What is Hector DAO? Your ultimate guide
Hector DAO is a new product that wants to be stable but is not a stablecoin
- What is a DAO?
- A stable coin, not a stablecoin
- Solving the problem
- What you can do with Hector DAO
- The future?
Hector DAO (HEC) may only be a few months old, but it is garnering interest as a novel attempt to create a cryptocurrency that will maintain its value. What is Hector DAO (HEC)? How does Hector DAO work? What is Hector DAO used for? Let’s find out.
Since, as its name suggests, Hector DAO is a decentralised autonomous organisation (DAO), we had better explain what a DAO is.
What is a DAO?
A DAO is a group of people or users who are bound together by a set of rules, with decisions put together on a blockchain. Because the rules of the DAO are set in the code on the blockchain, that means there is no need for a traditional hierarchy, meaning there is a sense of equality. Hector DAO operates on this particular principle.
A stable coin, not a stablecoin
The other thing to say about the HEC coin is that, while it is not a stablecoin, it aims to be a coin that is stable. The anonymous group of nine people behind the Hector DAO cryptocurrency argues that stablecoins are not truly stable. Instead, they are pegged to a particular fiat currency, usually the US dollar, which has a value that fluctuates over time.
Just because a stablecoin, such as tether or UST, is worth $1, that does not necessarily mean anything, because that dollar, and the amount it can purchase, changes in value under pressures such as inflation and movements in the currency markets. The true value, the purchase power, of a currency tends to drop over time. This means that a stablecoin will, ultimately, be worth less in the real world than it is on a spreadsheet which, it could be argued, negates the point of having a stablecoin.
So, how can we create a cryptocurrency that serves as a store of value in the long term? While stablecoins can serve that purpose in the short term, it can be argued that, because of the depreciation in value over the long term we see in fiat currencies, they are potentially less useful as time goes on. The people behind the Hector DAO cryptocurrency argue that their token can provide the solution.
Solving the problem
While a traditional cryptocurrency, which goes up in value, might be seen as a potential answer, there will come a point when all the crypto’s coins or tokens are mined, thus reducing the value of the coin. Hector DAO aims to avoid this particular problem by the way that it is backed. It operates on the Fantom blockchain and is backed by the chain’s native FTM, as well as the DAI and USDC stablecoins. HEC is a kind of fork of the Olympus cryptocurrency, which was designed to serve as an algorithmic stablecoin, maintaining its value through the use of reserve assets, such as DAI, to maintain a steady value, if not a steady price.
The people behind Hector DAO describe the activity that led to the HEC coin being created from OHM as a “spoon”, meaning it is “a fork which develops into its own unique system, and prefers cooperation over competition”. A fork takes place when the community behind a crypto makes a change to its rules. The way the Hector DAO cryptocurrency works is through liquidity, which is provided by the cryptos that back it. If the price of those falls below one HEC, then the protocol behind HEC buys back HEC tokens and then burns them, thus raising the price of Hector DAO until it is above what is backing it.
As the white paper says: “HEC is backed by DAI and other assets owned by the reserve treasury, and will function in a very similar way: when HEC trades below DAI, the protocol will buy back and burn HEC, increasing its price to at least 1 DAI. This means that HEC will always be worth equal to, or more, than DAI.”
What you can do with Hector DAO
There are, ultimately, two options for owners of Hector DAO HEC. The first one is staking. This is a pretty common theme to cryptocurrencies. Staking involves locking up the token in a staking contract, in return for an equal amount of staked HEC (sHEC). Rewards are paid out in sHEC approximately every eight hours and, should you wish to unstake your Hector DAO, then you are able to do so, getting your HEC back in return for your sHEC.
The protocol behind Hector DAO rewards staking because the process means that the crypto is not being spent, which in turn means that it helps to stabilise the price of the token, which is the ultimate point of the cryptocurrency.
The other option is bonding. This involves giving the system liquidity protocol tokens in exchange for HEC. What is notable here is that, if you bond, then you can get HEC at a discounted price. In effect, you are getting more Hector DAO for less money.
However, there are two types of bonds that can be used. These are 4,4 bonds and 1,1 bonds. The 1,1 bonds are paid in HEC, which means that 1,1 bonders have to manually claim and stake if they want to earn interest that way. The 4,4 bonds, on the other hand, are paid in sHEC, which means HEC is automatically staked and earning interest. The 4,4 bonds are locked in for four days with no part of the bond being claimable until that time period ends, and 1,1 bonds vest 20% a day, with the vested portion of the bond being claimable at any time.
There are nine people, all using pseudonyms, who are responsible for the development of the Hector DAO coin. These are Guru, John and wKich, who are the developers; Leonida and Ilija, the strategists; Prometheus, who is responsible for both strategy and PR; Nero and Agenor, who take care of marketing; Zeus is responsible for community management; and Poseidon, who is in charge of partnerships and external relations.
It is unclear whether Hector DAO’s Zeus is the same Zeus who was involved in the set up of Olympus. The team is scattered worldwide, with six from the EU, one from Russia, one from China and one from Australia. Hector DAO went live on the open market in November 2021 and according to CoinMarketCap, the organisation, for want of a better word, has self-reported a total circulation of 2,904,447.36. However, since this is unaudited, this may not be the case as of 12 January 2022.
Hector DAO has several projects in the pipeline. These include a cross-blockchain project, a bank, a decentralised finance (DeFi) NFT-related game, a method of launching projects on the Fantom blockchain, a decentralised exchange, an educational centre, a payment system and even a stablecoin. Whether and when these concepts will come to fruition remains to be seen.
Hector DAO self-reports a total circulation of 2,904,447.36 HEC coins as of 12 January 2022. However, that figure has not been independently verified.
Hector DAO was created by a team of pseudonymous developers as a fork from the Olympus cryptocurrency.
Probably. One thing to note, though, is that this is a very new currency and its creators choose to use pseudonyms. That does not necessarily mean that there is anything wrong with it – after all, bitcoin was founded by someone who used a pseudonym – but it is worth keeping in mind.