What is Helium Crypto and how does it work?


What is Helium Crypto and how does it work?

Helium is a decentralized blockchain-based network designed to enable seamless and low-cost IoT (Internet of Things) device communication. At the heart of this innovative network is the Helium cryptocurrency (HNT), a vital component that not only ensures the network’s functioning but also incentivizes participants.

Launched in 2019, Helium was founded by Amir Haleem, Shawn Fanning, and Sean Carey, with the intent of revolutionizing the way wireless networks function. With a belief that the internet should be decentralized and more accessible, the Helium network was designed as a two-sided market with rewards provided in Helium tokens, HNT.

The Helium network provides IoT devices with network coverage through its unique approach of employing consumer hotspots, which users install in their homes or offices. These hotspots provide miles of wireless network coverage, serving as nodes in the Helium blockchain. The hotspots do much more than just provide network coverage. They also mine HNT, the native cryptocurrency of the Helium blockchain.

HNT is mined and distributed to various participants in the network, including hotspot owners, based on their contribution to the network. This innovative concept, often termed as “Proof-of-Coverage,” involves these hotspots demonstrating they are providing network coverage in their locations by verifying the wireless coverage of other hotspots in their vicinity. Therefore, unlike conventional Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus mechanisms, Helium’s unique Proof-of-Coverage model incentivizes expanding network coverage rather than computing power or wealth.

The HNT tokens play a crucial role in the operation of the Helium network. These tokens serve as an incentive to hotspot owners to participate in the network, thereby ensuring a steady growth of the network coverage. The tokens can be spent by users to access the network services, thereby driving the demand for the token. Moreover, the tokens serve as the medium of exchange within the network, enabling the realization of a decentralized, peer-to-peer wireless network.

The underlying technology of Helium is based on a variant of the HoneyBadgerBFT protocol. This protocol is known for its fault tolerance and ability to function even when a fraction of its nodes are compromised, making the Helium blockchain particularly resilient to attacks. The network also utilizes the Ethereum blockchain for certain operations, such as token transactions, with plans to become fully EVM (Ethereum Virtual Machine) compatible to leverage the vast array of decentralized applications on the Ethereum network.

One of the unique aspects of the Helium network is the role of the end-users in its expansion. Users install Helium hotspots in their homes or offices, providing network coverage and acting as validators for the network. This setup, known as a decentralized wireless network, ensures the network’s organic growth. Users can purchase a Helium hotspot, plug it in, and start providing network coverage, effectively becoming a part of the network. As the number of hotspots increases, so does the network’s coverage, scalability, and security.

The Helium network also integrates a concept known as “The Burn and Mint Equilibrium” to balance the supply of HNT tokens. This model encourages the burning (destruction) of HNT tokens by users to create Data Credits. These Data Credits are non-transferable and tied to a user’s account, serving as the only way to pay for network services such as device data transfers. This mechanism ensures the HNT supply remains stable and controls inflation.

Security in the Helium network is maintained through a unique consensus group mechanism. Every epoch, a new consensus group is chosen among the hotspots. The selected group is responsible for producing blocks and recording transactions on the blockchain. This selection process is random, making it difficult for an attacker to compromise the system. Additionally, the frequent change of consensus groups adds an extra layer of security to the network.

In conclusion, the Helium Network is an innovative approach to creating a decentralized wireless network for IoT devices. Through its unique Proof-of-Coverage model, the network incentivizes the expansion of wireless coverage. The native cryptocurrency, HNT, serves as both a reward for participants and a medium of exchange within the network. With its unique consensus mechanisms and focus on user participation, Helium represents a significant leap forward in the realm of decentralized networks and cryptocurrency. Its design provides a compelling model for future blockchain-based networks, marrying practical utility with robust security, and participatory growth with economic incentivization.