HIP-017 - A sustainable APY

Hector is a Decentralized Autonomous Organization. To us this means it's controlled by the users of our ecosystem and not by a central entity. It means before changing important parameters of the Hector Ecosystem, we first listen.

Yesterday we listened. We asked you for input regarding our APY for 2022. We had originally planned to wait a few days with this HIP, but in light of market sentiment towards rebase DAOs combined with users deciding to exit at this stage, it has become clear that this needs to be done before the damage from dilution becomes too large.

Over the past month, it rapidly became (more) clear to us that rebase projects with Ohm's model ultimately can not sustain high APY rates. This was proven by the drastic fall in token price and market cap of these Ohm-inspired projects. High APY rates are only sustainable when buying pressure is higher than selling pressure, which is at the end of January 2022 obviously not the case for (pure) rebase projects anymore. As a consequence, you all see the Hector price and our projects market cap are declining. An ecosystem that focuses on displaying the price action of the rebase token is prone to downward pressure on the underlying token price due its dilution. A 10,000% APY means the supply is multiplied by 100 in a year (excluding bond sales, so even more).

All the team's efforts are directed at increasing the value of the Hector token. It's what we do over 16 hours a day. And we are not complaining; we love this project and our community.

In our vision, it's absolutely crucial to decrease dillution and take measures to create scarcity (so deflation). Deflation means everybody's piece of the pie will increase. Not decrease. It was great to see most of you understand the unsustainability of a APY of 10,000% and the direction we are moving in.

We want to thank everybody that got back to us with constructive feedback and we're happy to see a vast majority already came to the same conclusion as the Hector team: a too high APY is not sustainable. We love the support for the direction this team is going:

• a sustainable APY
• Hector Rebase as part of the entire Hector Ecosystem with many subprojects adding value to $HEC
• using revenue for buy backs (deflation!)
• introducing the $TOR token to introduce a UST-inspired stable coin that will lead to minting our native stablecoin by burning $HEC (deflation!)

There are two ways we can reduce APY. Either by (1) a static APY for a fixed period, or (2) a dynamic APY that gives the team the opportunity to find the perfect balance between attractiveness of (the subproject) Hector Rebase, market circumstances, dilution and deflation.

Option 1: Fixed APY of 500% for a 2 month period Option 2: Dynamic APY ranging from 200-1500%, set by team

In both scenarios, we will re-evaluate after 2 months, so by the end of March and take into account all important parameters (market circumstances, revenue, burn rates from TOR, etc)

Also: we will soon rebrand to Hector Finance as the name for our Ecosystem, as 'DAO' is at the moment mainly associated with Olympus forks. We obviously will remain a DAO in the sense community decides on our future.

Please vote for your preference!