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Preliminary results of the HYPE tax and BUILD DAO revenue

This article tries to summarize the results of the HYPE tax and its effects on the revenue of BUILD DAO.

This analysis excludes the outliers generated by the launch which are unlikely to occur under normal everyday conditions.

NOTE: Hype Protocol is a modular system meant to evolve over time and all claims here are valid only at the time of writing.

There may be inaccuracies in this article. Please do your own research and don’t take anything here as financial advice.

HYPE HAS NOT BEEN AUDITED. APPROACH THIS KNOWING THAT YOU MAY LOSE ALL OF YOUR FUNDS!

HYPE tax recipients

As explained in the HYPE docs, the tax is used for multiple purposes.

  • Provide perpetual farming rewards to the Uniswap LPs.
  • Send part of HYPE back to BUILD DAO to bootstrap future HYPE farms
  • Buyback BUILD with HYPE and distribute part of it back to BUILD DAO and part to BUILD staking.

BUILD DAO treasury

BUILD treasury balance

Using the data set of BUILD balance exported from Etherscan for the first day of HYPE trading, we can make the following conclusions.

Using median value of the incoming BUILD buybacks for the whole 24 hours period multiplied by the number of transactions, we can expect 27 BUILD / day.

Using the total income in the last 12 hours, we can expect about 44 BUILD / day.

Let’s use an average of these two values and assume that the BUILD DAO can get a stream of 35.5 BUILD / day buybacks deposited into its treasury.

At the current price of ~$20 / BUILD, this represents an income of about $710 / day for the DAO.

BUILD staking

Since only half of the HYPE -> BUILD buybacks are currently deposited into the treasury, the other half (~35.5 BUILD / day) is used as rewards for the BUILD staking.

HYPE treasury balance

Similarly, the following conclusions are made from the data set of HYPE balance exported from Etherscan for the first day of HYPE trading.

Using median * tx = 23.6 / HYPE / day

Using past 12 hours = 74 HYPE / day

Using the average of the two values: 48.8 HYPE / day.

Assuming we bootstrap a new HYPE farm every 3 days, this would mean we can allocate roughly 150 HYPE as initial rewards for a new farm. At current HYPE price of about $17 / HYPE, this represents $2,550 of rewards.

While it doesn’t seem like much, it could still serve as a small initial spark for new pools for LPs to lock liquidity. Additionally, as we have not finished the initial farming period yet, it’s better to avoid making any conclusions on this point yet and wait until the initial distributing of 100k HYPE is over.

LP rewards

ETH/HYPE pool

The following numbers are additional HYPE rewards added to the pool from the HYPE tax. This analysis tries to estimate how much HYPE will keep coming in as new rewards after the initial farming period ends.

Median: 56.6 HYPE / day

Last 12 hours: 144 HYPE / day

Average of the two: 100.3 HYPE / day.

Using the current price of HYPE $17 / HYPE, this is about $1700 / day or about $620,500 / year. Using the current liquidity on this pair of $126,500, the APY would be around 490% / year.

NOTE: There is a lot of assumptions here so please don’t take this as given. It’s just the current analysis that tries to estimate the effects of the hype tax. Nothing in this article is financial advice. HYPE may also just drop to $0 and then there won’t be any APY at all. Do your own research and always expect to lose all of your funds!

BUILD/HYPE pool

The numbers below are additional rewards continuously added from the HYPE tax.

Median: 15.5 HYPE / day

Last 12 hours: 87.7 HYPE / day

Average of the two: 51.6 HYPE / day

This is approximately half of the ETH/HYPE pool. Since the current liquidity on this BUILD/HYPE is almost the same as ETH/HYPE but the reward rate is lower, we can expect the liquidity on this pair to be about half of the ETH pool size after the initial period ends.

Future plans

As mentioned in the documentation, Hype is a liquidity locking protocol aiming to increase the liquidity of as many tokens as we can.

The next logical steps are therefore to let the initial week 100k HYPE distribution to finish and then start launching as many new farms as we can.

By doing that, we’ll try to optimize for 2 main goals:

  • Increase the total liquidity locked across all HYPE pools
  • Increase the total trading volume across all HYPE pools

More liquidity and more volatility from many tokens will lead to more trading volume which will in turn lead to more hype tax fees.

To achieve these goals, we also plan to experiment with other ways to lock up liquidity and other incentive types.

Conclusion

HYPE is designed to be a modular and highly customizable system. The first day, while not perfect, has already started to give us some data to discuss.

HYPE is also the first product by BUILD finance which has started to generate revenue for the BUILD DAO.

Jump on our Discord to discuss how can we make it better.

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