mining-token-rewards.md

description
How do HNT get allocated? Read on to find out.

Mining and Token Rewards

Hotspot Hosts and other Helium Network participants have many questions about expected mining rewards. This is for good reason. Earning HNT is one of the most exciting pieces of the Helium Network.

While there's no exact formula for calculating how much HNT you'll earn over a given period, there are some higher level concepts, design elements, and rules to keep in mind that will help better explain what you might earn and why. This section covers these, as well as some mining and token reward basics.

{% hint style="info" %} HIP 20 and Max HNT Supply

The Helium Community has approved HIP 20. This introduces Halvenings, Net Emissions, and a Max Supply of 223MM HNT. Read more here and here.
{% endhint %}

{% hint style="info" %} HIP 15/17 and change to Beacon-only PoC, hex density-based reward scaling

The Helium Community has approved HIP 15 and HIP 17. This changes proof-of-coverage (PoC) from multihop to beaconing, and rewards based on hex-density.
{% endhint %}

How Do Hotspots Earn Helium Tokens?

The Helium blockchain rewards Hotspots for providing wireless coverage and verifying the Helium Network. Hotspots are rewarded in Helium Token (HNT).

Every epoch, the current consensus group mines 30 blocks on the blockchain. In each block, Hotspots perform various types of work and are awarded according to the following distribution:

Reward Type	Description
PoC Challenger	Rewarded to any Hotspot that creates a valid PoC challenge and submits the corresponding receipt to the blockchain.
PoC Challengees (Beacon)	Awarded to any Hotspot that completes a PoC challenge, known as a Beacon or a single-hop PoC challenge.
Witnesses	Distributed to all Hotspots that witness a packet as part of a PoC Challenge.
Consensus Group	Divided equally among the Hotspots that are part of outgoing Concesus Group, responsible for mining blocks.
Security	Awarded to Helium, Inc and other Network investors who hold Security Tokens.
Network Data Transfer	Distributed each epoch to Hotspots that route LongFi sensor data for sensors on the Network during that epoch.

{% hint style="info" %} Do I Have To Actively Participate to Earn Rewards Once My Hotspot is Deployed?

No. Once your Hotspot is completely deployed and fully synced with the Helium blockchain, you as the owner are not required to do anything else in order to earn HNT. Your Hotspot will perform all of the above activities on its own while it runs. That said, there are some optimizations you can make to ensure your Hotspot is operating at full capacity. {% endhint %}

Target HNT Production Per Epoch

The current target production rate for new HNT minted per month is 5,000,000. (This will drop to 2,500,000 month with the first scheduled halving on August 1, 2021.) This means that, if the blockchain performs as designed, it will produce 5,000,000 HNT per month. This target rate is based on the following two targets, as defined in their specific chain variables:

• Target block time is 60 seconds.
• Target epoch size is 30 blocks.

Recall that, in the Helium blockchain, blocks contain some number of individual transactions and epochs are comprised of all the blocks mined by a the current Consensus Group since the last epoch.

So, if we achieve our target block time of 60 seconds, and target epoch of 30 blocks, the blockchain will produce 5MM HNT per month. Per epoch, this equals roughly 3424.66 HNT. The math for this is as follows:

• (43800 minutes per month / 30 minutes per epoch) = 1460 epochs per month
• (5000000 tokens minted per month / 1460 epochs per month) = 3424.65753424658 HNT per epoch

{% hint style="info" %}

What Are The Current Block and Epoch Times?

At any point you can go to the Helium blockchain Explorer to view recent block and epoch statistics, past HNT production numbers, and much more. Your Helium Mobile Wallet will also give you the average block and epoch times for the trailing 24 hour period. {% endhint %}

HNT Distributions Per Epoch

As calculated above, the target HNT per epoch is approximately 3424.66. The next logical question is "Where does all this HNT go?" Let's take a look.

{% hint style="info" %} Prior to HIP 15, the reward distribution gave Challengers a larger proportion of mining rewards, with 18% of tokens and only 8.55% of rewards to Witnesses. With the implementation of HIP 15 (active as of December 16, 2020), as written by the author, the distribution was adjusted with more weight going to witnesses and less to challenger, with the total pool between the two staying the same (26.55%). {% endhint %}

Below are the mining rewards per epoch. For every complete epoch (marked by the election of a new Consensus Group), all the HNT produced get distributed over the following reward types:

Reward Type	Percentage	HNT Earned by Reward Type
PoC Challenger	.95%	32.53427
PoC Challengees	5.31%	181.849446
Witnesses	21.24%	727.397784
Consensus Group	6%	205.4796
Security Tokens	34%	1164.3844
Network Data Transfer	Up to 32.5%	Up to 1113.0145
Total	100%	3424.66

{% hint style="info" %} Rewards Change Over Time

In the above table you can see the maximum allotted rewards per reward type in accordance with HIP 10 (described below).

If you want to see the current reward type percentage, you can always query the Chain Variables API.

The next maximum allotted rewards change is currently scheduled for August 1, 2021. {% endhint %}

HIP10 and Variable HNT Rewards for Network Data Transfer

As noted above, HIP10 was activated on August 24th, 2020. HIP10 was introduced by Helium Community Member hashc0de and was adopted by the Helium Community. It ensures that HNT is rewarded at a rate of 1:1 to the amount of Data Credits (DC) routed by any given Hotspot per epoch. In doing so the Network Data Transfer reward is proportional to the DC spent that epoch. This proportional relationship between Network Data Transfer reward type and DC is capped at 32.5% (1113.0145 HNT). Therefore, if the DC burned doesn't equal the value of 1113.0145 HNT the remaining HNT is redistributed to the Proof of Coverage (PoC) rewards groups pro-rata.

Here are a few examples to illustrate how this works in practice:"

Example 1: DC Burn does not exceed 32.5% HNT

• In a given epoch, 2,000,000 DCs are transferred across the network
• The HNT Oracle Price is $2.00
• In this scenario, total HNT value of DC transferred in this epoch is 10HNT. This calculation is:(2,000,000 DC * $0.00001 / $2 HNT Oracle Price)
• These 10 HNT would be split proportionally to the Hotspots who did the work routing packets at the 1:1 rate.
• The remaining 1103.0145HNT from the Network Data Transfer reward would be distributed ratably among the Challengers, Witnesses and Challengees.
  • 38.10413727 to the Challenger group
  • 342.9372355 to the Witness group
  • 721.9731273 to the Challengee Group

Example 2: DC Burn exceeds 32.5% HNT

• In a given epoch, 500,000,000 DCs are transferred across the network

• The HNT Oracle Price is $2.00

  In this scenario, total HNT value of DC transferred in this epoch is 2500HNT. This calculation is:(500,000,000 DC * $0.00001 / $2 HNT Oracle Price)

• Because the Network DC burn exceeded the 1113.0145HNT available to the Network Data Transfer reward, all Hotspots who did the work over this epoch with split the full 1113.0145HNT proportionally.

Additional Notes on Reward Types and Payouts

• All Hotspots in the Consensus group will earn an equal reward.
• All Hotspots participating in PoC, including Challengers, Challengees and Witnesses will earn rewards proportional to how many events they participated in out of the total number of events per epoch.
• All Hotspots participating in Network Data Transfer will earn rewards proportional to their share of the total data transfer in that epoch, as shown above.
• Hotspots can earn one or more reward types during any given epoch.
• Hotspots are only eligible to submit one Proof of Coverage Challenge - which results in them earning the PoC Challenger reward - once per two epochs.
• PoC Challenger, PoC Challengee, and Witness reward types get distributed in the epoch that includes the corresponding PoC receipt.
• A Hotspot can earn more than one PoC Challengee and Witness rewards per epoch.

HNT Proration and Slow Block Times

The Helium Network is still new and growing quickly, so there are bugs to be squashed and optimizations to be made. Target block and epoch times can be difficult to attain consistently. To account for this, the Helium blockchain uses something called proration to ensure that the target of 5,000,000 is achieved even if block and epoch times aren't on target.

{% hint style="info" %}

Target HNT Depends on Blocks, Not Clocks

It's easiest to think of target HNT production over the span of one month. If the blockchain performs on target, resulting in roughly 1460 epochs per month, then 5MM new HNT will be produced. "One month" is a period of time measured by a clock. However, under the hood, we use block time, and the resulting epochs, to mark HNT production against our target. So when blocks are slow, HNT production is reduced proportionally. {% endhint %}

What Happens to HNT When Block Times are Slow?

Occasionally, due to the rapid growth of the network, there can be less-than-optimal block times. This results in slower epochs. When this happens the Network will produce less HNT over the same period of time. This may seem counterintuitive. Shouldn't the blockchain produce more HNT when block times are slower to ensure the 5MM per month target is hit? No. Again, think blocks, not clocks. Here's a step-by-step example to make it clearer:

• Let's assume for a given 60 minute period, the average block time was 120 seconds (instead of the target 60 seconds).
• This would mark 30 blocks over the 60 minute period, conclude an epoch, and result in HNT rewards being distributed.
• As with any epoch, we would distribute the target of (approximately) 3424.66 HNT.
• However, since this epoch took twice as long as normal (60 minutes versus 30 minutes) the blockchain essentially distributes HNT at half the normal rate.

When Block Times Slow Down, Everyone Earns Less

The most important take away here is that, when block times slow and HNT production is reduced, everyone participating in the Network - Witnesses, Challengers, Helium, Investors, etc. - is impacted equally (with the exception of Consensus Group members; more on this below). So, although it's annoying that the effective rate of HNT may have dropped over a given period of time, know that you're not the only one earning less. And this is by design.

Consensus Groups and Slow Block Times

The only group that doesn't see its HNT reduced per epoch when blocks are slow is the Consensus Group. Currently there are 16 members of each Consensus Group, sharing 6% of the HNT produced per epoch - or approximately 12.842475 HNT.

This amount stays fixed while every other category of HNT payout is prorated so that members of the Consensus Group are incentivized to keep elections fast. Otherwise, a malicious Consensus Group member might be inclined to prolong elections. This could be done, for example, to prevent a subsequent election, thus ensuring current membership in the Consensus Group stays intact. By distributing a fixed amount of HNT per 30 block epoch (as opposed to prorating payouts), we remove the incentive to disrupt elections.

Optimizing Your HNT Earnings

{% hint style="info" %} Join the Helium Discord Server

Looking to get advice from 1000s of community members on how to optimize your HNT earnings? Join the Helium Discord Server and start asking questions. {% endhint %}

In order to optimize your HNT earnings, there are a few things we recommend:

• Deploy Sensors as over 30% of all HNT goes to Hotspots that route actual sensor data.
• Ensuring you aren't the only Hotspot in your area is the method most likely to increase your earnings. If you are in an area with three or more Hotspots you are likely to participate as a PoC Challengee and Witness more PoC challenges that are happening around you. These are the two highest HNT distributions for Proof of Coverage per epoch, so optimizing around them has a high impact.
• Opening internet network ports helps in delivering PoC Challengee and Witness receipts to the PoC Challenger. These receipts are delivered via the internet through a peer-to-peer network, and can be affected by NAT, firewalls, and other networking issues. The most optimal configuration is adding the Hotspot to your network DMZ which allows unfettered access to and from the internet, but not to your local network. Alternatively, manually opening port 44158 to the Hotspot will help, and enabling uPNP on your network router is a good fallback.