- Author: @ferebee, @JMF, @abhay
- Start Date: 2024-11-08
- Category: Economic, Technical, Governance
- Original HIP PR: #1119
- Tracking Issue: #1120
- Voting Requirements: veHNT, veIOT, and veMOBILE Holders. See specific voting details below.
If approved and implemented, this proposal would phase out the subnetwork tokens introduced through HIPs 51, 52, and 53 (IOT and MOBILE), and the network would return to rewarding participants directly in HNT. Additionally, HNT emissions allocated to HST holders will end, and instead will augment the HNT issued to active Hotspot owners and network builders via the current Utility Score, effectively increasing the HNT available to reward ecosystem participants by over 40%. Finally, unissued HNT (approximately 4.2 million) from the Helium L1 will be used both to gradually fund the MOBILE treasury, and to replace the MOBILE Operations Fund delegated to the Helium Foundation.
Moving to a single token simplifies the Helium ecosystem, making it more understandable for current and future network builders, and more accessible to the crypto community at large. Using HNT as the sole reward currency also corrects the imbalances created by the treasury system. Specifically, MOBILE network participants would see immediate increases in the value of their rewards, while IOT participants’ rewards would continue to be supported post-halvening as the network grows through ongoing community investment.
Overall, this proposal would increase rewards for current and future participants of all networks.
The current multi-token system is complex, making it challenging for new users to understand the role of each token. Members of the crypto community also find it difficult to evaluate interconnected tokens and the mechanisms through which they accrue value, which deters investment in network coverage and ecosystem growth.
Historically, the Helium ecosystem has debated the distribution of value among the various tokens, including ideas to introduce demand-side burn for MOBILE and a potential subnetwork fork from HNT. These discussions often create friction within the community and can distract potential newcomers.
HIP-51 introduced a guiding principle: if all networks contribute value to Helium through HNT, then all networks benefit.
In recent years, the IOT and MOBILE subnetworks have contributed significantly to Helium’s growth, with independent tokens helping the ecosystem expand beyond IOT by supporting MOBILE even during volatile market periods. Today, with the economic paths of both subnetworks becoming clearer and token volatility decreasing, a unified focus on building networks with HNT is achievable and beneficial.
As the MOBILE network matures, it’s evident that MOBILE rewards are valued lower in HNT terms than the HNT emissions allocated to the MOBILE treasury. If MOBILE network builders received direct HNT rewards instead, their rewards would increase by about 2 times in HNT terms, creating a strong incentive for continued network development.
Meanwhile, IOT’s value is closely aligned with its treasury support, and it remains a vital part of the ecosystem. This proposal seeks to maintain that support.
All Helium Ecosystem participants are affected directly or indirectly by this proposal.
Specifically Helium Security Token (HST) holders are negatively affected by this HIP. HST holders are investors in, and early employees of, Nova Labs, Inc., who currently receive 30% of emitted HNT, decreasing every year to 15%. This HIP will redirect the approximately 11 Million remaining HNT scheduled to be emitted to HST holders directly to the rest of the network's participants.
This proposal suggests several tokenomic changes to simplify the Helium ecosystem and promote future network development.
At a high level, we propose to:
- Discontinue HNT emissions to HST holders, and emit all HNT towards network participants directly based on the Utility Score rather than towards the IOT and MOBILE treasuries.
- Discontinue IOT and MOBILE emissions, subject to veIOT and veMOBILE votes, and reward participants directly in HNT based on the Utility Score, subject to a veHNT vote.
- Revoke the remaining 18.2B MOBILE currently in the MOBILE Operations Fund, and request that Helium Foundation burn these tokens, contingent on the veMOBILE decision to discontinue MOBILE emissions.
- Recognize the 4.2 million unissued HNT from Helium L1 after HIP-20 and issue them in two ways:
- Establish a new 1.3M HNT MOBILE Growth Fund to fund future development of the MOBILE network, to be administered by Helium Foundation.
- Emit the remaining 2.9M HNT directly into the MOBILE treasury on an epochal basis until the next halvening (2025-08-01), contingent on the veMOBILE decision to discontinue MOBILE emissions.
The existing IOT and MOBILE treasuries remain operational and subject to veHNT governance. Holders of subnetwork tokens may continue to hold them, or may exchange them for HNT at any time through the treasuries. The exchange rate of the MOBILE treasury will continue to improve until the halvening due to the ongoing HNT emissions defined in 4-2 above.
The distribution schedule within each subnetwork remains under the control of subnetwork governance, and is unchanged by this proposal. All subnetwork rewards including veHNT delegations are now distributed in HNT.
Subnetwork governance remains in place using the existing tokens IOT and MOBILE, which will remain available to trade on the market, even as emissions cease. A suggestion is made for a future HIP that could shift veIOT and veMOBILE to a new mechanism derived from veHNT, while promoting long-term alignment to subnetworks in a way similar to the current system. Alternative forms of subnetwork governance may be proposed by the community, to be decided by a future veHNT vote.
This proposal does not address other functions of the subnetwork tokens, which remain unchanged until addressed in future HIPs.
HNT distribution between IOT and MOBILE subnetworks continues to follow their DAO Utility Scores as per HIP-51 and HIP-88, including the additional portion redirected from current emissions to HST holders. HNT will be rewarded directly to participants via the same claim mechanism they are familiar with, rather than being deposited in the subnetwork treasuries.
Rewards will be distributed according to the existing subnetwork structures and remain subject to subnetwork governance. For example, the 6% of subnetwork token emissions rewarded to delegators will instead be rewarded as 6% of the HNT awarded to that subnetwork.
Emission shares which are unallocated (such as Oracle rewards) or partially unallocated (potentially MOBILE Service Provider rewards) will be burned unless a future HIP specifies otherwise.
Treasuries retain their current HNT balances. Existing IOT and MOBILE wallet balances remain unchanged, and holders can continue to hold, or can redeem for HNT at any time at the treasury rate.
Due to market factors, the IOT treasury is well-funded relative to IOT network contributions, whereas a large portion of early MOBILE rewards were minted without a backing of treasury HNT.
Currently, IOT trades at its treasury rate to HNT, while MOBILE trades at a speculative premium, possibly reflecting expected future value. As a result, current rewards and valuations don’t fully match the underlying HNT emissions.
- Higher Value of IOT Emissions: IOT rewards are valued higher in HNT than the HNT emitted to the IOT network, based on Utility Score.
- Current Strong Exchange Rate for IOT Tokens: IOT converts to HNT at a strong rate, though this may decline as MOBILE network revenue increases, and HNT emissions to IOT decrease.
- Lower Value of MOBILE Emissions: MOBILE rewards are worth less in HNT than the HNT emitted to the MOBILE subnetwork, due to lower HNT funding of the MOBILE treasury relative to subnetwork utility.
- Market Premium on MOBILE Tokens: MOBILE trades at approximately 2 times its treasury rate.
If subnetwork emissions were to shift to HNT without adjustments, potential effects would be:
- IOT network builders may see reduced HNT value of rewards.
- IOT holders would benefit, with a fixed IOT:HNT treasury rate.
- MOBILE network builders would benefit, with HNT rewards valued 2 times current MOBILE rewards.
- MOBILE holders would lose speculative premium, reducing their holdings’ value closer to the treasury rate.
This proposal introduces provisions to counteract these potential disadvantages.
Subnetwork governance remains in force, and this proposal doesn’t modify the existing system of governance using veIOT and veMOBILE, as derived from locked IOT and MOBILE tokens. While no new subnetwork tokens will be minted, participants can acquire voting rights by purchasing tokens on the open market and locking them.
Eventually, as existing IOT and MOBILE tokens are redeemed through the treasury, a new method of assigning subnetwork voting rights will become appropriate. This proposal recommends that the Helium community enact a new mechanism through a separate HIP, decided by veHNT vote. As an example, the following method is suggested.
A new form of veIOT and veMOBILE could be introduced, based on the delegation of veHNT to subnetworks. Instead of locking IOT and MOBILE tokens, delegators of veHNT could lock the delegation of their veHNT to a particular subnetwork, for a duration of between 0 and 1 year, similar to the existing lockup of the subnetwork tokens, thereby signaling their dedication to a particular subnetwork. In return, they would receive, on a linear scale, between 0 and 1 “new veIOT” or “new veMOBILE” for each veHNT whose delegation has been locked to that subnetwork. These new governance tokens could replace the existing subnetwork governance tokens when a sufficient number of them has been created.
However, in the interest of simplicity, this proposal leaves this decision up to further discussion by the community.
Subnetwork tokens are currently used for various supply-side operations within subnetworks, such as hex boosting in MOBILE. While IOT and MOBILE tokens will continue to exist after the implementation of this proposal, and can therefore still be used for these purposes, subnetworks are encouraged to adjust these operations to use HNT in the future through subnetwork governance.
The implementation of this proposal requires independent changes to HNT, IOT and MOBILE, and several votes. We describe these steps below.
Because this proposal intends to redirect HNT emissions from HST directly to participants on the network (Hotspot owners, etc.) and revoke a portion of the MOBILE premine that was passed by HIP-51 (HNT voters), it requires a veHNT vote. We propose a simple binary vote for this portion of the HIP.
In addition, this HIP proposes to halt emissions of IOT and MOBILE tokens, which are subject to veIOT and veMOBILE governance. With the passage of the veHNT vote, HNT emissions will come to replace existing IOT and MOBILE emissions, providing rewards to IOT and MOBILE network participants, while emissions of HNT to the IOT and MOBILE treasuries will cease.
Therefore, veIOT and veMOBILE holders will each vote separately on the proposal to stop the emission of IOT and MOBILE tokens simultaneously with the cessation of HNT emissions to the treasuries and the begin of HNT emissions to the treasuries.
Note that veIOT or veMOBILE holders could theoretically vote to continue emission of a subnetwork token, contrary to the recommendation of this proposal, but this would result in the issuance of tokens unbacked by treasury HNT. It's notable that this would dilute the subnetwork token supply and reduce the exchange rate, in HNT terms, of the existing subnetwork tokens.
The additional mint of 2.9M HNT to the MOBILE treasury is intended to support the value of existing MOBILE tokens, rather than to back additional MOBILE emissions. Therefore, it is contingent on a veMOBILE decision to stop MOBILE emissions. The same applies to the Foundation burn of the 18.2B MOBILE tokens in the Operations Fund.
Should the veHNT vote fail, the veIOT and veMOBILE votes will be void. If either subnetwork vote fails, the veHNT decision by the community will stand.
We expect that this proposal, if approved, can be fully implemented on or before January 15, 2025.
With this proposal, the community would approve halting all HNT emissions to HST holders, and instead directing them entirely into the existing HNT distribution mechanism via the Utility Score as specified in HIP 51, including its A factor, which will remain in effect. Thus, emissions from HST will be redirected fully to ecosystem participants.
Following HIP 20, Helium experienced L1 outages, leaving 4.2 million unminted HNT. This proposal intends to use this HNT in two ways. First, a new gradual emission of HNT into the MOBILE treasury from the implementation date until the next halvening (August 1, 2025) is established, contingent on a veMOBILE decision to stop MOBILE emissions. This would be a total of 2.9M HNT supplementing the MOBILE treasury.
Second, a new MOBILE Growth Fund is established using the remaining 1.3M HNT, which corresponds roughly to the value of the current MOBILE tokens in the Operations Fund at the treasury rate. This fund, directed by the Helium Foundation, is to be used for deployer incentives, such as boosted rewards, subsidized hardware swaps, or incentives for new service providers. To balance this, the Foundation will burn the entirety of its current 18.2B MOBILE holdings, also contingent on a veMOBILE decision to stop MOBILE emissions, thereby decreasing the circulating supply of the MOBILE token and strenghtening the treasury exchange rate.
Another way to move to HNT as the single token of the Helium ecosystem would be to redeem all subnetwork tokens for HNT automatically in a single operation. While this is simpler conceptually, it would involve coordination with external entities holding MOBILE tokens, and could inconvenience holders of subnetwork tokens who face external constraints on the timing of their trades.
The community has discussed other mechanisms to improve MOBILE builder rewards in real terms, in order to encourage buildout of the MOBILE network, including forms of direct burn of MOBILE tokens. However, HIP 51 has established HNT burn as the sole medium of buy-and-burn as payment for demand-side operations, so that all demand-side revenue accrues first to HNT. Changing this mechanism risks damaging the confidence of current and future participants in the stability of the Helium ecosystem.
Any change to Helium tokenomics demands the attention of holders of the tokens involved. While this proposal aims to simplify the Helium ecosystem and make it more approachable in the long run, not all participants will immediately benefit to the same degree.
This proposal does not address uses of IOT and MOBILE that extend beyond rewards, such as subnetwork governance and supply-side operations. Subnetwork tokens remain available and may be used for these purposes temporarily.
However, it is suggested that new mechanisms for these functions, based on HNT, be implemented by future HIPs.
This proposal will be implemented by Helium core developers. An initial investigation of the work required suggests that its phases can be completed by the proposed start dates.
This HIP is successful if the simplified tokenomic system helps to unify the community, encourage MOBILE buildout, and reduce confusion for outside observers.