Why Are My Helium (HNT) Mining Rewards Going Down?!
It’s not your imagination and you are not crazy. If you have been involved with helium mining, you have probably seen your rewards go down over time. What gives?! You have the optimal setup, you are connected via ethernet and yet your rewards keep getting smaller and smaller!
Well I want to discuss the reasons for this phenomenon and it may not even be your fault, but it is still good to know what is happening.
When I first got into helium mining, I knew this would play out, but some people go into the project without a full understanding of the tokenomics and game theory to get people into mining.
The Math (Is Your Miner Better Than Average?)
When helium first launched the monthly minting of HNT was around 5 million tokens. Built into the protocol though are halving cycles (every two years) in which the total supply being introduced falls over time. As of this article, helium is producing around 2.5 million tokens per month.
As of this article, we are at the beginning of year 3. So every 2 years, the amount of HNT being mined will continue to fall all on its owned by design.
So how is it all distributed? All of it goes to the miners? Below is a screenshot of where this HNT is actually going.
Turns out that not 100% of the HNT is going to those that have bought miners. You have two groups that are going to validators and investors. So only 61% is going to hotspots or around 1,525,000 HNT a month.
By design, over time the number of rewards is supposed to get increasingly get larger for the actual data transfer function of the network. The increased rewards for just providing proof of coverage is what incentivizes us to create a network of miners.
Okay so based on the current distribution and amount of HNT minted, we can figure out what an average miner should be earning based on a simple formula.
Miner Average = (HNT Minted Monthly)/(Average Days in a Month)/(Global Hotspots)
1,525,000/30.42/400,000
As of this article that would be 0.12 HNT/Day for your average miner!
If you are above that figure, congrats! You are doing better than average and doing something right. Anytime if you are wondering if you are doing alright, that is the formula you should use to crunch your baseline target or expectation for profits.
For those that have a number lower than that, either you haven’t optimized your setup or it could be an additional factor outside of your control.
Location Location Location!
This is one of the largest factors when it comes to your earnings and something that is also difficult to change without thinking outside of the box.
Most people that are involved with helium mining, buy and set up the miner within their homes. Why? It’s easy. You don’t need to ask anyone’s permission and it takes about 10 minutes to set it up inside and let the passive HNT start flowing into your helium wallet.
The issue though is when you live in an area that already has a ton of miners that already exist. Once there are more and more miners in your area, you start fighting to witness other miners, and there is a bit of redundancy built into the helium network. Below you see an image of miners in the greater Chicagoland area (where I am at) and you’ll see that the heatmap has a ton of miner concentration in the city.
At this point, having a miner in the suburbs is most likely to produce better results unless you have your miner strapped to the top of a skyscraper building that can witness all miners across the entire area.
See the network wants to be able to cover a wide area, so helium miners can’t only exist in big cities that have larger populations. Also, it wouldn’t make sense that your miner gets rewarded the same as everyone else no matter what.
That is why it is better to be in a city that has a handful of miners but isn’t overcrowded to the point where it affects your rewards negatively. The network is built to incentivize this though and is obviously a way to encourage people to get miners in locations that don’t already have them.
If you are wondering if you are in an overcrowded area, just take a look at your transmit scale which is out of 1. Having a low transmit scale effects the rewards of people witnessing your beacons, so having a ton of miners around you with lower numbers is what causes your rewards to be lower not necessarily having a low scale yourself.
The one downside for most people that are involved with mining though is that you don’t have complete control on where you live. If you are located in a big city, it’s not like you are going to move to the suburbs just to increase your HNT earnings (well you could lol).
That is where you need to think outside the box and there are some companies that already have thought of this.
You could buy a miner and then contact people in good locations and offer to split revenue (this could be family, friends, businesses, etc.). If you can’t do that then the only real way to have multiple locations is to have a real estate empire. Now you see why most people just don’t want to deal with all that hassle, so they just set up their miner in their home residence and get whatever rewards they can get.
Equilibrium of Markets
When you first heard of helium, people probably discussed how they are taking this tiny device and making money without doing any active work. And your thought was “so it is a money-printing machine?”
And that thought process is which onboards a ton of new hotspots over time lol. I mean that is the reason I got into helium mining myself and bought a bobcat 300 helium miner.
I had done the math and the possible ROI and it looked pretty darn good compared to any traditional type of investment. So I went ahead and put in an order near the end of April 2021. Want to guess how many hotspots there were at that time?
28,000 hotspots…
Currently sitting at close to 400,000 miners now. A small increase of 13,200% 🙂
So without really doing anything bad on my own end of setup, the rewards are getting split amongst more and more miners that come online.
The only way this can be offset is in the increase in the price of HNT in USD or fiat in order to keep the earnings in USD relatively the same. But that is outside of your control just the number of miners coming online.
If the price stays constant is when the profitability and attractiveness go down. It was essentially designed to happen. Once people talked about the easy money being made, the profitability is likely to fall to a point where people say “why am I doing this, all for $10/month?”.
I don’t know the exact number, but that is how the market will find equilibrium, and hotspots will stop coming online and reducing rewards. The activity of mining helium is easy, but it does reach a point where the number just doesn’t attract new miners. Then if the price increase and the rewards start becoming attractive again, boom you have people buying miners again.
This entire system will bring miners online at a more reasonable pace and motivate them to spread to areas that aren’t covered.
I can’t even imagine if all the supply issues weren’t existent and people got their miners in a couple of days rather than having to wait 5 months. The number of hotspots would probably be at a million already lol.
I know reading or hearing this sucks, but it is good to manage your expectations. Even if rewards go to $20/month that is for essentially doing nothing. If rewards went to something like $5/month, that is when I see the number of miners coming online significantly falling.
My Own Results
When I first started my helium mining journey I was making around 0.1 helium per day. I bought some new equipment to improve my setup and went to earning around 0.2 helium per day!
But over time, my earnings have also fallen. I currently am around 0.05 HNT per day.
It really comes down to my location. I knew buying a miner in a city would result in earnings below average unless I had a higher DBI antenna located the top of a tall building. Since I don’t have access to a tall building or rooftop, my earnings are below average.
I knew that going in and it is playing out as expected, basically the only thing I can hope for is an increase in the price of HNT at this point.
The only other option is to possibly move the miner’s location to my parent’s house out in the suburbs, haha, but the earnings haven’t reached a point for me to think about that yet 🙂
Conclusion
It’s unfortunate, but based on human psychology paired with the tokenomics and protocol design, I think that the rewards for mining will continue to fall for all hotspot owners. The only relief is an increase in price for HNT. For that to happen it really just needs time and demand for the helium network to increase.
There is a point of equilibrium though for new miners coming online as profitability falls, so that is another indication that things will smooth out.
Basically, look for a slowdown in the trend of new miners coming online and that should indicate a slowdown in the reduction of earnings for your helium miner!
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This article was generated from the following Youtube Video:
