September has been great for the continued development and progress of Hydranet and HDX. This month was marked most boldly by historical upgrades to Ethereum that affect the entire crypto industry.
On September 15, the Ethereum mainnet officially switched from a proof-of-work consensus based on mining to a proof-of-stake consensus based on minting in an event dubbed “The Merge”. While this upgrade has been well-known and under development for several years, the potential benefits and consequences of it were, for quite some time, purely theoretical. For better or worse, the effects are now unfolding in reality.
Mining has been at the heart of Ethereum’s token generation and reward structure since its inception. As with Bitcoin, ETH mining grew very competitive and formed a vast, fast-moving ecosystem based upon raw computational power, efficiency, and energy costs. This ecosystem grew so powerful that its demand on the market had enough force to exhaust supply chains and cutting-edge chipmakers worldwide. With this in mind, and with ETH having by far the 2nd highest rate of crypto market adoption, it can’t be understated how significant it is that its proof-of-work consensus has been deprecated.
The switch to a proof-of-stake consensus has a few advantages. A drastic reduction in the energy consumption required to generate new tokens and a reward model that incentivizes smaller holders who were priced out of competitive mining, to mention a few. According to Ethereum, the new consensus model reduces energy consumption by over 99.95%. Naturally, a monumental change of this stature, at this scale, has created substantial market disruptions that will continue to have ripple effects throughout the entire crypto industry and beyond to global supply chains and industry.
You can read about the Merge in more detail here: https://ethereum.org/en/upgrades/merge/
Arbitrum Nitro Roll Out
Coinciding with the Merge, Arbitrum One underwent a major upgrade (Nitro) that concluded on August 31. Among the breakthroughs — is an increased throughput claimed to be 7x-10x higher, call data compression that reduces L1 footprint (and costs), safer retryable transactions, deeper L1 interoperability, a complete overhaul of public documentation, and more. The debut of Nitro marked the first anniversary of Arbitrum’s mainnet launch. You can read more about Arbitrum Nitro here.
HDX is an Arbitrum token and directly benefits from these new upgrades to its network.
WhiteBIT, our primary CEX for HDX trading, is currently working to upgrade its exchange to support Arbitrum Nitro. These upgrades are still a WIP. HDX is still available to trade on the platform, but deposits and withdrawals will remain locked until they are finished. We are in frequent communication with WhiteBIT throughout this upgrade process and look forward to providing the community with further updates on when HDX trading will go live on its exchange again.
HDX Mint and Rebase Bug Post-Mortem
The rebase bug was the centerpiece of last month’s update. To briefly recap, the bug generated an excess of 5M HDX in staking rewards that, in turn, caused the circulating supply of HDX to exceed its total supply. This created an imbalance that required immediate correction. The bug was present in OHM’s code until it was revealed in a private audit and quietly patched. HDX was forked from OHM before this vulnerability was patched. Fortunately, our development team was able to quickly patch the bug on HDX, and the community was given the final say on how to resolve the supply imbalance. The bug was patched on August 15, and the following Snapshot vote proposed options between freezing staking rewards for a fixed period (approximately 6 months) until the total supply naturally caught up, or minting the excess staking rewards. Minting won the vote, and the imbalance of 5,046,246 HDX was effectively neutralized. All funds from the mint were transferred to the staking contract.
A few weeks after the bug was patched, huibuh, our Blockchain Engineer, published an excellent post-mortem that goes into detail on what triggered the bug and which solutions were implemented to effectively patch it. You can read it here.
HDX Tokenomics & Investor Survey
We unveiled two successive WIP drafts of our tokenomics paper to the HDX community this month. We will continue to consider it as a WIP development until a 3rd, likely final, draft is published. The community has provided us with a lot of constructive feedback since the first draft was published, and this is largely reflected by changes made to version 2.
We are also preparing an Investor Survey for the new tokenomics. We look forward to sharing more info on it over the next few weeks.
Hydranet DEX — ATLAS Deployed to Closed Beta Group
ATLAS, the concept name for the next phase of Hydranet DEX, has been rolled out to our closed testing group for some final touches. The revamps made to ATLAS are substantial and include a major reworking of the orderbooks, implementation of Connext watchtowers that allow for direct control of L2 assets from L1, the implementation of bot trading, L2 Active Enhancement (multiple L2s up and syncing online simultaneously), client-side DEX refunds, taker pays maker fee deductions, and much more. We were initially hoping for a public release in September, but the work involved in upgrading Connext and refining our bot interface required more time. High-frequency trading is one of the biggest targets for the DEX, and bot trading is a way to automatically push the DEX towards higher and higher levels of the trading volume. We intend to publicly release the ATLAS build of the Hydranet DEX with this feature fully available for anyone to test.
Our Treasury has continued to grow. It now contains over 51.5k GLP. A Snapshot vote was held from September 22–25 proposing to, amidst a crypto bear market, diversify our Treasury holdings beyond GLP. The vote to diversify won with an overwhelming majority >95%.
Though GLP contracts have been through multiple audits, we believe it is wise to limit our exposure to smart contracts and hedge with more native/spot assets. The tokens proposed as additions in this vote are Arbitrum ETH, Arbitrum DAI, native BTC, and/or wBTC. As GLP itself is a breadbasket of blue-chip cryptos and stablecoins (USDC, ETH, WBTC, DAI, and USDT), this move is largely a deviation away from reliance on a single set of smart contracts. The emphasis on keeping a stable breadbasket of cryptocurrencies remains the same.
Bonds were raised and sold out twice throughout the month. On September 6, infrastructure bonds were put up for sale. The goal of these bonds was to raise funds for upgrading Hydranet DEX and its HUB infrastructure, with a plan to host the DEX entirely on a platform that can be paid for in crypto by the debut of Phoenix, our mainnet build. These bonds completely sold out within 5 days, raising 2000 DAI and 1.33 ETH.
On September 23, orderbook bonds were raised — targeting further development of critical DEX features: taker-pays-maker fees, and Connext DEX fee refunds. These features have been partially implemented into the DEX already, but they require further refinement and testing. These bonds sold out in less than 4 days, raising 1500 DAI and 1.5 wETH towards the goal.
All the bonds that were raised this month sold out quickly. If you’re interested in buying bonds sometime in the future when they become available again, we recommend you join our Discord channel. We will be sure to make a public announcement.