This is an introductory article to the tokenomics of Helis Network and the bridge fee model. Within this article, we will explain the bridge toll model being operated by Helis, from both a technical and philosophical point of view.
The ICO Landscape Today
In today’s ICO space, there are several pitfalls for participants. With the help of our advisors, we’re deciding to follow the fair token sale model, an example of which was utilized by LTO Network, a project that innovated and pioneered the bridge fee model earlier in 2019.
We often see private investment dumping tokens on listing, or selling to get back their initial investments back and holding the rest long term. With more bargaining power for higher pegs, bonuses and better release schedules, Retail Investors are often held hostage in projects with poor token economics or in bad & illiquid market conditions.
The Technicals — How does it work?
Bridge Fee Model
Helis Network utilises a bridge fee model across its network. The network’s native tokens consist of multiple contracts of bonded (bridged) tokens. We have opted for applying the bridge fee on each round of our token sales. By crossing into the liquid smart contracts, users are charged a fee by the network, which is burned from the network forever!
Effectively, only tokens on the unbonded contract will reflect the circulating supply, and the bridge fee model will ensure fees in tokens crossing the bridge will be burned out of supply.
All Helis tokens for sale for seed and private contributors will be bonded and if the contributors wish to make these liquid they will have to cross the bridge toll and pay a fee. The fee schedule for each round is as illustrated in the next section.
How does the Bridge Fee work?
Bridge Fee schedule for each round
Helis Network Utilises a 1:1 token bridge between bonded (bridged) and unbonded (liquid) tokens. They exist on two different contracts for reasons due to mechanics and liquidity.
Bonded to unbonded: There is a dynamic fee using the bridge toll model. This is primarily to prevent dumping and increase community incentivisation and participation, adoption of the enterprise products etc.
For instance, seed investors have the option to cross the bridge with a first month fee of 55% of the tokens transferred that decreases by 20% each month over a period of 9 months. The fees will be calculated and processed by the smart contract automatically and burned by sending to a 0x0 address. While the bridge is drawn down, the burned fees will be taken out of the total supply resulting in an every decreasing total token supply.
Unbonded to bonded: There is a static fee of X tokens which is paid to the validator nodes within the network.
The advantages of the Bridge Fee Model?
Recent experience shows that projects that raise a lot of capital have to live up to higher accountability and most project struggle in demonstrating reasonable value in relation to their high valuations. Furthermore, there is an over-reliance on dumping tokens on listing, and around harsh vesting cliffs. Instead of operating a lock-up vesting schedule, our tokens have direct liquidity. However, there is a catch.
A bridge fee will be present for the first 9 months from launch. By implementing the bridge fee model, we deter initial liquidations on exchanges as bridge fees are to be paid, especially in the early beginnings of the launch. Why is this fair? The bridge fee is offset by a lower token price given to our seed investors for agreeing to the lockup earlier. Thus, an equilibrium of fairness is reached and determined by market forces.
Additionally, a price equilibrium is achieved between the seed and the private round, where by seed investors cannot abuse the price advantage. Lastly, a price floor can be achieved with the private terms and assist the project with reduced price volatility.
Distinction between Use Case and Speculation
Helis Network liquidy tokens are for use on the Helis Network, paying Helis transaction fees, use cases within our products, such as paying for recurring payments, payroll usage fees, governance & voting, and staking .
Helis Network unbonded tokens are for liquidity (directly tradeable). Only the unbonded tokens are directly tradeable.
Tokens can travel across the network both ways unlimited times, just keep in mind the bridge fee when doing so. The supply is fixed and can only ever decrease (rapidly), as once tokens move from one contract to the other, they are immediately exchanged 1:1 minus the fee.
Why operate a bridge fee model?
Firstly, we’re planning to have a low amount fundraised and thus a low fully diluted hard cap.
We want to show the community that we are serious about building products and operating a business, not a whitepaper or a pipedream. With that said, we have managed to create one of our first products on a small amount of seed investment back in 2018, showing that tens of millions of dollars is not needed for blockchains or protocols which have no market or use case behind them.
Our goal is to gain DeFi adoption in the real world through enterprise and retail adoption with our plug and play products.. By having to carefully manage our budgets, Helis Network is motivated and driven to eliminate waste, over-zealous spending and often at times corruption in blockchain business operations; Helis Network would rather than raising tens of millions and diluting retail investors (our community; important to adoption and championing our developments), leaving them with a bad experience on the market.
By setting things up this way, we’ve eliminated two issues;
- Early sell-offs and mass liquidation by VC and angel investors.
- ICO projects and business models having no real relevance to the token use case.
Does the Bridge Fee Model Work? — Enter LTO Network
One of the first projects to successfully use the bridge fee model was LTO.Network, a dutch-based company pioneering legal notary transactions on the blockchain, with partnerships with major tech companies. They utilised the bridge fee model in an environment were projects were increasing using bonuses and ethereum pegs to offer investors valuations on tokens which could not be supported by market conditions; instead opting for a revolutionary new model entirely.
LTO.network decided that the fairest model was to give seed investors 100% of their tokens, with the democracy and agency to liquidate as and when they pleased, at a price. A fee would be changed and thus fee burned permanently from the network in order to compensate for the liquidation occuring on the ERC-20 liquid token contract. This created the fairest equilibrium possible for token sale participants throughout the project’s fundraise.
By building community traction in the form of campaigns, initiatives and games, LTO has built a strong community of supporters. From inception, rarely have their seed investors crossed the bridge. Data shows that only 10,750,000 / 72,500,000 tokens (14.82%) as of 05/07/19 have crossed the bridge from seed to ERC-20 from January 2019 through to August 2019; testament to LTOs’ communities strong support. The Bridge Fee model gives confidence and assurance to investors as they are the sole agents over the control of their tokens.
Unlike positive incentives, like staking — where you hold or stake for longer and then get rewarded more — negative incentives reverse the effect and punish for not behaving the way the protocol wants you to behave. The choice for negative incentives was based on the assumptions of crypto assets having extreme volatility, in which case most prefer liquidity despite potential losses — rather than positive incentives in the future. This is especially true during uncertain times for altcoins, as traders and investors prefer to flee to less riskier assets.
However, the outcome is not factually different from the previous models: private sale still can get the full unlock and the full position as intended if they don’t sell for X months. We gave participants the freedom to choose and decide when they want to enter or exit, at the same time making sure that the interest of the protocol and the long-term focus is maintained. Exit early — sure, fine, get a part burned. Wait for X months — have the freedom to do whatever you want with the full amount and no fees.
This model achieves a few cool things. First of all, it does not foster the behavior which you see with cliff unlocks, when people wait to sell the initial to fix their position. Secondly, it benefits those who help the project long-term, because their position constantly grows in relation to total supply as other participants choose to burn their stakes for liquidity. The fact that this happens in such a transparent way makes it also a fun community interaction when everyone can see what is happening.
We are humbled that other projects are looking to adopt the LTO Bridge Model. As Helis shows, the model does not need to have a mainnet to enable such lockups, it can be done with bonding curves. In the case of LTO Network, strong community and the utility of staking was a catalyst to balance things out. It’s important to remember that incentives always dictate the way a person acts, so it’s up to projects to guide the community and ensure sustainable growth with the tools available. If you don’t think through your lockups and complain about private sale selling — it’s not their fault, it’s the way you designed incentives. Glad to see other projects innovating!
Ending the Bridge
After nine months, the bridge fee will cease to operate, and investors will be free to cross the contracts without penalty, we believe this is fair, and also gives Helis Network a fair advantage of a nine month run-way to provide evidence and examples of adoption by enterprises that want to use ours tools to integrate and enable their businesses in expanding into new markets.
- Website: https://helis.network
- Twitter: https://twitter.com/helisnetwork
- Telegram: https://t.me/helisnetwork
- Medium: https://medium.com/helisnetwork