Published: Feb 4, 2023. Updated: July 17, 2023
Disclaimer: The information in this document is provided for informational purposes only. You should not construe any such information as legal, tax, investment, trading, financial, or other advice. Please note the more detailed disclaimers at the bottom of this document.
The Hydranet token, called HDN, is a utility and governance token. It can be used for Hydranet DAO1 governance, trading fee reduction on the Hydranet DEX and as necessary collateral to run important elements of the Hydranet DEX2 ecosytem. HDN runs natively on the Arbitrum One blockchain with ERC-20 standards.
1.1 The past
The user was able to choose to stake either sHDX or gHDX here: https://app.hydranet.ai/#/stake, earning 0 % APY in HDN. The HDN supply when writing this document is unlimited.
1.2 The present
The new HDN smart contracts3 were deployed in July 2023, won't include staking, and implemented the maximum supply of 300 Million HDN. This number will only be reachable by HDN bonds. Every new 5 Million HDN that will be minted by bonds has to be approved via a public community vote first.
1.3 The future
Hydranet DAO and community leaders will continually explore the technical and legal feasibility of distributing Hydranet DEX fees in another currency than HDN, for instance, Arbitrum ETH. Until then, it will focus on rewarding active participants and increasing HDN liquidity. Once the Hydranet DAO community is satisfied with the order book liquidity and the circulating supply, the multi-sig team can instruct developers to test and audit different smart contracts for a Hydranet DEX fee distribution model in favor of direct reward.
1- Here in after also referred to as "they", “DAO“ or its representatives, called “multi-sig” 2- A downloadable desktop application for trustless off-chain cross-chain trading, hereinafter only referred to as "Hydranet DEX" 3- The token will be called HDN as voted per DAO snapshot vote
2. HDN Usecases
2.1 Fee Reduction
By holding a specific amount of HDN in your Hydranet DEX wallet, you can enjoy a corresponding percentage reduction in trading fees when transacting on the Hydranet DEX platform.
This proposal essentially presents a streamlined version of DEX NFTs, which is grounded in the Hydranet Tokenomics 3.1 framework. The primary motivation behind this discussion is to expedite the launch of DEX NFTs, thereby providing immediate advantages to HDN holders.
Amount of HDN
Fee reduction in %
5000 - 25.000
25.001 - 75.000
75.001 - 150.000
150.001 - 250.000
250.001 - 500.000
more than 500.000
Please note: The Hydranet DAO reserves the right to adjust the system and its numbers. Small changes (sub 25%) might be deployed without another DAO vote to ensure the profitability of the Hydranet DEX. Bigger changes will be subject to DAO votes.
2.2 HDN DAO Governance
HDN is a unique governance token that empowers its holders with voting rights within a decentralized autonomous organization (DAO). Utilizing snapshot technology, each HDN token represents a single vote, ensuring a fair and democratic decision-making process for the DAO's community-driven operations. Votes can be seen and interacted with here: https://snapshot.org/#/hydranet.eth/
3. DEX Fees
3.1 Usage Overview
The collected fees from the Hydranet DEX will be converted to Arbitrum Ethereum (aETH) and used in the following pools:
- 70 % to strategic liquidity of HDN tokens (see 3.2)
- 30 % to the Hydranet DAO treasury (see 3.3)
The flagship product, the Hydranet DEX, enables off-chain peer-to-peer trading with a 0.1-1% fee per trade (for taker and maker each). The fees might vary, depending on the trading pairs, trading activities, and referrals. The DEX fees will be collected and managed by the multi-sig team which acts on its own, separately from the DEX team.
3.2 Strategic Liquidity
The multi-sig team will use 70% of the fees generated by the Hydranet DEX to build strategic liquidity for HDN. The objectives of strategic liquidity are:
- deep liquidity in HDN pairs on exchanges
- HDN token purchases (as a result of providing liquidity) and then potentially
- HDN burning and supply reduction
This will be done for the entire price range of HDN. The multi-sig team will also prepare mechanisms to minimize the negative impact of individual dumps by creating a deep price floor. It is achieved by focusing a particular share of these 70% DEX fees on a low-price liquidity pool (LP). Since the HDN price is determined by supply and demand on the open market, this price floor will be dynamic and moved in accordance with the current price of HDN. The tools used for managing the HDN liquidity will be Market Maker bots on orderbook exchanges, e.g. Whitebit and Hydranet DEX, and Liquidity Provider NFTs on Uniswap.
An overall increased liquidity of the HDN token will create an environment where the HDN token can develop freely and make the token more attractive to traders. The mechanism used for dump prevention will furthermore create an extra level of stability for all token holders. When the community is satisfied with the status of the HDN liquidity, any bought-back HDN in this process will be eligible to get burnt.
Any changes made to HDN in the Protocol owned Liquidity (POL) will be presented by the multi-sig team to the community and have to be confirmed by a public snapshot vote. However, to react quickly to changing market circumstances and to add newly acquired DEX fees to the liquidity management tools, the low-price LP will be adjusted by the multi-sig team to the best of their knowledge, without a public snapshot vote. The NFTs used to manage liquidity will always be visible to everyone in the multi-sig wallet: https://debank.com/profile/0xB9eBe487fc454264CbCdDfd19374D4D2353c779d.
3.3 Hydranet DAO Treasury
The multi-sig team will use 30 % of DEX fees in the following ways:
- build the Hydranet DEX client platform and perform upgrades to the system, which includes team recruiting, training, and the development budget.
- for Hydranet branding and marketing, including continuous promotion and education of Hydranet and blockchain innovations in industry mediums. A sufficient budget for various advertisement activities, to help Hydranet become popular among investors, and to attract active users to the platform.
- pay for Referrals (distributed by Influencers).
- reserve for any emergency or unexpected situation that might come up.
4. Additional Plans
4.1 Special DEX NFTs
Please note: The implementation of DEX NFTs has no date yet. Currently, this has to be seen as a work-in-progress proposal.
Special DEX NFTs (DNFTs) would be an interesting tool with utility for Hydranet DAO and Hydranet DEX users. For Hydranet DEX users, the possible benefits of DNFTs could be discounted trading fees for certain periods. The DNFT would serve as proof for the user to obtain the benefit. For Hydranet DAO, the DNFTs could serve as a means to raise capital without selling bonds and thereby inflating the token.
Specific DNFT attributes and qualifications need to be discussed further. But they could be any combination of the following, with further room to expand on ideas into the future:
- A minimum number of staked HDN held to be eligible for DNFTs
- Options for Resale: an open, accessible DNFT marketplace would increase their value and provide them more appeal.
- Minimum Turnover: The holder has to trade on the DEX, either for a certain amount of time or up to a certain amount in the capital, before trading fee discounts activate.
- Resale Taxation: When, and if, the DNFTs are resold, a small tax can be charged and paid to Hydranet DAO. This would create another income stream for Hydranet DAO and could be added to the holder share of the Hydranet DEX income.
- Trading fee discount specifics.
- Limitations on specialty NFTs: Limits and issuance amounts, as well as timing, need to be the subject of a more detailed and thorough investigation from our internal teams and outward contributions from the community.
Proposals and demonstrations spurred on by the community are integral to this idea, as is community voting. These special NFTs have a relevant impact on all stakeholders. Certainly, there is a risk in giving too much power to DNFTs (namely, detracting from standard incentives and harming the platform).
4.2 HDN as Listing fee
Another option that is currently getting explored is taking HDN as a listing fee. If a team wants to list a new token on the Hydranet DEX, they would have to apply and pay a listing fee to Hydranet DAO and provide the necessary liquidity for their token. The received HDN can then be used for liquidity, payments, or burning of the HDN token.
5. HDN Supply
5.1 HDN Distribution
Snapshot of the supply distribution at the end of 2022:
- 101 Million: Community from XSN (Stakenet) swap
- 8 Million: Protocol-owned Liquidity (POL) for Exchanges (managed by multi-sig)
- 15 Million: Treasury for Team vestings for 2-3 years (managed by multi-sig)
- 42 Million HDN: staking rewards, distributed to all stakers since the token launch
5.2 HDN Emissions
Users can buy HDN bonds with DAI or wETH, to support the DAO directly. All acquired funds go into the multi-sig treasury and are used for paying servers, marketing activities, and developers. When available, bonds can be bought here: https://app.hydranet.ai/#/bonds
6. Additional Info
6.1 Arbitrum Network Info
6.2 HDN Token Info
Attributes of HDN token:
- the main token of the Hydranet DAO
- token on exchanges
- voting rights
- reduced fees on Hydranet DEX
- smart-contract: 0x3404149e9EE6f17Fb41DB1Ce593ee48FBDcD9506
Treasury address: https://debank.com/profile/0xc5888c4c261a1c5e8745eb1977eb54fcb21d2a28
The Hydranet DAO will continually try to improve these HDN tokenomics, propose more features and adjust to new legal insights. Also, if the HDN ecosystem grows and new products or players enter, the HDN tokenomics might be subject to bigger updates.
The Hydranet DAO reserves the right to propose a change to the fee usage to the community if they feel that it is in the best interests of the community. Corresponding investigations are planned. The burden sharing of any future trade fee discounts and/or referrals will be made in particular about a fair distribution of the associated benefits.
No financial advice
The information contained in this document is not intended as, and shall not be understood or construed as, financial advice. The Hydranet DAO are not attorneys, accountants, or financial advisors, nor are they claiming themselves to be and the information contained in this document is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.
They have done their best to ensure that the information provided in this document is accurate and provides valuable information. Regardless of anything to the contrary, nothing available on or through this document should be understood as a recommendation that you should not consult with a financial professional to address your particular information. The Hydranet DAO expressly recommends that you seek advice from a professional.
The Hydranet DAO wants to state explicitly that US residents are not allowed to buy or interact with the HDN token.
The involved teams shall not be held liable or responsible for any errors or omissions on this document or for any damage you may suffer as a result of failing to seek competent financial advice from a professional who is familiar with your situation.