What is Helium ($HNT)?
Helium is a global, distributed network of Hotspots that creates public, long-range wireless coverage for LoRaWAN-enabled IoT devices. Hotspots produce and are compensated in $HNT, the native cryptocurrency of the Helium blockchain. The Helium blockchain is a new, open-source, public blockchain created entirely to incentivize the creation of physical, decentralized wireless networks. Today, the Helium blockchain, and its tens of thousands of Hotspots, provide access to the largest LoRaWAN Network in the world.
Helium relies on a novel type of work called Proof of Coverage, and a new consensus algorithm (based on HoneyBadger BFT). The Helium Network is used to route data for long-range, lower power IoT devices that use Helium's LongFi protocol.
Helium, the native token of the Helium blockchain, has two primary uses: As a means of rewarding Helium Hotspot operators for participating in building out and securing the network and as the foundation for Data Credits (DCs) which are produced by burning Helium tokens. These DCs are used to pay all transaction fees on the network.
The Helium blockchain uses a novel work algorithm called “Proof of Coverage” (PoC) to verify that Hotspots are located where they claim. Put another way, PoC tries to verify, on an ongoing basis, that Hotspots are honestly representing their location and the wireless network coverage they are creating from that location.
Why Proof of Coverage?
The Helium Network is a physical wireless network that succeeds based on the amount of reliable coverage it can create for users deploying connected devices on it. As such, it required a work algorithm that was built for this use case. Proof-of-Coverage takes advantage of the unique, undeniable properties of radio frequency (RF) to produce proofs that are meaningful to the Helium Network and its participants. Specifically, PoC relies on the following characteristics:
- RF has limited physical propagation and, therefore, distance;
- The strength of a received RF signal is inversely proportional to the square of the distance from the transmitter; and
- RF travels at the speed of light with (effectively) no latency;
Using these properties, the blockchain is constantly interrogating Hotspots using a mechanism known as a “PoC Challenge”. The ultimate power of Proof-of-Coverage lies in the fact that the data generated by the ongoing proofs and stored in the Helium blockchain is definitive verification of the wireless coverage provided by Hotspots on the Network.
Helium Token Usage
The Helium Token is designed to serve the needs of the two primary parties in the Helium blockchain ecosystem:
- Hotspot Hosts and Network Operators. Hosts mine HNT while deploying and maintaining network coverage.
- Enterprises and developers using the Helium Network to connect devices and build IoT applications. Data Credits, which are a $USD-pegged utility token derived from HNT in a burn transaction, are used to pay transaction fees for wireless data transmissions on the network (in addition to things like adding Hotspots and sending).
At launch genesis block, the Helium Network targeted 5,000,000 HNT per month. And since the community approval of HIP 20, the Helium blockchain uses a two year halving schedule, with a maximum supply of 223,000,000 HNT. HNT halving happens every two years from the genesis block.
Data Credits and Burn-and-Mint Economics
As noted above, Data Credits are a $USD-pegged utility token derived from HNT in a burn transaction and used to pay all transaction fees on the Helium Network. One Data Credit will always cost $0.00001. Or, $1.00 will always buy you 100,000 Data Credits. But, as noted above, Data Credits are produced by burning HNT. And the market price of HNT will of course fluctuate.
This HNT to DC relationship is based on a design commonly called a burn and mint equilibrium and is intended to allow for the supply of HNT to respond to network usage trends such that, when equilibrium is found, the amount of HNT that exists remains static month on month. (Helium borrowed heavily from Factom’s usage of this design though other blockchains have also used it.) The amount of Data Credits produced by burning HNT will move up and down based on the USD price of HNT as reported by the HNT Oracles.
Helium was founded in 2013 by Shawn Fanning, Amir Haleem, and Sean Carey, with a mission to make it easier to build connected devices. Helium believes that today's wireless connectivity options are wholely inadequate for the next generation of machines. To solve this they developed the Helium Hotspot, a combination of a physical blockchain node and wireless gateway that network participants can deploy to receive compensation in HNT. In order to receive rewards, Hotspots must submit proof of wireless coverage in a cryptographically verified location and time. Once the network is deployed, any sensor using the Helium LongFi wireless protocol can connect to the network which is intended for battery-powered devices sending small amounts of data over miles of range.
Hotspots are rewarded in HNT based on the quality of the coverage they provide and the amount of LongFi sensor data they transport for devices on the network. HNT is burned to create Data Credits, a non-fungible token used for all transaction fees on the network. Data Credits are required for things like sending sensor data and asserting Hotspot location. Any LongFi-enabled IoT device can send data through any Helium Hotspot that's providing coverage.
Like most blockchains, Helium has a system of transaction fees. All transactions in the Helium blockchain are paid in Data Credits (DCs). Data Credits are produced via burning some amount of HNT using an on-chain transaction. And thanks to a system called "Implicit Burn", users (typically) don't need to manually supply DCs to pay fees. As long as the Helium wallet being used to submit the transaction contains enough HNT to burn to DCs to fund the transaction, the burn will happen implicitly, requiring no user intervention.
Transaction Fee Schedule
The following is a list of the current set of fees required for various transactions, along with their details. Transaction fees are paid in Data Credits. (Note that the cost is not shown in HNT as this number is variable based on the current $USD/HNT price as defined by the HNT Price Oracle.)