An Overview of Helium's Tokenomics
By Beluga Research August 23, 2023
- The Helium Network IoT token is minted through a unique mechanism, combining data transfer with the Proof of Coverage protocol on the Solana blockchain
- The IOT token maintains a consistent value relation to Helium's HNT token, allowing for a secure and balanced redemption process through the Helium Wallet App
- The Helium Network, powered by decentralized wireless hotspots, provides a cost-effective and secure solution
- It is a user-centric alternative to traditional ISPs, rewarding participants for network growth
The Helium Network IoT token is minted through a unique mechanism, combining data transfer with the Proof of Coverage protocol on the Solana blockchain. Helium's Internet of Things (IoT) network is powered by a dual token economy consisting of the HNT and IOT cryptocurrencies. IOT is the native utility token that fuels transactions on Helium's decentralized blockchain. As of August 2023, approximately 6 billion IOTs are in circulation out of a fixed maximum supply of 200 billion.
IOT tokens are mined by Helium hotspots, the physical devices that provide the infrastructure coverage for the network. The innovative token design ensures that IOT maintains its value relative to HNT through an algorithmic treasury swap contract. This enables IOT to be redeemable for HNT at a consistent rate.
In addition to transactions, IOT can also be staked and lent out to generate yield on decentralized finance (DeFi) protocols. For example, Kamino Finance offers staking and lending for both IOT and HNT, supporting the growth of Helium's ecosystem. The dual token model and integration with DeFi help make IOT an integral component of Helium's decentralized IoT network.
Mining IOT Token: The Fusion of Data and Proof
The integration utilizes an innovative mining mechanism that leverages the LoRaWAN protocol. LoRaWAN stands for Long Range Wide Area Network and is a low-power, wireless networking protocol designed for Internet of Things devices. The key component in this integration are LoRaWAN hotspots deployed across the Helium network. These hotspots provide the wireless infrastructure and coverage needed for IoT devices to connect and transmit data. They also execute the Proof of Coverage protocol which verifies network coverage and triggers the mining of IOT tokens as a reward.
IOT token price over the past three months. Source: CoinGecko
The minting and management of the IOT tokens occur on the Solana blockchain. This serves as the foundational layer, hosting the IOT mint address where the tokens are generated based on the hotspot activity. This integration leverages LoRaWAN infrastructure to mine and distribute tokens on the Solana blockchain, enabling an innovative incentive model.
Redemption for HNT
The IOT token has a very close relationship with the Helium Token (HNT) which is central to its functionality. IOT tokens are consistently backed by HNT, tying the two tokens together. The exchange rate for redeeming IOT to HNT is governed by the Network Utility Score (NUS), a key metric that determines the redemption ratio. This mechanism promotes a balanced and fair exchange, building a sense of security and trust within the community.
Redemption from IOT to HNT is primarily conducted through the user-friendly Helium Wallet App. The app provides individuals and enterprises with a streamlined platform to seamlessly exchange their IOT for HNT tokens. By facilitating simple IOT to HNT redemption, the Helium Wallet App supports the interconnected nature of the two tokens.
Unlocking Helium's Mining Potential
The Helium miner, also known as a hotspot, is the backbone of the Helium ecosystem. These devices serve the critical functions of minting HNT tokens and verifying transactions on the Helium blockchain network. The HNT tokens minted by miners power all operations on the network. Additionally, miners validate each transaction, bolstering the legitimacy and security of the network.
HNTT token price over the past three months. Source: CoinGecko
What sets Helium mining apart is its innovative approach that diverges from traditional cryptocurrency mining. Instead of relying on computationally intensive processes, the Helium Network taps into decentralized wireless networks. This allows everyday individuals to become active participants by contributing their existing wireless infrastructure and resources. The model opens up mining to the masses and fuels the growth of the network.
The Helium miner enables token generation, transaction verification and the expansion of the wireless network that underpins the unique Helium blockchain model. By leveraging crowdsourced wireless networks, Helium removes intensive computational barriers and creates opportunities for widespread community participation.
Benefits Over Traditional ISPs
The Helium Network represents a major shift in how people can access the Internet, offering numerous advantages compared to traditional Internet Service Providers (ISPs). While ISPs typically operate in a centralized manner and limit customer involvement, Helium's decentralized architecture allows users to actively participate in expanding network coverage while earning rewards.
This participatory model enhances overall network security and resilience. The blockchain-powered encryption built into Helium's peer-to-peer network also provides robust protection of user data and activity. The crowdsourced nature of the network significantly reduces costs compared to an ISP's physical cables and centralized infrastructure, making Helium a more affordable and accessible option.
By incentivizing the growth of the network, Helium places control and rewards directly in the hands of its users. The result is a next-generation network built by and for the community, with enhanced security, strong encryption, accessibility, and significant cost savings compared to traditional ISPs.
Envisioning the Future
The Helium Network represents an exciting shift towards decentralization and user participation, creating a new model for internet connectivity. The integration of blockchain-enabled IoT tokens allows individuals to participate in building out a shared network infrastructure. As users add coverage with hotspots, the reach of the Helium Network grows.
This is just the beginning of a transformative journey. As the IoT landscape continues to evolve, Helium stands as an innovative model, showing how communities can come together to create solutions. In the coming years, expect to see the network expand as IoT devices become more integrated and new use cases emerge.
Ultimately, the marriage of blockchain and IoT through Helium lays the foundation for realizing the full potential of connected devices. By leveraging a decentralized approach, Helium aims to revolutionize industries and transform the way we interact with technology. The future looks bright for new innovations that put control of the internet back into the hands of its users.