- Author: @tjain-mcc, @shayons297, @jmfayal
- Start Date: 2022-01-26
- Category: Economic / Technical
- Original HIP PR: #334
- Tracking Issue: #336
- Status: Draft
This proposal outlines economic and technical constructions with the aim of scaling the Helium Network to support new users, devices, and types of wireless network protocols.
We propose that each wireless network supported by Helium (LoRaWAN, Wifi, 5G — referred to as Decentralized Network Protocols or DNPs) has its own subDAO with its own token (referred to as Decentralized Network Tokens or DNTs). The key specifications of the DNT such as Proof-of-Coverage rules, data credits rewards, and consensus mechanisms are governed by each DNT DAO.
The aim is to create an economy such that the underlying HNT-Data Credit burn-and-mint equilibrium remains undisturbed, and Proof-of-Coverage rules and miner emission amounts are dictated by the corresponding wireless network’s sub-token.
The technical model requires that the entire Helium Network lives at some proposed base layer (L1). All accounts and transaction activity happens at this L1. All subDAOs operate as economic and governance layers (L2) with their respective DNTs acting as native tokens for this purpose. Each L2 also runs software to calculate DNP specific items (e.g.: all the Proof-of-Coverage code that exists on the current LoRaWAN network to determine Hotspot rewards) and the L2 Validators who have staked DNTs come to consensus on these calculations.
For the Helium Network to grow to global scale in number of active devices and users it is necessary to develop economic and technical primitives that will support that scale across various wireless networking technologies.
HIP 27: CBRS 5G Support provides a broad discussion of 5G DNP specific data credits mechanisms, and HIP 37: Omni-Protocol PoC outlines an incentive model as well as proof-of-coverage rules for the 5G Network. This is a three-part proposal that builds on such existing work with two primary aims:
- Provide a general structure for onboarding new DNPs to the broader Helium Network, with mechanisms in place to ensure that protocol-specific attributes such as Proof-of-Coverage rules, data credits pricing, and block validation are within control of the emergent DNT DAO.
- Specify the implementation of the structure proposed through detailed onboarding proposals for the LoRaWAN and 5G networks, described in HIP 52: LoRaWAN DAO and HIP 53: 5G DAO.
The technical and economic design decisions of the Helium Network today have been made around the flagship LoRaWAN Decentralized Network Protocol. In order to support new networks and devices, there are two core problems to be addressed: blockchain scalability and DNP specific incentive alignment.
This proposal outlines two constructions to address the aforementioned core problems:
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Blockchain Scalability: We propose that each DNP has Validators who operate software to calculate DNP specific items (eg: all the Proof-of-Coverage code that exists on the current LoRaWAN network to determine Hotspot rewards). Validators stake DNTs and are rewarded by DNT inflation.
All non DNP specific transactions (simple transfers, burning HNT to DC, etc) occur at some high throughput, low latency base layer chain on which the overall Helium Network lives.
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DNP Specific Incentive Alignment: We propose that each DNP operate as its own sub-DAO within the broader umbrella of the Helium DAO. DNP Sub-DAOs are able to issue DNTs to their stakeholders and DNT denominated governance controls DNP specific attributes.
There are three key drivers for proposing that consensus and execution for each DNP occur at some base layer chain, while the economic and governance layer for that DNP is separated from the native token of the overall Helium Network
- Scalability: Each DNP has the ability to run its own code for DNP specific items
- Native Tokens: Provide Separation of Governance Each DNP effectively governs its Proof-of-Coverage rules, data pricing, and rewards distribution mechanisms. This structure provides significantly more self-sovereignty over the structure and direction of the DNP.
- Composability Implies Utility: If the overall Helium DAO base-chain is able to support smart contracts, it is possible to imagine a variety of novel use cases for HNT as well as each of the DNT tokens. Some examples here are signaling strategies (yield aggregator DAOs that take HNT from passive holders and stake to specific DNPs based on market conditions) or money markets (liquid borrow-lend markets for greater delegation to Validators or leveraged staking).
This proposal impacts all current and future stakeholders in the Helium Community.
We propose that each DNP operates as its own subDAO within the broader Helium DAO, while both DAOs exist on a single base L1 chain. Each DNP has its own economic and governance layer through its subDAO, which comprises all DNT holders.
All subDAO specific addresses across all DNPs on the network will live on this L1 chain. All tokens exist on the L1 chain. The L2 is for calculation and computation purposes only.
New DNPs are added to the network through Helium Improvement Proposals with HNT denominated voting as per governance by token lock standards defined in HIP 51.
Before we can define the DNP specific economic structures, we need to outline how the rewards are split between DNPs and how to fund the earliest stages of development for new DNPs.
Currently, under HIP-27, non-LoRaWAN gateways are only rewarded based on data transfer and those rewards are based on the 1 DC burn = 1 DC equivalent earning principle laid out in HIP-10. That reward bucket is currently, as of January 2022, limited to 35% of total HNT issuance per epoch. Any HNT from that bucket that is not allocated to Data Transfer rewards is reallocated to LoRaWAN PoC rewards.
We propose two significant changes to the reward buckets
Split PoC rewards between wireless protocols based on a formula that accounts for DCs burned and active devices per DNP
The success of the Helium network is contingent on its ability to find real world applications that burn data credits via data transfer activity. Therefore, the incentive model should be designed in a way that promotes wireless network protocols (DNPs) that accomplish that goal. Additionally, the scale of each DNPs participation network should also be taken into account, so as not to overly disadvantage early protocols with lower DC burn rates. To accomplish this propose the quadratic equation below:
Each protocol would be assigned a ‘score’ per epoch:
Once each protocol has a score, the % of total Epoch PoC rewards assigned to each DNP will be assessed by comparing the individual score to the sum of all scores:
To put this into context, if you have two networks with 50,000 and 500,000 devices each, the smaller network would need approximately 3.16 or ![(10^{1/4}^2] times the DC burn to have a comparable protocol score to the larger network.
Most importantly, this model gives us a framework to add new DNPs in the future without having to design reward splits on an ad-hoc basis.
Implement a ‘cold start’ bucket to help fund early stage networks that don’t yet have meaningful DC burn
The Lorawan protocol on Helium benefitted from having a built in ‘cold start’ reward system via PoC rewards to help fund the growth of the network. Under the new model, a network that doesn’t have any DC burn would not have any way of rewarding it’s early users, so we are proposing a 10% ‘cold start’ reward bucket that is carved out from the PoC rewards bucket.
Under this system, any DNP that has been live for sub 1 million epochs (approximately 2 years) would evenly split 10% of all HNT POC rewards. Additionally, if a specific DNP had enough devices or was burning enough DCs to receive 10% of the larger PoC/data rewards bucket, it would be excluded from the ‘cold start’ rewards bucket.
If no DNP ‘qualifies’ for the cold start bucket, those rewards would be reallocated to the regular PoC/data reward bucket.
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DC burn used in PoC split calculation: DC burn is limited to data transfers per DNP. The calculation does not include fees associated with other actions, including, but not limited to, gateway assertions, token transfers, and gateway relocation fees.
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Decentralized Network Protocol (DNP): Wireless network type is a computer network that uses wireless data connections between network nodes and utilizes a uniform, standard set of rules that determine how data is transmitted between different devices in the same network. (i.e. LoRaWan, 5G, Wi-Fi, NB-IoT etc. all different Decentralized Network Protocols).
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Frequency of PoC reward split recalculation: Manually adjusted on a frequency at the discretion of DeWi unless and until an auto recalculation feature is built into the protocol
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Active Device: Active devices are the subDAO's definition of devices creating valid coverage during the epoch
DNT are issued against a Programmatic Treasury with issuance, redemption, and transaction fee parameters set by DNT governance. Each DNT can set the shape of the curve which governs its programmatic treasury.
We suggest that all DNT Programmatic Treasurys take the shape P = S^k where k > 1, P represents Price, and S represents Supply. The quote currency is the DNT and the base currency is HNT.
For a given amount of HNT deposited to or withdrawn from a given DNP bonding curve, the increase or decrease in supply and price is given by resulting change in the area under the curve. The integral is given by
The shape of the curve for k only slightly larger than 1 is as follows
It is critical to note that the programmatic treasury proposed is one-way for all network stakeholders other than the HNT minting contract at the L1. This implies that inflows into a given subDAO’s programmatic treasury are only possible through epochal HNT emissions, and no other participant can deposit HNT into the curve. TokenDNT holders can, however, withdraw from the curve at any time.
Since DNTs are fungible assets that can be listed on secondary markets, miners will have multiple sources of liquidity for their earned tokens at any time. This mechanism ensures that miners receive a steady, predictable stream of revenues as per the shape of the programmatic treasury instead of being subject to compounding forms of market risk through speculation driven inflows into the curve.
We provide an end-to-end description of data transfer, Proof-of-Coverage, and consensus rewards for a given DNP under the Helium Network.
Data Transfer Process
For each DNP, we propose that a device looking to receive coverage across the network purchase Data Credits by purchasing and burning HNT.
The device subsequently burns those Data Credits in the name of the Hotspot or set of Hotspots once data has been transferred.
The device then relays the receipt of this transaction to the set of Validators for the DNP.
The DNP Validator set then relays this information to the HNT emissions contract in order to determine the HNT amount to be distributed to the DNP subDAO for all rewards distribution.
At the end of each epoch, the DNP Validator set prepares the distribution for mining rewards denominated in the DNT to each Hotspot based on coverage provided.
Proof-of-Coverage Process
The DNP subDAO defines the rules for Proof-of-Coverage challenges. In a given epoch, Challengers, Challenges, and Witnesses relay the results of challenges to the DNP Validator set in order to distribute Proof-of-Coverage rewards denominated in DNT to relevant devices.
Consensus Process
The DNP subDAO defines the rules for consensus, and distributes a portion of DNT emissions in a given epoch for DNP Validators.
Emissions Calculation
At the end of a given epoch, the HNT emissions contract performs a tally of the data credits transferred across DNPs. The emissions contract subsequently distributes the determined amount of HNT to a DNP subDAO multi-signature wallet, the addresses of which comprise the set of Validators of that DNP.
DNT Issuance
Each DNP DAO then submits the entire amount of HNT into its Programmatic Treasury in order to mint new DNT for Hotspots and Validators participating in data transfer and Proof-of-Coverage.
In a given epoch, if the DNP Hotspots were to receive some amount of HNT from the Helium DAO, the DNP subDAO multi-signature wallet distributes a corresponding amount of newly minted DNT of equal market value as per the Programmatic Treasury to the Hotspots in its network based on its mining rules.
Note that all new issuance in the DNP Programmatic Treasury through HNT emissions are distributed to Hotspots and Validators.
DNT Issuance
If a given address wishes to redeem their DNT, they can “sell” against the Programmatic Treasury to receive the market rate of underlying HNT.
The transaction involves sending the required amount of DNT tokens to a burn address, and receiving the determined amount of HNT tokens from the DNP subDAO multi-signature wallet.
The address relays the message of the sale to the set of DNP Validators, which then adjust the position of the Programmatic Treasury in the following epoch after adjusting for all other sales and any new issuance.
Transaction Fee
A DNP subDAO governed transaction fee is placed on redemption of DNT tokens on the Programmatic Treasury. This fee is charged in HNT and we suggest starting it at 0.3% of all transactions. This HNT fee is immediately submitted to the DNT Programmatic Treasury.
For example in a given epoch, if the 5G Programmatic Treasury had trading volume of 100,000 HNT and brought in 300 HNT worth of transaction fees, that 300 HNT is resubmitted to the Treasury increasing the price of DNT according to the equation.
We set the following economic constraints in order to ensure an equilibrium within each subDAO and the overall network
- HNT remains the unit of buy-and-burn in order to maintain the HNT flywheel. Data Credits are universal, in that they can be created by burning HNT and are usable across any DNP.
- Mining rewards for Hotspot in a given DNP are distributed in the corresponding DNT
- DNTs can be traded on secondary markets but are redeemable for HNT as per the primary market defined by its Programmatic Treasury. New DNTs can be minted by depositing HNT into the Programmatic Treasurys as well.
- Each DNP can set their own DNT emission schedule and distribution.
- What does a migration process look like for the existing implementation onto the new structure outlined?
- What governance procedure should be used to whitelist specific DNP DAOs?