Helium 1000:1 redenomination. What is that?

Recently Helium Improvement Proposal (HIP) 39 ‘Redenomination‘ was approved by the Helium community. Through Heliumvote.com, HNT owners could vote on this proposal which originated from the community of Helium enthusiasts. What does this radical proposal mean for HNT investors and Hotspot owners? Let’s dive in.

What is Helium HNT redenomination?

With this redenomination proposal, the number of ‘bones’ per whole HNT token will be reduced from 100,000,000 to 100,000. This will mean that the value of 1 token will be reduced 1000x (for example from $45.00 to $0.045) while the number of HNT in circulation, including those in your wallet, will be multiplied by 1000 (for example from 3 tokens to 3000). Do not worry, once implemented your HNT wallet will not immediately become more or less valuable at the moment of change. However, there are potential beneficial long-term effects.

Experience shows that redenomination can have a positive effect on the price of tokens in the long term, because the low price per unit makes them more accessible to smaller investors or investors looking for a currency with a low entry price per token. In practice, beginning investors are more likely to choose a token with a low unit price than, for example, Bitcoin, whose high price per token can be a deterrent. The currency Polkadot (DOT) carried out a redenomination last August and within a week its market cap doubled. Is this what is in store for HNT?

Redenomination is not a new concept. This strategic move is also common in the stock market and some countries use it to counter hyperinflation.

HIP 39: Redenomination voting results

Unlike some voting models, which require a majority of >50%, this vote required a ‘rough consensus’ of 66%. In the end, the proposal was adopted with a majority of 73.81%. Another interesting fact is that individual votes were not equal. A voter’s voting power depended on the number of HNT that a voter had in his or her HNT wallet or had staked at the time.

Mixed feelings in the community

Not everyone is equally enthusiastic about the redenomination. A quick search on Reddit reveals a number of discussions in which the authors disagree with the proposal. For example, HIP 39 could come across as a ‘quick trick’ to pump up the value of HNT, while a project with a good foundation should not need this, which could damage its image.

Others say that the pro-arguments used for this proposal would be an insult to the intelligence of HNT owners. For example, it is said that people complain less when more HNT tokens are earned from mining, even though the value per token is lower. It would also be ‘very confusing’ for HNT investors if they had to calculate with fractions of whole tokens.

However, the argument that most offends Reddit users is this sentence from the proposal:

That being said, the measure will be seen by some as being a ‘gimmick’ to increase market cap. Thankfully, that perception is likely to be short-lived as most individuals have a short memory of splits or redenominations once the ‘new’ system is implemented.

https://github.com/helium/HIP/blob/master/0039-hnt-redenomination.md#drawbacks

The perception that redenomination is a trick to make the price go up is, according to the writer, quickly forgotten by the community after implementation because they are said to suffer from poor short-term memory. Interesting choice of words.

Helium HNT redenomination date

The big question now is, when will the HNT redenomination be implemented? The author of the proposal ‘@JMF’ says on discord that no date has been set yet, but that it will probably be in early 2022. As soon as a date is known, we will of course communicate this.

Sources & more information:

Detailed explanation & proposal on Github: https://github.com/helium/HIP/blob/master/0039-hnt-redenomination.md

Vote result: https://heliumvote.com/14MnuexopPfDg3bmq8JdCm7LMDkUBoqhqanD9QzLrUURLZxFHBx