HNT, or Helium Native Token, is the cryptocurrency rewarded to hotspots and validators for performing their designated tasks on the Helium blockchain. Helium Hotspots participate in Proof of Coverage (PoC) and Data Transfer (from network end nodes) while validators perform consensus mechanisms, challenge hotspots to send beacons, and add new blocks to the Helium blockchain itself.
Data Transfer Rewards are issued at a 1:1 ratio to HNT expenditure (meaning a hotspot owner would be rewarded the same amount an end node owner is expensing for the data transfer) and are capped at 30% (in Year 1) of all minted HNT. The remainder is granted to the Proof of Coverage Rewards Pool as a bonus for providing early coverage. All transactions made on the Helium blockchain are paid in DC, or Data Credits. Data Credits are produced by burning some amount of HNT. Unlike HNT, which fluctuates with the market, DC are pegged to the $USD. Learn more below:
PoC, or Proof of coverage, is a novel work algorithm used to determine hotspots are in fact in the location they’ve been asserted. Radio Frequency (RF) transmission strength at a given location can be calculated based on the distance it has traveled from the source. Thus, knowing a hotspot location it can be interrogated in order to determine if its location is correct, this is called a Challenge. There are three distinct roles (entities) involved in a challenge:
- Challenger - The Validator that constructs and issues the PoC Challenge. See HIP 55 for a more detailed description.
- Beaconer - Sometimes called "Challengee". This Hotspot is the target of the POC Challenge and is responsible for broadcasting (or "beaconing") challenge packets to potentially be witnessed by hotspots that are within the RF range of the Beaconer.
- Witness - Hotspots that are within RF range of the Beaconer and report the existence of the challenge packet after it has been transmitted.
For example, if your hotspot was challenged during an epoch, it will be eligible to a portion of the 5.31% of rewards that go to PoC Beaconers. A practical way of thinking about this is that a Hotspot might earn a "reward unit" for succeeding at a challenge. If five additional Hotspots succeeded at a challenge during the epoch and each of them also earned a "reward unit", then each Hotspot gets 1/6th of the 5.31% of rewards in that epoch.”
Learn more here: Helium- Proof of Coverage