HIP-008 Buyback and Burn

Summary: Using a combination of LP and RFV funds to create a price floor and stabilise the HEC token price.

Background: As a spoon of OHM, it is our aim to, over time, develop into an entirely unique project. The standard for all OHM forks on all networks is for the treasury to buy back and burn tokens when the price per token falls below $1. This is what allows those projects to call themselves “reserve currencies” - they are all designed to go to $1 and stay there.

We now feel that it is the right time for the Hector project to break away from that, and to pivot more towards being a utility coin. (Don’t worry, we can make/adopt a reserve currency at a later date).

As such, we recently put forward a proposal which would allow the protocol to buy back and burn tokens at a price higher than $1, and much closer to the “Backing per HEC” price shown on the dashboard. This will in essence allow HEC to become something more akin to a utility coin rather than a reserve currency, and will allow further increases in token price.

The original proposal can be found here: https://medium.com/@HectorDAO/buyback-and-burn-c82c866fc168

After lengthy discussions with the community, the consensus is that the “Dynamic Hybrid Approach” is the best course of action. In this scenario we will employ what we are calling the 4:1 metric: ⁃ When POL LP treasury pairs amount to more than 20% of the RFV, POL LP pairs will be split into their HEC and DAI components. The DAI will be used to buy tokens, and the HEC will be burned along with the HEC purchased at the market. ⁃ When POL amounts to less than 20% of the RFV, we will use the RFV to buy back and burn HEC tokens from the market.

To remind the community: ⁃ Buybacks will be used in periods of contraction only ⁃ Buybacks are designed to stabilise the price ⁃ Project developments are there to increase the price

When will buybacks happen? The price at which buybacks happen will be within a given range, and the time of buybacks will not be announced ahead of time. This is to stop people from “gaming the system” and profiting from buyback price movements.

The buyback price will be slightly below the “backing per HEC price”. As POL and RFV increase through bond sales, the buyback price will also increase since it will lag slightly behind the backing price.

As the project grows, so too will the backing and buyback prices. This will allow for more long term growth which is protected by the protocol.

What will buybacks look like? Buybacks will not be single buys worth millions of dollars. They will be broken up into smaller buys which will be done within certain price ranges. They will be made unpredictable and will be used to stabilise the price of the token.

The buyback and burn mechanism can be implemented very quickly, should this vote pass.

Please carefully read all of the information above twice before voting below.

Vote "Yes" if you are in favour of the buyback and burn mechanism above.

Vote "No" if you are against it.