Guide to Helium

• The Helium blockchain is transitioning to a decentralized proof of stake protocol to power the Helium network, decentralized P2P wireless infrastructure for the internet of things (IoT).

• Coinbase Cloud enables HNT holders to run their own validator, helping to secure the network and earn rewards.

• Our platform is optimized to run a large number of Helium validators for a customer — we make it very easy to deploy and maintain your infrastructure, with nodes managed from one simple, non‐custodial interface.

An introduction to Helium

The Helium network, referred to as "The People’s Network," is a decentralized wireless network that allows internet of things devices (IoT), such as smart fridges, pet collars, or rentable scooters, to wirelessly connect to the internet and geolocate. The network is secured by the Helium blockchain which, starting summer 2021, will become a proof of stake protocol.

The IoT ecosystem is expanding, but a true boom is hampered by the need for these devices to connect to the internet via satellite or cellular technology. IoT devices need inexpensive, readily‐available but not high‐bandwidth internet connections to send data to and receive data from the internet. Satellite and cellular technologies, the traditional providers of this coverage, have higher power requirements, higher costs, need contract‐based payment, and/or have lower ranges of coverage, and as such are a limiting factor for the ecosystem’s expansion.

The Helium network is a collection of hotspots hosted by individuals around the world. It solves the problem of using satellite or cellular technology for IoT devices by providing a low‐power, low cost, privacy default peer‐to‐peer wireless network run on open standards. It allows IoT devices to geolocate and send and receive data wherever they are or may go. This decentralized peer‐to‐peer network of hotspots uses radio frequencies and consumer‐grade hardware to create the pay‐as‐you‐go internet connection for IoT devices, and is powered by a novel work algorithm called Proof of Coverage. However, while Proof of Coverage is used to provide useful work to the network, it is not a type of consensus mechanism. Going forward, Helium will be powered by both Proof of Coverage (work) and Proof of Stake (consensus).

In order to provide consistent coverage, the network offers incentives intended to create regions of hotspot density. Rewards are increased or decreased depending on a number of factors including a hotspot’s proximity to other hotspots. Hotspot density serves as a means to secure the network as well as to ensure that the service range could meaningfully connect devices.

Helium has been extremely successful since it was founded in 2013, with immense traction across a variety of industries, including Lime scooters, InvisiLeash pet tracking products, Salesforce IoT employee onboarding, and Victor e-mousetrap pest control. Over 65,000 hotspots are providing coverage at the time of writing, with an additional 1,000 added per day on average. These hotspots, often sold out or on backorder, were named one of Time’s Best Inventions of 2019.

Since its launch, the Helium blockchain has been secured and validated by the hotspot operators on the Helium network. In addition to providing service for IoT devices through Proof of Coverage, hotspot operators would also use their consumer‐grade hardware and basic internet connections to also form blocks, participate in consensus, and extend the chain. However, the Helium network has become a victim of its own success, as the immense growth in global hotspots made it difficult to come to consensus in a timely and secure way.

When Helium transitions to proof of stake, a new layer of enterprise‐grade validators, such as those run on the Bison Trails platform, with more robust infrastructure than the hotspots will be introduced. These new validator nodes will help create a more reliable network, faster connections, and, in the future, provide potential proxies for future light hotspots to the network.

Hotspot miners will continue to earn the majority of rewards for relaying IoT device data and providing network coverage, but the activity of those miners will be verified and recorded to the chain by the consensus group which is made up of a semi‐randomly elected group of Helium validators. Becoming a validator is an opportunity for anyone with HNT, including hotspots owners and investors, to earn additional rewards by staking their coins to a Helium validator.

"As one of the most trusted names in the blockchain infrastructure industry, we’re excited to work with Coinbase Cloud to enable HNT holders to run their own validator within the Helium Network," said Scott Sigel from the Decentralized Wireless Alliance (the Helium Network’s Foundation arm). "This is a critical step in the network’s growth, security, and adoption, and we know they will work with us every step of the way to implement the network’s validator staking process."

How to participate on Helium

There are three key players in the Helium blockchain:

• Hotspots provide network coverage for IoT devices in their vicinity

• Validators gather transactions, form blocks, and come to consensus on the state of the chain

• IoT devices use Helium’s hotspots for data transmission needs, paying in Data Credits to do so

Helium hotspot coverage

Hotspots operating on the Helium Network use a long‐range wireless protocol (Long‐Fi) and the operator’s internet connection to broadcast a radio signal to which low‐power devices can connect. Any LoRaWAN device (the standard for IoT) can then connect to the hotspots, making micropayments for the privilege of accessing the network.

Since genesis, Helium has been powered by a novel work algorithm called Proof of Coverage. Proof of Coverage is the method by which a device relays its physical location and ability to provide coverage to the blockchain without having to be trusted by the chain, allowing the network to operate securely across an array of independent, distributed operators. Hotspots on the Helium network are randomly assigned Proof of Coverage “challenges” requiring them to ping nearby hotspots and prove that they are located and successfully transmitting coverage from where they say they are; hotspots earn HNT for successfully completing the tests. Hotspots without neighbors aren’t able to verify coverage and therefore earn less HNT than those that are part of an interconnected network.

As the Helium network has grown in use and popularity, its operators’ consumer‐grade hotspot hardware and internet connections have become less able to simultaneously provide coverage, complete proof of coverage tests, and conduct consensus for the Helium blockchain. With the transition to proof of stake, validator nodes will be randomly selected to perform the work of Helium’s consensus group instead of a randomly selected group of miner hotspots.

Proof of stake validators will verify hotspots’ transactions, perform consensus, and add new blocks to the Helium blockchain, earning rewards in HNT for contributing to the network’s stability. Each Helium validator must have 10,000 HNT staked to it in order to participate. A minimum of 100 validators has been proposed for the active set; once that threshold has been reached, the protocol will begin electing validators from the pool to perform the work of the consensus group. There is no maximum to the active set, incentivizing joining the network as a validator early while the pool to be selected to perform work is lower.

Helium uses HoneyBadgerBFT as its consensus method, a PoS consensus protocol considered robust in less‐than‐ideal network environments. It allows a known group of nodes to reach consensus, even over unreliable connections, by not relying on network timing assumptions and instead acting asynchronously by using a group threshold to achieve censorship‐resistance. This is in contrast to synchronous consensus methods which rely on all messages being passed around the network within the same time period; synchronous consensus is reliant on internet connectivity operating as expected as nodes use network timing assumptions to gauge when all messages have been received.

Validators on Helium are elected to a consensus group, receive encrypted transactions from hotspots, pass them around to the other validators in the group, work together to decrypt them, and reach a common agreement on the ordering of the transactions before forming a block.

Helium's consensus group

Each epoch (≈30 blocks), the protocol uses a probabilistic beacon to select a number of validators (estimated from a few dozen to the low hundreds) from the total validator pool to form the Consensus Group. Unlike most PoS networks, validators are selected to participate semi-randomly rather than based on the amount of HNT staked. As such, operators optimize their participation in the network by operating as many validator nodes as possible.

Rewards on Helium

The effective reward rate for validators on Helium is based on the staking rate of the total supply of HNT in circulation; as the percentage of total tokens staked increases, the reward rate decreases. All reward rate estimates are based on the assumption of 10k HNT staked per validator node. At launch there will be no over-staking; a node operator who wants to stake more than 10k HNT must spin up multiple validator nodes in increments of 10k HNT. This per node cap incentivizes participants to distribute their stake across multiple validators, helping increase security and decentralization.

To connect to the internet via Helium’s hotspots, IoT devices make micropayments with Helium Data Credits. Helium Data Credits (DCs) are non‐transferrable USD‐pegged work tokens created by burning HNT; IoT operators can purchase DCs by paying with a credit card or HNT, but the DCs can only be created by burning HNT. The more devices that connect to the Helium network by paying with DCs, the more HNT is burned, making HNT more scarce as the network grows by decreasing the overall inflation rate.

Source

At Genesis in 2019, the Helium network’s issuance target was 5,000,000 HNT per month. This rate will last until August 2021, when the Helium network will experience its first halvening, meaning only 2,500,000 HNT will be issued each month moving forward.

Halvenings will continue to occur every 2 years for the first 50 years of network operation, until the network has reached its maximum supply of 223,000,000 HNT around 2070. No new HNT will be minted from then on. (Note: Originally the maximum supply of HNT was to be 240M. It was reduced by 17M following network complications. All future-looking issuance is projected). There is currently a circulating supply of 91M HNT.

Though Helium has a longer unbonding period than many protocols, the protocol does support transferring stake to a new validator in any wallet. This means that a Helium validator could move their operations to managed infrastructure such as Bison Trails’ without needing to go through the unbonding period.

Risks of participation on Helium

At the time of writing there is no slashing in Helium, though the team may implement it in the future. As such, validators can not lose their initial stake. However, if a validator chosen to take part in the Consensus Group prevents the group from performing its tasks, the validator will incur penalties resulting in a temporarily reduced amount of rewards earned.

Penalties affect the potential to earn rewards by reducing the chance a validator will be selected to take part in a Consensus Group. At the end of every Consensus Group period, 25% of the validators in the current consensus group are removed and replaced with new, random validators from the overall validator pool. A validator’s chances of being removed from the Consensus Group are higher if they have a higher penalty score, and their chances of being added to a new Consensus Group are lower if they have a higher penalty score.

There are four penalty types on Helium that combine to create the penalty score:

• Tenure penalties are not performance‐based, but are designed to ensure that there is churn in the selection of Consensus Group members and that no validator may be in the Consensus Group too frequently or for too long. Every validator that participates in a Consensus Group receives a tenure penalty for their participation.

• Distributed Key Generation (DKG) penalties are assigned to a validator if a group election to include a block on the chain fails and the validator in question was part of the reason it failed. This penalty could take place when the Consensus Group is working together to decrypt transactions sent by hotspots or when the group is working to sign a block and commit it to the blockchain.

• Performance penalties are most frequently a result of validator downtime.

• Byzantine Binary Agreement (BBA) penalties are assigned when a validator is online but fails to adequately contribute a bundle of transactions or metadata to the Consensus Group, due to poor node performance such as being underpowered or having a poor network connection.

All penalties decay at the same rate as defined by the protocol‐defined penalty history limit. The penalty history limit defines a number of blocks that will be committed before a validator’s penalty is reset to 0; the penalty decreases over the course of that period of time. As such, validators who participate in a Consensus Group and receive a tenure penalty for doing so are all ensured to be probabilistically eligible to participate again in a new Consensus Group after the same set time period.

There is no native delegation as part of the Helium protocol; any services offering Helium delegation are taking custody of a participant’s HNT and spinning up conglomerated validators on their customers’ behalf in the background.

Governance on Helium

As of June 2021, Helium does not have an on-chain governance system. However, HIP-31 is under discussion and may create a governance model via token burns. Any community member can submit a Helium Improvement Proposal (HIP) on Helium’s Github or Discord to make their voice heard on issues such as token economics, blockchain dynamics, upgrades, and more.

Why run a Helium node?

• Running a validator node helps the network function properly and remain secure. It is a critical step to maintaining the shared network state.

• Hotspots continue to earn the majority of rewards for relaying device data and providing the Helium network’s coverage, but now the activity of those hotspots will be verified and recorded to the chain by Helium blockchain validator nodes.

• There is an incentive to be an early participant in the network, as the HNT issued per annum will halve every two years. There is also an incentive to be a long-term participant in the network, which will experience a higher rate of burning HNT as it grows in popularity and more IoT devices require Data Credits to connect to it, lowering overall inflation.

Why choose Coinbase Cloud

Coinbase Cloud is uniquely positioned to provide unparalleled enterprise-grade node infrastructure for Helium validators:

• Protocol Experts: We are node, participatory infrastructure, and protocol experts. Our team is working closely with the Helium team around critical network issues, such as network economics and network parameters. We test all software, infrastructure, and protocol upgrades on our own infrastructure first ensuring any breaking issues are caught well before propagating changes to our customers’ infrastructure.

• Easy‐to‐Use Platform: Coinbase Cloud is optimized to run a large number of Helium nodes—we make it very easy to deploy and maintain your infrastructure, with nodes managed from one simple interface. We designed an intuitive user experience that is surprisingly simple given the complexity of the underlying technology.

• Enterprise‐Grade Infrastructure Security: As one of the most trusted names in the blockchain infrastructure industry, we have best‐in‐class security augmented by information, application, and incident management policies.

• Access to Protocol Specialists: Our dedicated protocol specialists keep Coinbase Cloud's customers up‐to‐date about changes to the validator ecosystem. They provide advice, insights, and guidance that arms our customers with critical information to better manage their participation.

• Premium Provider: We are the world’s premier multi‐cloud, multi‐region infrastructure provider specializing in permissionless participatory networks.

• Custodian Agnostic: As a non-custodial infrastructure provider, we can work with you to participate in Helium regardless of your custody solution.