Hydra Economic Boost Package — Preparing for the Next Phase
As we are excited to be on the doorstep of the main HYDRA distribution event, our team has been working relentlessly to make sure the node infrastructure and economic design are optimized in the most efficient way for what is to come. At present, HYDRA is composed of two sub-components.
On one side there’s the LOC community and LockTrip team which played a vital role in the early stage of the project -> funding the research, architecture prototyping, validating two iterations of Testnet and even conducting valuable stress testing through the unprecedented public TPS competition that had the network running at critical load for an extensive period of time.
On the other side, there are the new non-LOC members of Hydra joining the communtiy, interacting with the network. They are quickly becoming the economic muscle of the project by strengthening the network weight.
The main distribution event of HYDRA is unique because it will intertwine these two subgroups — and upon its conclusion, HYDRA will deliver an infrastructure that is empowered by a diverse community which will be the backbone of the project’s decentralization.
With all this being said, our team has been carefully gathering data and analyzing various simulations in order to ensure that the next phase will give the highest net probability for HYDRA as a system to not only succeed — but also unlock the greatest upside potential.
This post will introduce the conclusive set of economic modifications prior to the launch of the distribution event. We hope you enjoy it as this is the result of a significant amount of work.
By the way, you can still participate in the HYDRA Airdrop → JOIN HERE
Hydra Performance Data
Since the debut listing back in January 5, HYDRA has been growing at an accelerating pace. We have seen a stellar performance in terms of price, community growth, node infrastructure and adoption.
- The Twitter followings of Hydra jumped by 145% in March alone
- Hydra Telegram group steadily followed the exponential curve, as can be seen below:
Looking for on-chain metrics, we can see that the transactional activity on the Hydra chain has been climbing as well, indicating organic activity across the blockchain community:
Most notably, we have gained hundreds of new stakers who have joined the Hydra ecosystem and are now helping to maintain the blockchain through their staking activity.
In parallel to this, we have seen relatively few HYDRA being claimed by existing LOC holders, which will result in significantly more HYDRA being burnt than initially expected. Given these new circumstances (massive community growth and an abundance of unclaimed HYDRA), our calculations show that there is an opportunity for optimizing the distribution settings towards the new environment.
A System-Wide Airdrop Rate Modification by 35% to 0.65 HYDRA per LOC to Adapt the Airdrop Design to the Current Environment
The current Airdrop participation measures at approximately 8.2M HYDRA which is approximately 68% of what was initially planned. This means that a significant amount of HYDRA will be burnt.
Starting from the very first week, we will be reducing the distribution rate by 35% to make sure all members who participate will be adapted to this ratio.
This means that the total distributed amount after 50 weeks will be reduced to 0.65 HYDRA per LOC. At first this may sound surprising or counter-intuitive. But we firmly believe that this will benefit the entire ecosystem and make it significantly more resilient.
Note: Before you get worried, please keep in mind that the cut will apply to everyone at the same rate (including team/founders wallets and the company treasury). So your share of the network will remain the same. In fact, the team/founders and company treasury will be the biggest contributors to the reduction (from an absolute HYDRA count perspective).
Hence, this does not lead to a reduction in value, because it preserves the exact same ratio among all airdrop participants. When you apply the reduction on all members, that cancels each other out and it preserves the same rankings.
At the same time, the airdrop weight comparative to the non-airdrop economy will be slightly lower, which will enable a more smooth economic transition with much higher upside.
In addition, by cutting the ratio, we not only preserve the share/ranking among all airdrop participants but at the same time, we can also enable a much stronger APY over a more prolonged duration period which is something that has been validated as a critical component for the early phase growth of the network. To some extent, this modification will be converting some of the airdrop initial supply into a higher APY for the whole system, which users can still take advantage of as early adopters.
What are the benefits?
- Enhancing the short and medium-term staking APY significantly which benefits all actors who are part of the system equally.
- Protecting the interests of the hundreds of new community members, who joined the Hydra family over the past weeks. Together we now have a very strong core, which will further fuel growth and expansion across the crypto space
- Strengthening the organic growth phase through an extended seed-phase (more on that below)
- Further enhancing the protection against short-term speculators and benefiting those who are here to stay (speculators will end up with slightly less HYDRA, while long-term supporters are rewarded through higher staking rewards and will compensate the lower initial supply). This enables the system to have more resilience against actors who are looking to exit early/as soon as possible, as those will have a higher opportunity cost from missing on the attractive APY, than the ones who are committed to supporting the network and the infrastructure.
- With the rate reduction, the initial supply will be in the 8M-9M range (including company treasury)
But this is not the only change we will be making to the ecosystem:
Reducing the Staking Weight of Core Nodes for a Boosted APY during Seed-Phase
The Hydra chain is currently supported by four core nodes, which played a key role in the pre-distribution phase. They not only ensured a smooth processing of blocks and seeded the decentralized node infrastructure, but they also protected the chain against 51% attacks when little supply was available.
With the HYDRA distribution starting tomorrow, they will have served their key purpose and we will start to reduce their share of the staking weight. Through this process, the Hydra chain will become truly decentralized as more and more nodes come online and grow their weight through the weekly distributions. We expect more than 500 new nodes to come online worldwide as part of this process.
The throttling down of core nodes will also come as an additional boost to the APY during the supply transition period. Our target schedule for the throttling is as follows:
- Reducing the weight of core nodes by 5% every week, until their share comes down to ~25%
- Then to maintain the ~25% throughout the next 2 years
According to our calculations, this will allow the treasury to end up at a final 35% share of total supply, as was planned from the beginning. If we are ahead or behind the schedule, then the staking weight may be adjusted slightly to get back on target.
This way we will be boosting the APY during the first two seed years by an additional 5–10%.
LOC Holders will end up with 1 HYDRA per LOC
The great thing about this setup is that despite the 35% cut in distributed HYDRA, you will still be able to make up for it through the higher APY. In the chart below, we are simulating the progression for a whitelisted wallet holding a flat 10,000 LOC throughout the airdrop period and staking all HYDRA received.
Example for 10,000 LOC → Ends up at 10,000 HYDRA
As you can see, the cumulative result at the end of week 50 touches the 10,000 HYDRA mark. So even though only 6,500 HYDRA were received as part of the airdrop, the end result will still be a 1:1 ratio due to the higher staking APY. Not to mention that the total supply will be significantly lower and that Hydra will be much more resilient as a network.
Extending the Seed Period of Hydra Chain
So what does all of this mean? We mentioned that the lower distribution amount contributes to a longer seed phase of the network, which turned out to be a critical factor to develop into a major network. Essentially the blockchain is rewarding early seed-adopters during the high APY period.
In the chart below, we have outlined the comparison between the default scenario versus boosted scenario.
In the chart above you can clearly see that the green line is consistently above the gray line, which shows the boost we expect from the optimization.
(Please note that these are rough estimates. Actual numbers can vary slightly depending on a number of factors)
We have highlighted two APY numbers specifically:
1. April 2022 — End of Distribution Phase
Here you can see that in the default scenario, we would have ended at roughly 39% APY. Although this is still much better than most alternatives out there, it is not as powerful as the 51% APY in the boosted scenario. This essentially means that anyone abandoning the network at the end of the airdrop will miss out on a significant opportunity.
2. April 2023 — End of Seed Phase
At the end of the two year period, Hydra is expected to maintain an APY of roughly 42% with the boosted scenario. The rate of drop slows down significantly thereafter. This is in contrast to the 34% expected with the default scenario.
Through this optimization, we are ensuring a more gradual change of state from the now starting airdrop phase to the post-distribution seed phase. Continuing from there, the transition from seed phase to its long-term maturity phase will be even smoother.
We are really excited for the upcoming events and are welcoming all newcomers to the growing family of Hydra chain!
Join the Hydra Community 👈
HYDRA is a proof-of-stake, inflationary blockchain that tackles some of the most profound and challenging economic issues with existing blockchain economies. Some of the more notable features:
🔥 100% Burn of all Transaction Fees
💎 50% Royalty on Gas for Smart Contract Creators → More Info
📌 Fixed Coin Transaction Fees of $0.20 → More Info
📌 Fixed Token Transaction Fees of $0.50 → More Info
💰 20% Minimum APR Staking Income → Staking Calculator
📈 Up to 540 TPS Elastic Capacity
🔏 EVM Compatible Smart Contract Platform
⚙️ Wallet-Level Scalability → More Info
🗳 Unique Decentralized Governance Protocol
⚖️ 18.5M Starting Supply with unique approach for handling the deflation tipping point. → More Info
