HIP20: HNT Max Supply

[jamiew]

Author(s): @jmfayal (jmf), @tjain-mcc (tushar), @rawrmaan
Initial PR: #72
Start Date: 2020-11-04
Category: Economic

Rendered view:
https://github.com/helium/HIP/blob/master/0020-hnt-max-supply.md

Summary:

This proposal suggests the introduction of halvings in net HNT issuance every 2 years (based on block height) to establish a max supply of HNT.

With the introduction of a hard cap on HNT supply, Helium’s token-economics would become more understandable to the broader crypto community at large. It would also create future scarcity and a new incentive to hold HNT. If there is more demand for HNT, miners will have additional incentive to deploy Hotspots. If miners deploy more Hotspots, the network will continue to grow its coverage, which will ultimately help meet the demands of end users and customers who use the network.

[malcolmry00]

Hmm. I don't think a utility coin should become more scarce. It is a great opportunity for competitors to exploit and label Helium as expensive. If a constant # is in circulation then great but the ethics of a hoarder on the people's network is not very utilitarian. If the model is sustainable, sure.

[rmichalo]

Our goal is to promote network node growth. This is done by creating an environment which incentivises positive economic opportunity for actors adding nodes to the network.

The burn&mint model heavily incorporates a variable which is somewhat independent of these actors - data usage. Data usage is already successfully incentivised via the token distribution model to provide coverage for data transfers. It does not need to be further incentivised.

A hard cap economic model will be more widely accepted by crypto investors, whom understand and value scarcity as Abhay noted. The perceived value of a hard cap is clearly evident in crypto discussion communities. The lack of a fixed hard cap in Ethereum's network is the #1 talking point by any BTC maxi when discussing drawbacks of ETH. Implementing a hard cap to HNT will be appealing to these investors, which will in turn drive speculation - and create positive economic opportunity for actors adding nodes to the network.

The solution proposed by Abhay is graceful and I very much support it.

[ghost]

I oppose HIP 20, at least for now. I prefer to leave the system unchanged until there is evidence that people are no longer incentivized to buy hotspots to join the network. That concern does not seem to be an actual current problem, as demand for hotspots remains high. People are complaining about not getting them fast enough. Many cities are nearing a point of not needing additional hotspots to have functional coverage. There will be natural decline in demand for hotspots as coverage saturation is met. So what's the actual problem needing to be addressed?

I am not opposed to the general idea of tying HNT minting rate to the burn rate of Data Credits in the future. I think the healthiest network would be when most selling is done by network operators, most purchasing is done by network consumers who will burn it for Data Credits, and when crypto investors are disinterested in us.

The current motivation of HIP 20 seems to be to increase appeal to cryptocurrency speculators. Why should we increase the appeal to them specifically? How does appealing to people who only want to buy low and sell high help advance LoRo as a technology? What problem does that actually solve for network operators today? Do network operators today actually have that problem? These questions are not answered in the motivation statement as currently written and the stated motivations are problems that do not currently exist. Don't fix what is not broken.

As a network operator, I am ok if the HNT/USD price is low right now. The value of the network should be determined by the demand for using the network, which is currently low. If LoRa turns out to be a great tech, demand will increase.

[rmichalo]

@jeremiahlee - Speculators provide many natural benefits to markets, one being improved liquidity which is very much needed for HNT to mature as a both an asset and LoRa project. HNT markets are currently very illiquid and a small six figure market sell order would take down an entire order book and move price drastically. Improved liquidity would also reduce price volatility. The majority of network growth going forward will be driven by multi-node operators - essentially groups who are placing hotspots for profit. Market illiquidity makes it difficult for groups like this to operate. There is also the obvious benefit of increased HNT price due to speculation, which will make economics for node operators more favorable, improve cash flow, and incentivise reinvestment into the network. The "all speculators are evil" stance you are taking is really inaccurate.

[rmichalo]

I oppose HIP 20, at least for now. I prefer to leave the system unchanged until there is evidence that people are no longer incentivized to buy hotspots to join the network. That concern does not seem to be an actual current problem, as demand for hotspots remains high. People are complaining about not getting them fast enough.

^In response to this - this high demand you are referring to is strictly due to Helium manufacturing constraints over the past year. Helium is already addressing this by no longer manufacturing hotspots, moving to RAK miners, and eventually to the cloud miner which will allow hosts to use many different LoRa gateways.

[big-s-k-y]

I support HIP 20.

Excellent work Tushar, JMF & Rawrmaan.

[ghost]

@rmichalo The healthiest way to speculate Helium is to expand the network and mine. There seems to be no decrease in demand for doing this, so no change is currently warranted.

HIP 20 seems to be an attempt to attract a different kind of speculator: one who has no intention of expanding the network or even interest in LoRa, just pumping/dumping yet another cryptocurrency.

[rmichalo]

@rmichalo The healthiest way to speculate Helium is to expand the network and mine. There seems to be no decrease in demand for doing this, so no change is currently warranted.

HIP 20 seems to be an attempt to attract a different kind of speculator: one who has no intention of expanding the network or even interest in LoRa, just pumping/dumping yet another cryptocurrency.

Already addressed these concerns in my previous posts. Speculators have a place in markets. I'm sorry you don't like them.

[malcolmry00]

Speculation could be good. More supply does encourage usage. I'm just an observer.

[Senterium]

• There is no longer a price floor with HIP 20 when the burn mechanism is deprecated. With HIP20, there's no hard economics stopping the price approaching 0, unlike the burn/mint scheme where there is an equilibrium, that is currently lower than the current price and acts as a floor
• If transaction fees still exist and not recycled, will decrease supply over time and still approach the recycling - which is 34?
• As recycling factor and net emission exists, HNT supply will go to zero and bone problems will exist
• HIP 20 completely relies on arbitrary value given to HNT to support price, which is all psychologically based and simply less predictable than a Burn-Mint-Equilibrium
• Wealth concentration and anti-growth by decreasing buying power of new hotspots after each halving
• Burn-Mint-Equil is not broken. Inflated price above the equilibrium dropping towards the equilibrium is not a breaking
• If limited supply HIP isn't done right and is changed in the future, then trust in the supply being truly limited no longer exists
• Constantly trying to appease sentiment is a slippery slope and is backward looking. An entity organized around 'looking good' will detract from actual improvement - Ex: private vs public companies
• With Net Emissions in effect of HIP20 and a truly constant supply, the single economic hope for price appreciation becomes hoping HNT doesn't become a utility coin anymore, but rather a transactional coin like bitcoin or ETH.
• There are alternatives. Same 'issue' of inflating price to fund short-term growth can be done in incentive aligned, synergetic ways, like staking for consensus rewards.

[jamiew]

I am pleased to formally recognize that rough consensus has been achieved on this proposal and I'll be marking it as approved, with the first halving date as-proposed for August 1st, 2020. On behalf of the community I'm also requesting the core development team begin any necessary engineering work.

In unscientific Discord polling, HIP20 had 99% support. Those poll numbers also pretty accurately reflect what I've observed in conversations here, in Discord, and in private conversations with interested parties who do not follow the day-to-day of community governance.

This proposal was circulated widely. Beyond GitHub, Discord and the community calls, Helium Inc sent push notifications to all iOS/Android app users and mentioned it in multiple email newsletters. I feel confident we've tried to reach everyone who would have an opinion on this.

Thank you to everyone who has provided feedback on this proposal here, on Discord, and on yesterday's community call. If you missed it, notes and a video recording are available here: https://jamiedubs.com/helium-community-call/

A quick recap of timeline and discussion:

• August 2020 – Idea first suggested and discused in Discord. Discussion and modeling of options, e.g. continuous deflation vs. annual 10% reduction vs. bi-annual halvings, etc
• 2020/11/04 – HIP formally submitted: HNT max supply (HIP draft) #72
• 2020/11/04 – proposal shared widely by Helium Inc via iOS/Android push notifications, an app that is used by presumably all hotspot owners and hosts: https://discord.com/channels/404106811252408320/730418759298318346/773642730412441671
• 2020/11/09 – Ad-hoc community call organized by @jmf to discuss: https://discord.com/channels/404106811252408320/773639684366008370/775391966417911809
• 2020/11/11 straw-man poll about what date change should take effect– https://discord.com/channels/404106811252408320/773639684366008370/776110724954849290
• 2020/11/18 – pre-meeting straw-man poll about approval, disapproval, or change date: https://discord.com/channels/404106811252408320/773639684366008370/778649670876004383

Poll summaries as of writing:

• 68/69 approve overall (99%)
• 
60/69 approve as-is (87%) – meaning 2020/8/1 halving date

[evanmcc]

added a clarifying PR: #196

[jstnryan]

Where's the code for this? PR? Open issue?

[mfalkvidd]

I think it is tracked in helium/miner#863

[jamiew]

This was deployed Sun Aug 1 12:00:36 AM UTC 2021

Audit https://github.com/helium/miner/blob/master/audit/var-79.md