Helium slumps 35% after proposed transition to Solana
IoT project's developers consider ditching their own blockchain
Helium (HNT), the internet-of-things (IoT) blockchain project, traded down on Monday, continuing a fall which has seen the cryptocurrency sink by 35% in a week.
In terms of market capitalisation, HNT has fallen from $771bn (£618bn) to $497bn over the seven days from 30 August to 5 September.
With the capitalisation of the total cryptocurrency market having largely remained static during the same period, this decline is not attributable to macroeconomic or sector-specific turmoil.
Developers propose shift to Solana
Instead, the decline can substantially be attributed to Helium’s own developers. In a new governance proposal called Scaling the Helium Network, the developers suggested that the project could shift from its own blockchain to Solana’s.
Currently, the network operates via proof-of-coverage, a unique consensus mechanism.
Helium users install something called a Helium Hotspot to provide decentralised wireless 5G network coverage for internet users in the area. HNT is distributed to Hotspot providers when coverage is verified.
However, the project’s developers argued that greater scalability and operational efficiency could be achieved by shifting to Solana.
They said they recognised that the shift would remove “the need for staked validators operating block production” but stressed that a move to the larger blockchain would provide Helium wallet holders with access to “a variety of applications, governance mechanisms, and other utilities not available natively on our sovereign L1 [layer one].”
Highlighting the issues currently arresting growth, the proposal revealed that in recent months network participants have struggled with “packet delivery issues” and “much reduced Proof-of-Coverage activity due to network size and blockchain/validator load.”
Although the transition to a blockchain project that has a market capitalisation of $11bn may pay off in the long run, the immediate reaction of Helium investors was overwhelmingly negative.
Helium traded down by 5.5% by 15:00 (BST-1) on Monday to $3.96. The project's market capitalisation has halved in the past month, and stands 87% below the level at which it began 2022.