HIP - 1.1: Ecosystem

Abstract

On December 30, 2022, the core contributors of the Hodl Finance community initiated a proposal for the establishment of a Decentralized Autonomous Organization (DAO) to adapt to the evolving cryptocurrency landscape and enhance community empowerment. The community accepted and passed the proposal on January 13, 2023.

In this follow-up proposal, the core contributors will present the new ecosystem.

This proposal marks the first step in forming the DAO. Subsequent proposals will provide further information on the legal structure, constitution, and the proposal life cycle for governance.

Introduction

As the name implies, it is proposed that the Hodl Finance DAO be designed to operate in a decentralized manner, where holders of $HFD have the power to vote and make decisions. While DAOs still need to be legally recognized as organizations in many jurisdictions, there are various ways to structure. This approach seeks to enable the DAO to bridge both the digital and traditional world while maintaining decentralization as much as possible.

Our proposed ecosystem is distinctive, as the circular economy of $HFD is designed to sustain the token's value through its performance and utility. $HFD is built on the Ethereum blockchain (ERC-20) and does not have a reflection feature, which makes it more user-friendly and accessible compared to the previous $HFT.

What will be discussed in this proposal:

-Staking Treasury; -Bonding Treasury; -Trading Treasury; -Market Making & Investments; -Realized Profit; -Operations Treasury; -Research & Development Treasury; -Buy-Back and Refill Bonding contract;

Staking Treasury

The first component of the proposed ecosystem is the staking contract and treasury.

It is proposed that the staking contract is designed to incentivize long-term token holders, liquidity pool providers, and NFT (Non Fungible Token) holders. It is proposed that in the future it can also be used to increase engagement with the Hodl Finance App(s). 30% of the total token supply is proposed to be locked into the staking contract (300,000,000 $HFD). When approved, the staking contract will distribute a total of 0.05% of this pool daily to token holders through various pools.

Initially, two staking pools are proposed to be launched: Single Side Staking (SSS) and Liquidity Pool Staking (LPS). Later, a third pool is proposed to be introduced: NFT Staking (NFTS).

Single Side Staking (SSS)

SSS enables $HFD token holders to stake their tokens directly in the staking contract through the dashboard for additional rewards. This encourages community participation and promotes long-term holding of tokens, thus fostering a thriving ecosystem.

DAO participants can choose the duration for which they would like to lock their tokens, and the rewards are determined accordingly through a staking weight.

70% of the daily reward pool is proposed to be distributed among stakers in the SSS pool based on their respective weight (proportion & Lock period).

• Flexible staking = weight 1 for each $HFD
• 1-year lock = weight 1.5 for each $HFD
• 2-year lock = weight 2 for each $HFD
• 3-year lock = weight 2.5 for each $HFD
• 4-year lock = weight 3.5 for each $HFD
• 5-year lock = weight 5 for each $HFD

When $HFD tokens are staked in the staking contract, escrow tokens will be returned to the wallet that can be used for voting and other benefits within the ecosystem. These escrow tokens will be referred to as $eHFD and will be required in your wallet to claim your deposit and rewards.

Forced Unlock

The DAO encourages long-term staking through the locking of tokens in the SSS pool. However, the DAO proposes to give the option for individuals to force unlock their own tokens. To accommodate this, it is proposed that the DAO enable a Force Unlock feature. This feature will allow stakers who have locked their tokens to force unlock them.

The Forced Unlock feature can be activated by paying a fee based on the initial staked amount and on the length of your locked period. The fee schedule is as follows:

• 1 year lock = 50% fee
• 2 years lock = 57% fee
• 3 years lock = 64% fee
• 4 years lock = 70% fee
• 5 years lock = 76% fee

Liquidity Pool Staking

A Liquidity Pool (LP) is proposed to be established using $HFD/$ETH to provide decentralized liquidity. By adding liquidity to the Uniswap LP and staking the LP tokens, individuals can earn rewards from the daily reward pool of the staking contract.

30% of the total rewards allocated from the staking contract is proposed to be allocated to the LPS pool. After the launch of NFTS, 15% of the rewards will be directed towards the NFTS pool.

Staking reward vesting

It is proposed that all claimed rewards are locked for a year before they are released. However, the idea is to allow stakers to claim them earlier through the Forced Claim feature.

Yes, early claiming! You can claim them all without waiting for a year. The tokens are locked but you can claim them from day one after the DAO activates the Forced Claim feature. Based on the locking days left you donate your remaining portion of the rewards to the Bonding contract.

Example 1: If you Force Claim your tokens on day 12, you will receive 12/365 rewards and donate the remaining to the Bonding contract.

Example 2: If you Force claim your token after a month, you will receive 1/12 rewards and donate the remaining to the Bonding contract.

Bonding Treasury

Becoming a Market Maker means having a lot of liquidity that can be used to fill order books and/or liquidity pools. Individuals will struggle to achieve Market Maker status due to volume and infrastructure requirements. Hodl Finance DAO will allow everyone to participate in Market Making. 🚀

Therefore, Hodl Finance DAO is seeking to introduce the Bonding Treasury. A never-ending discounted token swap for everyone to participate in. This way, the DAO ensures sufficient liquidity for the algorithms to perform Market Making.

Everyone can swap USDC, USDT, and Ethereum for $HFD through the Bonding contract.

Getting a discount on market price comes with dedication towards the DAO and its liquidity (see table below). All tokens swapped through the Bonding Contract are proposed to be automatically locked in the SSS contract to enable the purchaser of the bond to access the upside of the HFD ecosystem.

Locking periods & discounts:

• 1 year locking period - 5% discount.
• 2 years locking period - 10% discount.
• 3 years locking period - 17.5% discount.
• 4 years locking period - 27.5% discount.
• 5 years locking period - 40% discount.

Trading Treasury

For the purpose of ensuring the security of the funds received through the Bonding contract, an efficient and secure transfer system is proposed to be deployed to move these funds to the Trading Treasury. The Trading Treasury is a multi-signature wallet with five signers, each of whom holding an important role in the safekeeping of the keys.

A minimum of three signers must agree before any funds can be transferred from the Bonding Treasury into the Trading Treasury, and, at a later stage, to Market Making or investment activities. This multi-signature setup provides an added layer of security and protection for the funds received through the Bonding contract. It ensures that the funds will be used in a guarded and efficient manner to maximize the benefit for the community.

Market Making & Investments

Diversifying the assets in the DAO's treasury by including reputable projects in addition to $HFD, improves the safety and reliability of the DAO's long-term performance. This approach mitigates risk and ensures stability for the ecosystem.

Market Making

Market Making is a crucial component of the Hodl Finance DAO ecosystem as it drives liquidity and stability. It is proposed that funds from the Trading Treasury will be diversified and invested in various long-term cryptocurrencies to support this endeavor. The portfolio will be actively managed using grid and dollar-cost averaging (DCA) algorithms, which have proven effective in this highly volatile market.

Part of the core contributors has extensive Market Making experience, having executed over 1.5 million daily trades for various well-known exchanges. Using highly scalable algorithms in this volatile market allows an active trading treasury to generate consistent and stable yield without taking on high-risk strategies. For now, this results in daily rewards of approximately 0.03% to 0.1%. *

Example of the algorithms running on an exchange:

Investments

In addition to Market Making, Hodl Finance DAO will explore opportunities to invest in new and emerging crypto startups and projects. This may include participating in venture rounds and providing consulting services to support the launch and development of these projects. To ensure alignment with the community's values and goals, it is proposed that the investment rules will be outlined in the DAO's constitution and be subject to approval through a voting process among DAO participants.

Live Dashboard

The Hodl Finance DAO seeks to prioritize transparency in its trading activities, assets, and distribution. This is achieved through the use of a real-time dashboard, which provides visibility into every trade executed by the DAO. Additionally, read-only APIs are available to provide further transparency and access to information about the DAO's assets and distribution.

It is important to note that the DAO will seek to engage in a high volume of trades on a weekly basis, and the operation is fully automated. This means that community members can monitor the performance of the DAO through the dashboard without the need for active participation

Realised Profit

The Hodl Finance DAO proposes the deployment of Market Making algorithms to generate consistent profits without compromising the long-term strategy of the portfolio.

An example of this approach would be buying 1 Ethereum at a price of $1000, then selling it for $1001, and subsequently repurchasing it at $1000. By following this approach, the DAO generates a Realized Profit of $1.

This approach is commonly used in the Market Making space to provide liquidity and stability to the market.

Below is an example of how this strategy will look in practice:

Hodl Finance DAO seeks to employ Market Making strategies utilizing a high volume of trades with small order sizes. This approach allows the DAO to generate consistent profits without significantly impacting the overall portfolio.

It is important to note that it is the proposer's intention that the DAO's Total Value Locked (TVL) is recommended to remain diversified by using the Realized Profits for Buy-Backs, operations, and R&D. This approach allows the DAO to generate returns while maintaining a diversified portfolio and supporting the growth and development of the ecosystem.

Operations Treasury

The Operations Treasury is proposed to serve as a source of funds for the core contributors to cover the costs associated with running all operations and enabling growth. These costs may include, but are not limited to: taxation, legal expenses, financial management, marketing, subcontractors, bug bounties, and more.

The Hodl Finance DAO is proposing a strategy for allocating a portion of its Realized Profits and a portion of the total supply of $HFD tokens towards the Operations Treasury. Specifically, 25% of the Realized Profits and 10% of the total $HFD token supply is proposed to be directed towards the Operations Treasury.

Another part of the Operations Treasury is the multi-signature wallet with five signers. This serves as an additional layer of security and oversight, and ensures that the funds are only used for their intended purposes as described above. It is proposed that a minimum of three signers will be required to authorize the release of funds from the Operations Treasury to their intended goals.

R&D Treasury

The Hodl Finance DAO recognizes that innovative ideas require dedicated resources to bring them to fruition. To this end, the DAO shall, if this proposal is passed, create a Research & Development (R&D) Treasury to support the development of new ideas and proposals. Proposing that 10% of the Realized Profits will be directed towards this treasury.

The R&D Treasury will be used to create Minimum Viable Products (MVPs) and extended proposals on behalf of the DAO. It is important to note that the funds allocated to the R&D Treasury will only be used for the benefit of the DAO.

To ensure oversight and security, the R&D Treasury would have a multi-signature wallet with five signers. A minimum of three signers are required to authorize the release of funds from the R&D Treasury to their intended goals.

Buy-Back and Refill Bonding contract

The Hodl Finance DAO proposes to implement a strategy that allocates a portion of its Realized Profits towards Buy-Backs of $HFD tokens. It is proposed that 65% of the Realized Profits will be directed towards this purpose. These Buy-Backs will be conducted at unpredictable and random times, and the purchased tokens will be transferred to a multi-signature wallet owned by the DAO.

The purchased tokens will be added to the Bonding contract, which is designed to support the liquidity within the $HFD ecosystem.