HIP 39: Redenomination and YOUR Vote!
On September 14th, HIP39 was proposed by @JMF to redenominate the conversion rate between bones and HNT. The vote ends on November 18, 2021 at around 5am Pacific (13:00UTC) with the issuance of block 1,100,000.
Currently there are 100,000,000 (10^8) bones per HNT and under the proposed redenomination the conversion rate would be adjusted to 100,000 (10^5) bones per HNT. If passed, the value of one HNT token will be adjusted while preserving the total market cap and increasing the total number of HNT. The amount of rewards earned or distributed remains the same.
For example, if your hotspot was earning $25 (0.5HNT at $50) a day, it would still be making $25, but 500HNT at $0.05 a day after the redenomination. There is no actual “stock split” happening here, there is no new HNT being added to the system, only a new way to display how much is currently being distributed. What’s critically important is that the number of bones in the system would remain unchanged.
This change will introduce only one new chain variable and have no other changes to the blockchain. This chain variable will specify the value of HNT in Bones.
What is HNT?
The Helium Token is the native cryptocurrency and protocol token of the Helium blockchain. Its symbol is HNT
What are Bones?
Just like how satoshis are the smallest unit of a bitcoin (100,000,000 of a bitcoin), bones are the smallest denomination of the helium token. Every transaction is calculated in bones, while HNT is what is displayed for usability.
What are the key motivations?
Taken from HIP39*
Incentive Unit Bias: For most of Helium’s history gateway owners have enjoyed earning mining rewards in excess of 1 HNT per day (historically much higher), but with the HIP-20 halving and a 10 fold-plus increase in gateway deployments in 2021 those earnings have been reduced to partial fractions of an HNT. Even though the market price of HNT has increased approximately 20X since August 2020 and the median $ earnings per hotspot has remained generally consistent, there has been growing discontent with the HNT earning rate. In behavioral economics, the preference for obtaining full units (or completing full tasks) is called unit bias. In general, people prefer earning rewards denominated in full units rather than partial units. As we have seen in Helium, there were very few complaints when gateway owners were earning more HNT at a lower $ daily mining rate than when they were earning partial HNT at a higher daily $ rate. The redenomination would cause individuals to earn in higher HNT increments again, even if $ earnings stayed the same.
Simplification of Unit Measurements: Anyone that has mined or transacted in BTC or ETH has dealt with earning extremely small fractions of units. This can be frustrating and cause confusion when dealing with excessively small fractions (often denominated in thousandths of a unit). A redenomination would make transactions using HNT more digestible, by decreasing the decimal places needed in the majority of transactions.
Small $ Token Investment Bias: Tokens that are priced at a low $ amount are typically seen by the market as ‘inexpensive’ regardless of the size of the project’s market cap. In general high issuance tokens have benefited from this investment bias because the tokens are perceived to have more upside than higher dollar tokens. Typically, this equates to a higher overall market cap for projects and, in the case of Helium, could help increase the incentive rewards, not only in terms of HNT but also $s per gateway.
How does that impact me if this HIP passes?
If you are a miner
If you were mining 1 HNT per day with a hotspot, you would now mine 1,000 HNT per day. But remember the number of bones mined isn’t increasing.
If you’re a user of the network
There are no changes to the cost of data credits, that remains unchanged. What about burning HNT? The cost to burn will remain the same, but the number of HNT will be adjusted accordingly. If you need to burn 1 HNT, you will then need to burn 1,000 HNT to achieve the same number of bones burned.
How Do I Vote?
Helium now has a new voting system utilizing the blockchain to cast votes. HIP39: Redenomination. You can vote from your Helium Wallet, Command Line Interface (CLI), or the Helium Ledger CLI.
The number of votes going towards each voting choice is determined by your HNT and staked HNT wallet balance – this is known as Voting Power. To cast a vote, submit a burn transaction using the wallet of your choosing. Total cost of a burn transaction is 35,000 DC or approximately $0.35.
Final votes will be tallied at the block deadline and data credits burned to each vote choice will be purged from the Network. This is our first attempt at an on-chain voting system and an exciting step towards decentralized governance. The votes here are intended to capture community sentiment and support the current rough consensus mechanism.