Hedron the Sleeping GIANT | Part 1 - Overview
Updated: Nov 4, 2022
In February of 2022, the first token and smart contract to be built on HEX was born: Hedron.
Hedron Allows Hex Stakers to mint Hedron based on how many B-shares they have within a given stake – B-Shares are 1/1000th of a T-share, ie Billion shares to Trillion shares – and allow users to Tokenize their stakes by staking through the Hedron protocol.
Stakers can mint Hedron every day based on how many B-Shares are in their stake or let the HDRN accumulate and only pay gas one time when the stake has been fully served before ending the HEX Stake.
Creating an HSI stake allows users to do a few extra actions beyond what a normal stake can do. Once an HSI is tokenized, it can be sent from wallet to wallet or sold on an NFT marketplace. Secondarily, HSI’s give users the ability to borrow Hedron against a stake immediately. There Is a catch of course, installments have to be repaid every 30 days and risk going into the liquidation auctions after 90 days of non-repayment.
Users must pay a small premium on the borrowed amount that is calculated by taking the global APY of Hex at the time and dividing that by 2, which is then taken and divided by 365. This new number is multiplied by 30 and spits out the premium percentage that is owed on the advance. It looks something like this:
(((Global HEX APY/2)/365)*30 day installment premium)=Effective Premium Rate
If the 30 day payment is not paid after a total of 90 days, it goes to the liquidation auction.
At this point, the HSI stake in the auction can be bought using HDRN tokens in a bidding process. When a stake is purchased in one of these auctions, all HDRN used in the auction is burnt out of supply. This creates a deflationary token measure on the supply and combats the inflation from minting HDRN. Currently, over 2.4 trillion tokens have been burnt out of existence since only February.
Let’s take a quick look at where we can find these auctions on Hedron.pro
In the first 100 days – that are now over – Users with Hex stakes could claim a bonus that lasts for the life of that stake. The first 10 days gave a 10x bonus on the mint-able Hedron over the life of the stake, and every 10 days that bonus reduced by 1, over the course of 100 days until the bonuses expired.
Hedron, like Hex, has a Source Address(SA). This Address gets a copy of all bonuses from the initial launch phase of Hedron. Like the Hex Origin Address(OA), its owner is unknown/ undisclosed and there should be no expectations from this address. Currently, the SA holds 44% of the total supply, though that will grow over time as all the stakes with claimed bonuses continue to accumulate Hedron.
Hedron also has a Flow Address, which receives 0.15% royalties on any HSI NFT sales done on marketplaces that support or enforce royalties. There should be no expectations of this address and like the Source Address, its owner is undisclosed/unknown.
Now you might be thinking: So, is that all there is to Hedron? You just mint it for free (minus Gas) and sell it into oblivion? What about the Whales that can dump a billion HDRN per day? How is this thing a great addition to Hex?
This is where we start deep diving into what happens to Hedron over time.
To really understand Hedron, we must have a pretty solid understanding of Hex before we can fully wrap our heads around Hedron. If you do not understand Hex yet or this concept has started to go over your head, you may want to go watch my other videos, “You need to understand this about the Tshare”, “the Truth about Hex’s inflation”, and “The Ultimate Hex Staking guide” and then come back to this video.
Hedron’s Supply
Hedrons supply inflates over time. However, unlike hex its supply increases the most it will ever increase in the early years and decrease over time. How does this happen you might ask?
Because hedron is mintable every day for every B-share you have (which is 1/1000th of a T-share) and the difficulty of acquiring a T & B share goes up equally over time, this means that the difficulty of minting hedron increases. Let's look at the equation that dictates how much Hedron can be advanced from an HSI:
B-Shares * (TotalDaysStaked - DaysAlreadyMinted) = Borrowable HDRN
The formula used for Minting Hedron from a stake is as follows:
B-Shares * (DaysServed - DaysAlreadyMinted)=Mintable HDRN
Though this equation is static, the amount of Hedron possible to be minted over time from a Tshare will change. Because the cost of a T-share is constantly going up and therefore the difficulty of acquiring B-shares is also going up, this implies an exponential curve of increasing difficulty to mint Hedron over time.
If you want to understand this the easiest way possible, let’s consider Bitcoins inflation.
In the beginning of Bitcoin, its inflation was its highest by far. As a block reward halving occurs every 4 years, the difficulty to mine Bitcoin increases and the amount of Bitcoin rewarded per Block mined gets cut in half. Over time, it gets more and more difficult get Bitcoin as a reward and inflation decreases. Unlike Bitcoin however, Hedron has no supply cap whereas Bitcoin has a 21 Million supply cap which will happen around the year 2140.
The curve will look similar over time to what the Bitcoin Supply inflation looks like, though it will not be exact due to the difference in mechanisms that increase difficulty of obtaining either currency:
Hex’s inflation curve will look like this over time due to its compounding 3.69% supply inflation rate:
So now that we’ve established the curve at which Hedron’s supply inflates, let's take a look at how it deflates.
When an HSI has an advance taken against it – meaning someone borrows all possible Hedron from the stake at one time – that HSI can be sent to liquidations after 90 days if the first due payment to the smart contract is not repaid. When this happens, users can bid on the HSI for 24 hours. If there is a higher bid within the last 5 minutes, the auction is extended another 5 minutes until no more bids come in to extend the time. At this time, all Hedron used to purchase the stake are burnt from existence.
What we have seen so far, is that 2.4 trillion Hedron has been burned to date and many of the auctions are being sold for absurd amounts of Hedron - much more than what the HSI can mint or borrow. This implies that in the first era of Hedron we may see a consistent decrease in total supply over time even with a massive amount of inflation due to the bonuses that have been claimed. This will be a consistent feature over time, but the degree at which Hedron is burned we will not be able to forecast.
If Hedrons price stays low, we may see a much faster burn rate. If Hedron increases in price faster, we may see much less Hedron burnt.
As a small bonus, when users take an advance on their HSI, all premiums that are paid every 30 days are also burnt from Hedron’s supply. This is a small number in comparison to the liquidations, however it will add up over time and contribute more as the inflation curve plateaus.
Hedron Pumps Hex through Arbitrage
Currently, Hedron is priced around $0.0000007 and Hex is seated around $0.038. So how could there ever be arbitrage opportunities here?
To understand how an arbitrage point could happen, we have to first look at the cost of a max bonus single T-share stake. To obtain a single T-share (that costs 22903 Hex at the time of writing) with a 5555 stake, you only need 7,634 Hex. This means at current prices, this stake costs $289.32 which is the lowest cost that you can currently acquire a single T-share for. If that stake was made as an HSI, then you would be able to advance 1000 Hedron* the number of days in the stake: which would equal 5,555,0000. In order for the Hedron to be worth exactly the same as the cost of the stake, the price of Hedron would need to be $0.00005208 (an 80ish X price increase away). If the price surpassed this point while both the T-share rate and the Price were the same, then users could make a 5555 single T-share HSI to advance all Hedorn available and then purchase Hex with that Hedron until there was no longer a price difference.
Another point to note here, is that all HSI’s that end up being used for this arbitrage opportunity will ultimately be sold for Hedron, which will all be burnt out of the supply. Typically as we’ve seen, there is more Hedron burned in these auctions than the stake can mint. This is a major net positive for Hedron as well.
This arbitrage point will pull the price of Hex upwards every time it happens. It could bring down the price of Hedron temporarily, however it is likely that this creates a locking of the prices to one another of sorts and ultimately supports Hex’s price long term.
Long term, because the T-share rate will increase dramatically over time and the cost of Hex will likely increase as well, the price of Hedron at this arbitrage point will be rapidly rising with both the T-share rate and as price increases over time for Hex.
How though would Hedron ever have enough going for it that the price could ever reach that arbitrage point? All it has going for it now is the ability to buy HSI stakes in auction and for the few largest players they get to enjoy free money at these prices.
There are 2 answers to this. One, is that liquidity is so low now that speculators could move the price quite quickly upwards. Number two and most importantly though, I introduce to you ICOSA: The staking platform built for Hedron.
Icosa introduces Hedron Staking, a new token called Icosa which can also be staked, HSI buybacks and another NFT that allows access to a one time access staking pool with massive potential rewards. To fully understand how ICOSA is about to completely change the game for both Hex and Hedron, you will need to watch Part 2 of this series when it comes out.
As a final note to add here, all HDRN tokens and the protocol will be copied over to the Pulsechain when it goes live in the World’s Largest Airdrop.
Before we go though, I need to give an absolutely MASSIVE shoutout to the entire Icosa telegram chat. They are the sole reason I was able to understand everything in this and the coming videos so quickly, including Nomad, CryptoSloth, Alex, Enigma, Bloo and many others.
- CRYPTOGRFX
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