The HER Cryptocurrency Pt. 1
Explaining the utility of HER tokens
In this post, we are explaining the HER cryptocurrency’s utility and the role it plays within the Herdius System. For more information on Herdius and the HER token, read our white paper.
Utility of HER
The Herdius decentralized exchange network is intended to run on a proof-of-stake (PoS) blockchain. In proof-of-stake systems, the validation of transactions requires a node to put up tokens as a locked-in collateral. Only once the transaction has been verified by a decent amount of network participants, the staked tokens will be unlocked.
The HER token is intended as the staking currency on the Herdius blockchain. Hence, it allows any holder of HER to become a validator (similar to miners in Bitcoin) in the Herdius network. For their services, validators would earn a share of the transaction fees and block rewards.
The other intended utility of HER tokens within the Herdius system is that users who hold HER tokens would be able to pay transaction fees at a discounted rate when compared to paying fees in other cryptocurrencies. The envisaged Herdius exchange’s design does not want to limit users to paying fees in HER tokens, though. Instead, users would be able to pay fees in other cryptocurrencies as well. These fees would go to the Pool, from where staked validators could claim their share.
The Pool can be envisioned as a collection of all the transaction fees that were not paid in HER tokens. If, for instance, users pay their Herdius transaction fees in Bitcoin, the fee would not go directly to the validators that validated the block containing said transaction. Instead, the fee would go to the Pool.
Of course, we want validators to be entitled to their share of the Pool. The share a validator would receive would be based on the stake the validator had in the validated blocks that currently make up the Pool. Also, we want the payout’s token distribution to equal the distribution of tokens in the Pool.
- Alice staked 10% worth of transactions currently in the Pool
- The Pool contains 30 BTC, 50 ETH, and 20 BCH
- Alice will receive 3 BTC, 5 ETH and 2 BCH
In setting up the Pool this way, it ensures that every validator gets a share of the Pool that reflects the current trading activity on the Herdius network and not a random distribution. This way, validators can remain impartial to the types of transactions they validate: either they receive HER or a fair distribution of the most popular currencies.
To operate and maintain the Herdius chain, several node types are required: validators, supervisors, hallmark storage nodes and nodes holding a part of a user’s private key. The HER token is meant to give network participants access to the respective roles. Thereby, it plays a critical role in enabling and maintaining a healthy network. HER is envisioned to act as the unified incentive mechanism within the Herdius network and as the system’s main instrument for aligning interests and rewarding good conduct of all actors.
HER token holders are the key participants of the Herdius network. As such, we envision them to play a central role in the governance and development of the network. To that end, HER token holders shall be involved in quarterly suggestion sessions where they can make proposals regarding the future development of the Herdius chain and suggest new chains to be made compatible with the Herdius ecosystem.
We believe that smart contracts offer a safe and fair solution to all parties during the suggestion process. Thus, we want to set up smart contracts to which HER token holders could send their coins to vote on proposals. The smart contract we aim to use in this process will be published in advance of the vote to provide transparency and fairness over the process. HER tokens sent to the smart contract are handled by the smart contract which, at the end of the voting period, sends HER tokens back to their respective owners.
Disclaimer: Herdius is a project by the Berlin, Germany-based Herdius GmbH. Balazs Deme is the CEO of Herdius GmbH. Herdius will start its initial coin offering (“ICO”) in Q1 2018. All relevant information regarding Herdius and the initial coin offering can be accessed at www.herdius.com