The Helium Network has been making waves in the technology world as a groundbreaking decentralized wireless network designed to enable the widespread adoption of the Internet of Things (IoT). Powered by blockchain technology, the Helium Network relies on its native cryptocurrency, HNT (Helium Network Token), to incentivize users to set up and maintain hotspots. These hotspots act as the backbone of the network, providing coverage and facilitating seamless data transmission for IoT devices. As the Helium Network gains traction, understanding the dynamics of HNT supply, particularly in the context of halving events, becomes critical.
What is Halving and How it Affects HNT Supply?
Halving is a significant event in the Helium Network that occurs roughly every two years. During a halving event, the number of HNT rewards earned by hotspot operators for their role in providing network coverage and maintaining infrastructure is reduced by half. This event is crucial as it introduces scarcity into the supply of HNT, mimicking the principles of popular cryptocurrencies like Bitcoin.
The most recent halving event took place on August 1st, 2023. During this event, the emission rate of new HNT into the system was cut in half. As a result, hotspot operators now receive half of the HNT rewards they previously earned for their contributions. This reduction in rewards aims to create a controlled and predictable inflation rate, ultimately limiting the overall supply of HNT.
HNT Max Supply and the Impact of Halving
The estimation of when the maximum supply of HNT will be reached is a complex process, as it depends on various factors that influence the circulating amount of the token. Each day, the Helium Network performs a scheduled emission of HNT, increasing the token supply. However, with each halving, these daily increases become progressively smaller, gradually slowing down the rate at which new HNT enters circulation.
Another factor that affects the supply dynamics is the burning of HNT. When users purchase Data Credits, HNT is burned, removing it from circulation. On a daily basis, up to 1644 HNT is burned, but this burned amount is subsequently replaced. If the daily burns exceed 1644 HNT, the net effect is a reduction in the overall supply of HNT.
HNT Max Supply and Its Relation to HNT Burns
Over time, the daily supply increases will continue to decrease in magnitude, while the daily supply decreases are expected to trend upwards, assuming the continued growth in the usage of the network. Eventually, there will come a point when the permanent HNT burns significantly surpass daily scheduled emissions. At this juncture, the supply and max supply of HNT will be nearly identical. This equilibrium will establish a definitive HNT max supply, leading to a stabilized supply for the foreseeable future.
It is important to note that this convergence between supply and max supply is not merely a theoretical event projected far into the future. With the recent halving and increasing usage of the network, this convergence is likely to occur much sooner than anticipated, possibly within a significantly shorter timeframe.
Halving's Impact on Rewards and Data Transmission
During halving events, the rewards earned by IoT and mobile hotspot owners are halved due to the reduction in the mint rate. However, it is important to clarify that the halving does not affect the existing HNT balances in users' wallets. It only impacts the rate at which new HNT is minted from the date of the halving event onwards.
The halving event does not affect the cost of transmitting data on the Helium Network either. Data credits are fixed to a US dollar value, ensuring stable and predictable data transmission costs for users.
The Helium Network's halving events play a pivotal role in shaping the supply dynamics of its native cryptocurrency, HNT. By introducing scarcity and limiting the rate of new HNT emissions, halving establishes a max supply for HNT and contributes to a robust economic model for the network's expansion. The recent halving on August 1st, 2023, underscores the significance of this event and its impact on HNT's supply.
Looking ahead, the next halving event is scheduled to occur approximately two years from the recent one. However, the exact date will be influenced by various factors, including the growth and usage of the Helium Network.
As the Helium Network continues to expand and evolve, staying informed about the latest developments, upgrades, and halving events becomes crucial for users, investors, and enthusiasts alike. Understanding the dynamics of HNT supply and its relation to halving events can provide valuable insights for making informed decisions in this ever-evolving landscape of wireless connectivity and blockchain technology.
To learn more about the approval of HIP 20 and its connection to HNT max supply, visit the official Helium blog post at: HIP 20 on HNT Max Supply Approved by the Community.