Internet of Things on blockchain: how Helium (HNT) is changing the IoT market paradigm
Many blockchains are focused on a specific area, such as decentralized finance (DeFi), metaverses, and GameFi. These areas have become some of the most popular places in the crypto industry, but competition is growing stronger.
What is Helium?
Helium is a decentralized solution for wireless communication between IoT devices, positioning itself as a "people's network". The creators of Helium set out to change the paradigm of the Internet of Things market by introducing one of the fastest-growing wireless networks on the blockchain, with over 850,000 access points in 177 countries.
Helium was founded in 2013 and was not associated with blockchain technology and cryptocurrencies in any way at the time. Initially, Helium developers planned to create a decentralized wireless network for Internet of Things IoT devices. However, the plans were not destined to come true due to a lack of funding, and by 2017, the team had almost run out of funds to create the conceived project.
Then, the developers decided to stimulate community interest by issuing tokens and adding blockchain technology to their projects. The leading Helium network is set to launch in 2019, but later on, a vote was taken to switch to the Solana blockchain, which has high bandwidth and is one of the most productive in the crypto industry.
Over 80% of the vote favoured moving to Solana, but the Helium blockchain remains publicly available. According to Helium Foundation CEO Scott Siegel, the migration to Solana will allow the team to focus on scaling the network rather than managing the blockchain. The transition has proven to be pretty straightforward, as it turns out that the private keys of Solana and Helium wallets are compatible.
How Helium works
Existing wireless connectivity solutions in the IoT market do not meet the requirements for connecting next-generation devices. Helium developers have created access points that are both a blockchain node and a wireless gateway for communication between IoT devices and a core component of the ecosystem.
These nodes are called hotspots, providing security and decentralization to the Helium network. Essentially, each hotspot node is a miner that also mines the HNT cryptocurrency.
Users can connect a wireless gateway to the Helium network and receive HNT tokens as rewards. For this purpose, the project team implemented the LongFi protocol, which requests node network connections.
The Helium network is based on the Proof-of-Coverage consensus mechanism. The miners or hot spots run on an open-source cloud-based protocol called LoraWAN, which enables wireless communication between access points. LoraWAN is an enhancement of the Lora protocol with additional security and encryption components.
HNT token
HNT is a native Helium blockchain token that rewards miners who launch their access points to power the network. HNT holders can also burn tokens to create Data Credits, an NFT token used to cover network commissions and to send sensor data and location.
The maximum token issuance is 223 million HNT, of which 159 million are already circulating. The Helium protocol includes a balanced mechanism of token issuance and token burning. About 5 million HNT are generated monthly, which are distributed as follows:
- 30% — rewards to hotspots for data transmission over the network;
- 35% to hotspot infrastructure;
- 35% to investors and Helium Foundation.
Over time, the distribution will change: hotspot rewards will increase by 2.5% while distributions to infrastructure, investors and Helium Foundation will decrease by the same amount.
The token appeared on exchanges in June 2020 and traded at $0.27 after listing, reaching an all-time high of $55.2 in November 2021. The exchange rate fell until April 2023, reaching $1.32, but has seen steady growth.
As of December 2023, HNT is trading at $8.3 — more than 6 times its April low. HNT has a capitalization of $1.36 billion, ranking 52nd in CoinMarketCap's overall ranking and second among blockchains targeting the IoT device market. The HNT token is available on exchanges such as Coinbase, ByBit, Gate.io, KuCoin and Raydium.
Prospects for Helium
The new mining method has caused heated discussions on Twitter (X) and the project's subreddit. Users note its accessibility and good profitability for small investments: some claim that hot spots can earn up to $50 per day. However, users also note a shortage of Helium hotspots, probably caused by the high demand for them.
The Internet of Things is one of the fastest-growing industries in the world. According to Statista, the number of connected IoT devices worldwide could reach 38.6 billion by 2025 and about 50 billion by 2030.
The growing popularity of IoT devices could also positively impact blockchain projects related to this field, as they allow them to benefit from tokens for connecting their access points to a shared network.
Helium is one of the leading solutions for the IoT market in capitalization, second only to another popular blockchain, VeChain. Despite being launched later, Helium has already surpassed pioneers IOTA and IoTeX. This may be because the company itself was founded long before the transition to blockchain and has already built up a large user base.
