HydraDX — Idea of distribution with Liquidity Bootstrapping Pool
HydraDX is a technologically demanding concept which not many blockchain technologies could handle efficiently.
It all started as a brainstorming session, for searching the perfect liquidity layer, on Zee Prime Capital meetings. The primary goal was to optimize for the use case and not to make a technological compromise. This is why Polkadot and Substrate environment was chosen as a base for project development. It provides networking, interoperability layer, and consensus while providing freedom for modification and building custom business logic.
As HydraDX business logic was well designed, the team was able to attract strategic investors with their Omnipool and AMM idea, led by KR1 and Hypersphere, with CMS, Tenzor, DFG, and other development supporters like Blockscience. Given that funds were committed before any notion of coming success, the company tasked with launching HydraDX received 15 % of the total token supply. That is; both investors and the founding team will receive a combined 15 %. Investors are vested for 18 months, team 24 months with 6 months cliff, gradually unlocked.
Omnipool protocol explained
HydraDX is a fully decentralized and open protocol, one giant omnipool of liquidity. It has liquidity providers, but the protocol itself becomes a liquidity provider as well.
There are two sides to HydraDX omnipool — the “LP” side and the protocol side. The core idea is to have a base asset ($HDX) that is minted and held by the protocol. This asset will represent 50% of the initial value of the liquidity pool. The other 50% of the initial value is provided by the liquidity providers in exogenous assets. The 1:1 ratio is kept algorithmically; as assets are added or withdrawn, native tokens are minted or burned accordingly.
$HDX tokens remain within the pool until they are bought. $HDX can be exchanged in other tokens in the pool and can be traded freely outside of the protocol. In the omnipool, various assets can be priced against one another, since they are all priced against a tradeable base asset $HDX.
This enables $HDX to act as a price oracle, massively decreasing liquidity scattering and overall slippage and this also means that you do not have to provision a pair of assets as an LP (as usually in Uniswap or other DEX’s) and You can inject a single asset into the omnipool.
Dynamic buy and sell functions are logical improvements for the next generation of AMM’s. It’s all about balancing between low fees for traders and generating profits for liquidity providers. The core improvements of the HydraDX protocol are:
- Deeper Liquidity — minimizing liquidity scattering
- Lower Slippage
- Internal composability
- Better execution & UX
The concept of bonding assets against the protocol’s native token is similar for HydraDX and example Thorchain.
Looking into differences — with Thorchain, LPs have to buy/own the RUNE and bond it themselves. HydraDX mints and bonds the HDX itself so LPs don’t need to go buy it. The main difference is that Thorchain as most generic AMMs (except for Balancer) liquidity pools formed as pairs while HydraDX is forming from all liquidity just 1 pool — Omnipool. Also, both are using their native tokens ($RUNE and $HDX) as accounting units but Thorchain LPs have to rebalance $RUNE between pools and validators, while HydraDX is providing and managing $HDX liquidity automatically.
Liquidity Bootstrapping Pool
Liquidity Bootstrapping Pool is an adjustable Balancer smart contract that is used for initial distribution and price discovery of new assets. It uses a constant selling pressure and has a limited time duration, during which price continually drops if there is no demand.
The price will always fall even if it’s not dropping in the beginning and will rise instead. It will create large slippage for large buyers and finally will always fall in the end. The more important thing is that even if the price sets at more than ~5x the initial valuation because of a whale buy, over time you will be able to buy it at some median price that is similar to the person next to you and actually better than if you bought a large amount at once. Other than that… It’s a free crypto market, so we cannot tell any scenario will happen.
The main objectives of $HDX distribution via Liquidity Bootstrapping Pool are to conduct initial price discovery, which helps to set up native liquidity pool at mainnet and to publicly distribute part of HydraDX supply to its community.
Planned $HDX distribution:
- 15 % founding team & investors (investors vested 18 months, for team allocation — 24 months, stackable)
- 5 % on LBP on Balancer LBP
- 5 % Stakenet & Incentivised Testnet rewards
- 75 % liquidity mining & staking rewards
Once the chain is ready a Stakenet period will begin, with a one-way bridge from erc20 $HDX representation (from Balancer LBP) to a Substrate native $HDX.
On the native Substrate chain, $HDX holders will be able to stake and receive rewards (Stakenet and staking tutorials will be released beforehand). Rewards from $HDX staked by founders & investors at this stage will go towards on-chain treasury. An additional 5% will be claimed in this Stakenet & Incentivised Testnet period. These rewards will be used as a stress test of the maximum number of validators, transactions, and other parameters and allow holders to receive an additional $HDX. This will be also time for bootstrapping HydraDX validator sets.
Planned roadmap with Balancer LBP included:
- Roccoco V1 testnet {Hydrate}
- Balancer Liquidity Bootstrapping Pool (erc20 $HDX)
- Stakenet (erc20 $HDX → Substrate native $HDX)
- Incentivised Testnet
- Interchain Incentivised Testnet
- Kusama “Chaosnet” {Basilisk}
- Polkadot parachain mainnet launch
(informational guides and tutorials for each stage will be released beforehand)
$HDX Liquidity Bootstrapping Event on Balancer
HydraDX will be distributing $HDX via Balancer.
Starting on Monday 08.02.2021 at about 4 pm GMT (this is still subject to change), expecting to conclude after 3 days on Wednesday 11.02.2021 (block 11817007 to block 11836793)
You will be using $DAI cryptocurrency to swap $HDX from Balancer LBP
Weights of the LBP will gradually change from xHDX/DAI = 92.5/7.25 to xHDX/DAI = 17.5/82.5 during that period, creating downward pressure.
The pool will be created with 500mm xHDX tokens (5% of total supply) and 1.2mm DAI.
The initial price of the HDX token is 0.0296$.
If nobody bought it, it will fall to roughly 0.0005$ after 3 days.
Possible HydraDX purchasing strategy at the LBP auction on Balancer:
Assuming that the auction will be similar to $PERP (psychology of people is the same), the best time to buy HydraDX will be two green zones. (around 12h after the LBP event starts, and the consolidation period around the second day of LBP).
Of course, many people may try to play similar, so the best strategy to approach LBP is to split Your total desired investment into two / three, or even four batches. Please keep in mind the high ethereum tx fees last few days.
The chart shows that the most expensive moments for shopping are the very beginning, the middle and the very end of the auction, so I would avoid them in the first place. Also, the right strategy for LBP should be to split your orders into a few more rather than one, because no one knows what happens later.
!!After You swap $DAI for $xHDX (erc20 HDX version) on Balancer LBP there is nothing more You should do!!
HydraDX is following the same patch to Polkadot. xHDX is just a means to get $HDX on the native HydraDX chain. After LBP ends, You will be able to claim xHDX, to mint $HDX via the HydraDX claims UI portal.
The claim UI and a guide for how to redeem $HDX will be released soon.
After you claim your native $HDX tokens on the Hydra DX chain, you can nominate Stakenode validator nodes, via HydraDX UI, to receive more $HDX in Incentivised Testnet period.
For all of You interested in validating the HydraDX network, system requirements and node setup instructions will be explained in separate articles.
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