it has value. It’s just that there’s a long way to go before we achieve that vision.”

At Spexi, Killam is very conscious of crypto’s reputation. They’re still figuring out just how the aerial-photography payment system will work, but one assurance the company offers is that Spexi tokens will be unattractive to scammers and speculators because they’re not supposed to be get-rich-quick investments.

“I just don’t think it has the same cool factor and sketchy factor that that mindset is after,” he said. “When you’re trying to build a real, tangible business, there’s a lot of people out there that would find that extremely boring. “

Crypto idealists might want to remake the global financial system and replace centralized systems with decentralized ones, he said, but Spexigon is meant to be pragmatic.

“​​We’re not out to change how people think,” he said. “We’re just out to change how imagery is collected so that [customers] can change how they operate.”