Why Helium Is Going To Be So Damn Big - JMFayal
I see a lot of questions about how the sub-networks on Helium relate to each other and how monetary value is accumulated by each part of the network ($HNT, $MOBILE, $IOT, etc). Here’s my attempt at simplifying these relationships (and showing why helium is going to be so damn big).??????
By James Fayal
Not sponsored by Helium , or Helium Foundation .
Right now there are two sub-networks on Helium:
$IOT provides long range LoRaWAN bandwidth for a large variety or Internet of Things (IOT) devices and sensors.
$MOBILE provides LTE cell service, which can be purchased by cell networks to be used by their customers.
There is a new sub-network being proposed, tentatively called $ENERGY, which handles decentralization of the power grid (HIP-129) and there will likely be additional networks in the soon future.
I will focus on the $MOBILE network, but the dynamic of how each sub-network's flow of payments flows to and through $HNT is roughly the same.
Let’s start with a cellphone user roaming onto a local Helium Mobile node's coverage. These nodes take the form of wifi devices that transmit cell data to and from cellphone/ LTE users.
These users may not know they’re switching onto the helium network. Ideally, the transition happens seamlessly and the cell phone user benefits from a higher bandwidth than they’d otherwise get (or any bandwidth if none is otherwise available).
Right now, the main cell network on Helium is Helium Mobile , which is run by the group that initially created Helium, Nova Labs . Other major cell networks are testing the network, so in the future these cell users could be customers of Verizon, ATT, TMobile, or any other major network.
Obviously, to have access to data on a cell network the cell phone user must purchase a data plan from a cell phone network. This is typically purchased with $ or other fiat, but with Helium Mobile you have the option of paying for your service with $MOBILE tokens, if you so choose.
PS - Helium Mobile is only $20/month for unlimited data and many of their customers pay their entire bill with MOBILE rewards received from "mapping". When not in range of helium nodes you get full TMobile coverage at no additional cost.
To have access to the Helium network the MNO/MVNO (cell networks) needs to purchase Helium Data Credits (DCs). These data credits are used up as people on their networks use data on the Helium Network.
Data Credits are set in price at $0.00001 per DC and it currently costs $0.50 of DCs per GB of data used, but that price per GB may and probably will fluctuate in the future.
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Usually the cell networks will purchase DCs with $s (fiat) from 3rd parties that provide them DCs on demand (often called a consoles).
The consoles acquire DCs from the Helium network by “burning” (destroying it/ taking it out of circulation) the main token of the Helium network, $HNT. To have a constant supply of DCs the consoles must keep purchasing $HNT and burning it, which creates buy-side demand for $HNT (AKA number go up).
I won’t dive into how DC burn translates to $HNT price, but you can read more on that here:
Rather than paying $HNT directly to miners, which is how it worked prior to the creation of sub-networks in HIP-51, $HNT distributes tokens to each sub-network's “treasury”. The tokens in the treasury are what provide value to the sub-network as a whole.
The distribution of $HNT is constant and on a schedule (similar to $BTC), so the Helium Network must decide how much $HNT goes to each sub-network's treasury. To accomplish this it uses a Protocol Score (PS) (See HIP-51), which effectively provides a relative value of each sub-network. The PS is based on the DCs being consumed by each network for data usage, how many nodes are on each network and how much is “staked” to each network (see HIP52/53 for staking info). Once each network has a score, the $HNT is distributed proportionally to each sub-network each epoch (~once per day).
At this point, each sub-network decides how much of it’s own token (which are themselves released on a defined schedule) gets distributed to each stake-holder in their sub-network. As it relates to this model, most of that distribution goes to the Mobile Nodes/Miners that provided the cell bandwidth to the cell phone/LTE users, which brings us back to where we started.
In short, data used on the sub-networks is paid for via a mechanism that buys and burns
$HNT, which creates buy-side value for $HNT and the $HNT that is sent to the sub-networks provides the underlying value of each sub-network. It’s a beautiful system that provides a real $ basis for the value of $HNT and each of its sub tokens!
Bonus 1) Each sub-network has the ability to choose how it distributes its tokens. In order to incentivize $HNT holders to long-term stake their holdings to the sub-DAO they can provide a % of distribution to those stakers (~6% currently)
The sub-networks also have the option of burning some of their token for “supply-side transactions” (pretty much anything that isn’t purchasing data). One such example is requiring buy-in from nodes or service providers to be included on the network in the first place. A node may need to pay an “activation fee” in $MOBILE, which is then burned (therefore reducing the total $MOBILE issuance and creating buy-side demand for $MOBILE).
Bonus 2) At any time, the holder of a sub-network's token has the option of converting it to $HNT based on a floating “swap” ratio. The ratio is simply the number of sub-tokens in issuance divided by the $HNT in the sub-network's treasury.
Let’s say there were 1 million $MOBILE tokens in issuance (removing any that were burned in the past) and the Mobile treasury held 100,000 $HNT. At that moment in time, a holder of $MOBILE could convert 10 $MOBILE tokens into 1 $HNT token (1 million / 100,000 = 1:10. This provides a “floor” for the price of each sub-DAO token. The tokens of promising sub-networks (like Mobile) can and do trade above this floor on public markets.
Let me know what you think or if you have any questions!
s/o to Helium Foundation for keeping the wheels on this whole operation. For a deeper dive follow these people: amirhaleem, fmong, jhiller, abhay, jamiew, rawrmaan, pharkmillups, emilykmurray, and too many others to name.
Not sponsored by Helium or Helium Foundation .
Follow @JMFayal on X.