There have been many mining initiatives in the cryptocurrency industry. First, Bitcoin and Ethereum required miners to purchase expensive and high-energy use mining rigs.
Miners would spend their bitcoin rewards on crypto gambling on the best crypto casino or even staking their BTC in different blockchain projects.
Other blockchain projects like Cardano use the proof-of-stake protocol, which does not require expensive equipment and consumes very little electricity.
The next step in crypto mining comes from Helium. Helium mining only requires a small device that consumes 5W of electricity.
This guide will give an overview of Helium Inc, how mining works, Helium’s native token (HNT), the hardware needed for mining, and if it is still profitable to mine HNT.
What Is Helium Inc?
Helium Inc. is the company that created the Helium network. This network caters to IoT devices, enabling long-range connectivity and coverage between these devices and the internet. These IoT devices need to support LoRaWAN (low-power wide-area network). This type of network focuses on covering large distances on low-powered devices.
Furthermore, the Helium network uses hotspots to provide wireless coverage on the network. These hotspots are small devices that people can install in their homes. They are low-powered and allow people to earn the Helium token (HNT) if they run the hotspot and connect it to the Helium blockchain.
The Helium blockchain provides the wireless network with security and a way to earn HNT. Helium hotspot owners can help the network verify other hotspots and mint new HNT through the blockchain’s consensus mechanisms.
Lastly, The Helium network allows IoT devices to communicate with the internet and other devices. It does not require a massive investment in hardware. Helium enthusiasts can even build hotspots if they do not want to buy a hotspot for around $400. It only consumes around 5W of energy compared to other mining rigs that can consume over 250W.
Helium Inc. History
Helium started as a wireless infrastructure company in 2013. Their first projects involved creating wireless network products that could transfer small bits of data from IoT devices to the network. They used the 802. 14.5 radio protocol, but the company soon realized that its devices did not meet the requirements for its vision.
In 2018, the company announced the Helium hotspots and blockchain network. These two technologies combined allowed Helium to take steps towards its vision of creating an IoT network. The hotspot is the hardware that provides coverage. While the blockchain helps verify and compensate users for setting up the network.
Amir Haleem is the co-founder and current CEO of Helium. He has experience in the gaming industry and served as CTO at Diversion.
CTO Marc Nijdam previously worked at Yahoo and has over two decades of experience in the technology industry.
Frank Mong is Helium’s COO. With over two decades of experience in the cyber-security industry, he oversees business growth and marketing.
Lastly, the other co-founders, Shawn Fanning and Sean Carey, have left the company. But Shawn Fanning remains in an advisory capacity.
How Does Helium Mining Work?
The Helium network is also known as the People’s network. It uses a new kind of consensus mechanism called Proof of Coverage (PoC). It differs from the traditional Proof of Work (PoW) mechanism employed by Bitcoin and Ethereum. PoW relies on high-energy hardware like ASIC miners or GPUs to solve complex mathematical problems.
PoC, on the other hand, uses radio waves from Helium hotspots to achieve consensus on the blockchain. It specifically uses radiofrequency (RF) for three reasons.
Firstly, RF has no latency because it travels at the speed of light. This is significant because the network can verify transactions faster, and it increases the blockchain’s throughput.
Secondly, RF has distance restrictions. It can only reach a certain physical distance before losing efficacy. Thirdly, RF signal strength can determine where the signal came from.
This is important because hotspots can measure these distances to ascertain how much coverage another hotspot has. This, in turn, determines that hotspot’s HNT rewards.
Why Proof Of Coverage?
Helium designed PoC based on three main principles. These are permissionless, decentralized design, and Byzantine Fault Tolerance (BFT).
To provide a permissionless network, Helium needs to work with a host of different hotspots. PoC allows the creation of custom hotspots if they can complete challenges and meet network requirements.
Next, PoC does not reward miners based on their electricity consumption or adding more hotspots in the same area. Instead, it only provides rewards based on physical distance and continued operation. This means that one miner cannot deploy multiple hotspots in the same area to create a monopoly. This makes the network decentralized by design.
Lastly, PoC ensures that it is BFT by using HoneyBadgerBFT. Here the protocol elects a consensus group. They vote on which transactions go into the next block in the network. They use threshold encryption. All transactions undergo this encryption with a shared public key. The consensus group needs to cooperate to decrypt the transactions. This ensures that no single actor can append transactions to the network.
PoC works with connected hotspots that send each other challenges. These challenges are small tasks that a hotspot needs to complete to satisfy the PoC mechanisms.
Moreover, there are three actors in the challenge. There are the challengers, transmitters, and witnesses.
Challengers create challenges and send them to Transmitters. This occurs roughly every 240 blocks on the Helium network.
Furthermore, Transmitters is the challenged hotspot. Its task is to send data packets that the Challenger requires to complete the challenge. This is called beaconing.
Lastly, Witnesses are hotspots that are in the proximity of Transmitters. Their job is to verify that Transmitters are sending the correct data packets and completing the challenges.
Any hotspot can perform these roles during operation. This means that all connected hotspots receive an HNT reward. The hotspot owner does not need to perform any actions except ensuring their hotspot is well-placed.
Proof Of Stake On Helium
Helium launched a proof-of-stake consensus protocol on the blockchain to improve the network’s scalability and throughput. Helium wants commercial-grade validators to join the network. This includes companies and service providers that can reliably use strong hardware and fast network connections.
Validators need to stake 10 000 HNT into a staking pool and have data center grade hardware. Individual users can also stake their HNT in various validator pools and earn a passive income.
The Helium Token, HNT, launched with the Helium blockchain and is the network’s native currency. Helium also has another currency, data credits, which fund certain functions on the network.
The best way to get HNT is to contribute to Helium mining. This means being a hotspot owner and running the hardware in areas where HNT rewards are higher.
HNT did not have a pre-mine event, and its max supply is 223 million. And Helium has divided HNT distribution among three groups in its 1st year (2019). The first group is Network Data Transfer. They receive 30% of the total supply for sending and receiving data packets.
The second group, Hotspot Infrastructure, receives 35% for participating in Helium mining. The final group, Helium, Inc., and Investors receive 35% for blockchain governance.
Helium is also actively changing the HNT distribution over time. In the beginning, a larger proportion of HNT distribution will go towards growing the network. Currently, the network’s growth cannot meet the demand for hotspots because of the global chip shortage.
Accordingly, as the network grows, it will distribute more HNT for transferring data and less to investors. Helium will halt distribution changes after 20 years.
Furthermore, Helium implemented HNT halving for the number of HNT that can be mined. Since its genesis block in 2019, it has mined 5M HNT per month. On 1st August 2021, it halved to 2.5M HNT per month.
Helium users can swap their HNT for Data Credits. Data Credits is the only mode of payment for sending data over the Helium network. This means that Helium users need to trade in their HNT to use the network’s services.
Data Credits have a fixed price in US dollars, which is $0.00001. Data Credit holders cannot transfer their funds to other users. And each time a user converts their HNT to Data Credits, the converted HNT is removed from the circulating supply. This is called burning, and it is meant to keep HNT and Data Credits in a Burn-And-Mint Equilibrium.
Is Helium Mining Profitable?
Helium launched HNT as an incentive for people to grow the People’s Network. This means that in the first stages of the network’s expansion, hotspot owners receive higher profits from challenges and witnessing them.
Currently, it is nearly impossible to buy a Helium-approved hotspot. There are waiting periods that stretch to eight months. This is due to the global chip shortage.
On the other hand, profiting from Helium mining depends on your geographic location and the state of the Helium network in the area. Profits can differ if you live in a dense, rural, or remote area.
Firstly, in a dense area with many hotspots already connected to the Helium network, it is much more challenging to earn HNT. This is because other hotspots already provide coverage for a specific area. The best way to earn HNT from Helium mining in this area is to be a witness to challenges. This is less effective because there might not be many challenges in a widely covered area.
Secondly, in a rural area with fewer connected hotspots, there is a higher possibility of profit from Helium mining. This is because the network is smaller, and there is more room for growth. This means that there will be more opportunities to witness and issue challenges as more people set up their hotspots.
Thirdly, in a remote area, there are very few opportunities to issue and witness challenges with a connected hotspot. But setting up a hotspot early might bring you profits as the network grows in the area.
HNT holders can become validators on the Helium network. To become a validator, you need to stake 10 000 HNT into the Helium staking pool and have the required internet connection. Helium does not recommend a home internet connection.
Additionally, a validator pool earns 6% of overall HNT rewards for performing consensus group tasks. Individual validators receive rewards depending on the size of the validator pool, how often they are chosen for a consensus group.
Helium Mining Hardware
To begin Helium mining, you need a Helium-approved hotspot. These are physical devices that enable their owners to participate in growing the Helium network through transmitting data and mining HNT.
Helium provides a list of compatible hotspots on its website. Any third-party manufacturers and vendors need the approval of the Helium community before being listed.
The original Helium hotspot launched in 2019 to the US market. It is currently sold out in North America and Europe.
Furthermore, the Helium hotspot does not require much setup. All you need to do is find a suitable location to place the hotspot. Preferably, it should be placed in an elevated area (if you buy an outdoor hotspot) or near a window without electronic interference.
Next, you plug it in. You can monitor the hotspot’s performance from the Helium Hotspot app.
The Helium network is a novel implementation of blockchain technology. It uses HNT as an incentive for people to set up their Helium hotspots to grow the network.
Helium’s vision involves a LoRaWan peer-to-peer network that is permissionless and decentralized. At this stage of the project, people can earn profits from running their hotspot and from staking HNT in a staking pool.
In summary, Helium’s novel project might change drastically in the next year. This includes how miners profit from the network and the value of HNT as the network continues to burn and half the cryptocurrency.