Proposal: Whitelist Hedera (HBAR[eth]) with 100,000 BNT trading liquidity limit

Proposal: Whitelist Hedera (HBAR[eth]) with 100,000 BNT trading liquidity limit

TL;DR

  • Proposal to whitelist HBAR[eth].
  • Proposed co-investment is 100,000 BNT.
  • The HBAR[eth] token does have a freeze function that is safeguarded by multisignature via the hashport validator swarm where HBAR[eth] is minted/burnt.
  • The freeze function requires a minimum threshold of 7 out of 9 signatures to be used. USDC requires 1 signature in contrast.
  • There is no reason to doubt the legitimacy of the Hedera public network or Hashport.
  • The benefit to Bancor is clear. $5 Billion Dollars of untapped liquidity residing on Hedera that now has an easy migration path to Bancor via hashport.

Synopsis:

HBAR[eth] is a representative version of Hedera’s native HBAR token residing on Ethereum.

Currently there are no DeFi applications on Hedera that allow holders to earn yield. As a result there is approximately $5 billion dollars of idle liquidity that could potentially be captured by Bancor if HBAR[eth] were to be added to the protocol.

The HBAR[eth] token is minted and burnt via an interoperability platform called hashport (hashport.network). The validator set that is responsible multi-signing minting and burning transactions of HBAR[eth] on hashport is formed by the following industry leading companies: FIS from Worldpay, Animoca Brands, Hex Trust, BCW Group, Polygon, Limechain, The HBAR Foundation, Stablenode, & Calaxy.

The HBAR[eth] token has the ability to be frozen should an emergency situation arise, such as a theft or a hack. This freeze function requires signatures from 7 of the 9 aforementioned validators prior to a freeze transactions submission.

As a point of reference, USDC is part of Bancor, has the ability to be frozen, and requires no multi-signed transactions to have this functionality enabled. 1 organisation controls this function.

HBAR[eth] token address: 0x14ab470682Bc045336B1df6262d538cB6c35eA2A

Project Website: https://hedera.com/

Token Security:

Neither HBAR nor HBAR[eth] have an elastic supply, or rebase mechanism. The HBAR[eth] contracts do not have permissions that grant administrators unrestricted mint/burn

capabilities and are interacted with via a multi-signatured validator swarm. The HBAR token supply is fixed at 50,000,000,000, of which 15,169,582,423 are in current circulation. The addresses with the highest concentration of HBAR tokens are predominantly Binance exchange wallets, and team held multi-signed wallets, The team wallets are discussed here: (Hedera Treasury Management Report | Hedera)

Obtained via dragonglass.me

Project

The Hedera public network provides technology for the settlement of fast, fair, efficient 100% final transactions; within seconds. Hedera is a distributed network, rather than a single trusted entity and is governed by the Hedera Governing Council. As with any distributed system, hedera is extremely resistant to any kind of attack, as the adversary must control the majority of the network to influence its behavior; The hedera multi signatured treasury, held equally by council members currently controls more than ⅔ of the total token supply, making the network nearly impossible to compromise. Therefore, Hedera offers a compelling solution to trustless network interactions. The Hedera public network utilises the hashgraph consensus algorithm; developed by Hedera’s creator Dr. Leemon Baird. The algorithm provides for fast throughput (10,000 tps throttled) of 100% immutable transactions. The algorithm is also asynchronous byzantine fault tolerant; making it arguably the most secure consensus algorithm in existence. The Hedera public network employs the consensus algorithm in its Hedera Consensus Service offering that allows any entity to plug into the Hedera network to obtain fair ordered transactions that are 100% immutably logged. To see an extensive list of companies and dApps that are leveraging Hedera and its consensus service, please see here:

Tokenomics

Hedera’s native token, HBAR, is required to access, and participate in the network. Node operators stake HBAR with the network, for the purpose of helping to validate transactions and safekeep the network. HBAR is also the native currency of the network; holders must pay HBAR in order to use the features and service of the Hedera network. Therefore, the HBAR token is a utility token, and not merely a symbolic representation of the project. To learn more about the role of HBAR in the Hedera network please see here.

Community and Communication

Hedera is active on Reddit, Telegram, Discord. The Hedera team also operates official Twitter and YouTube accounts. Activity on GitHub is frequent, with new updates appearing every 2–3 days. The development team and advisors are presented on the team tab on the Hedera website. Dr. Leemon Baird, the co-founder and CTO of Hedera, is the project’s creator alongside his counterpart CEO Mance Harmon. The Hedera website includes a mailing address in Richardson Texas:

Available Audits

Hedera has been audited no less than 5 times between Carnegie Mellon, Quantstamp, and FP Complete over the last 3 years. Full and complete information with respect to audits can be found here: (Audits and Standards | Hedera). Hashport has been audited via Omniscia. The results of this audit can be seen here: (Omniscia LimeChain Audit).

Market and Trading Data

  • HBAR’s price at the time of writing is $0.258721 (Feb 15, 2022)
  • All-time high: $.569229 (Sept 15, 2021)
  • All-time low: $0.00986111 (Jan 02, 2020)
  • Price 90 days ago: $0.403667
  • 19,389,577,881 tokens in circulation
  • 50,000,000,000 maximum supply.
  • The current market capitalization is $5,024,758,551
  • The HBAR token is available on major exchanges, including Binance, Etoro, HitBTC, Huobi Global, Gate.io, Upbit, Bittrex, KuCoin, Bitstamp, and dozens of others.
  • The 24-hour spot volumes range from $297,295 (Bittrex) to $30,867,924 (Binance).

Benefits for HBAR[eth]:

Adding the HBAR[eth] token to Bancor will provide HBAR holders with one of the only ways of generating yield on their assets and as a result could unlock access to a new $5 billion dollar market for Bancor. This will bring in new traders and greater brand and platform awareness to Bancor.

3 Likes

Thank you for posting. What would happen if for some reason the keys get lost and the HBAR in the pool is frozen. Does that mean LPs are locked in unable to withdraw?

1 Like

Hi @jwhiteside

I wonder if there is any option for Hedera to alleviate the fear of onboarding a token with freeze option.
Your comparison to USDC is interesting yet USDC is a regulated, traded entity in the USA (of all places), which means that if they implement such freeze function, they will be facing a world of pain from the regulator.

For example,

  • Who are the 9 signers and how can we know they are not part of the same team?
  • How often (if at all) do you change signers?
  • Why cant you remove this option from the contract?
  • What might be a case where you would use this function?
  • How can the Bancor DAO and community be assured that ignoring the guidelines in this case would pay out in the long term?

I am writing this as an individual, not associated to Bancor.

2 Likes

Hey!

Thanks for the proposal - I am delighted to be considering hbar[eth] for whitelisting. The freeze function is potentially problematic for us. As you have quite astutely pointed out, there are other tokens that have a similar shortcoming; USDC is an extreme case.

I would prefer that ANY token with this kind of behaviour be removed from the Bancor ecosystem - USDC is no exception. However, I also concede that a level of pragmatism is appropriate. In the case of USDC, the assumption is that that Circle is unlikely to want to attack Bancor, and importantly, they are exposed to the legal consequences of deliberate exploit attempts. This is still an uncomfortable situation, but one that is necessary given the prevalence and importance of stablecoins in DeFi.

Which of these arguments can be extended to hbar[eth]?

Certainly, I trust Hedera to not exploit Bancor about as much as I trust Circle. As the author has rightfully pointed out, the 7/9 msig for hbar could be considered an improvement over Circle’s single signature. On this level, I am not so dubious.

The second argument is more compelling. The reason to accept the security compromise of USDC is that it is essentially unavoidable; not having USDC on the protocol is, on balance, more detrimental than the probability of a deliberate exploit by Circle, multiplied by its anticipated damage. In short, the protocol needs USDC to some extent. I am not convinced that the same can be said of hbar[eth].

Rather than end the post there, I want to ask why the freeze function is required. In the past, we have highlighted these types of issues for whitelist applicants, who have agreed to obfuscate the logic that underpins the security risk. If there is a reason for hbar[eth] to be pausable, I want to know what it is. At the same time, this may be a good time to reflect on whether it is truly necessary - if it can be undone, my preference is that this admin privilege is permanently removed.

1 Like

Hi There, thanks for your reply. I would be happen to try and answer your question. But first, could you please provide me with a bit more information around what it is you are asking? Whose keys getting lost are you alluding to? Are the keys specific to Bancor or to hashport?

1 Like

Hi Ashachaf, thanks very much for the feedback and questions! Hedera the company/network, that HBAR runs on is also, domiciled, regulated, and traded in the USA like USDC. The freeze function if it were ever to be enacted would not be coming directly from Hedera in this instance but the 9 validating members of hashport should there be an issue with the representative version of HBAR that resides on Ethereum.

The 9 Validating Members are as follows:
The HBAR Foundation - A well funded, independent organization created by the hedera network to be the growth arm for the network.
The Polygon Network - The largest and most successful Ethereum L2
Stable Node - A major supporting company to Maker Dao and the DAI Stable Coin
BCW Group - A global strategy and consulting firm within the DLT industry spanning many sectors and specialties.
Calaxy - The distributed social influencer platform created by NBA Player Spencer Dinwiddie and former NFT Player Solo Ceesay.
World Pay from FIS - A Fortune 250 company / largest payments remitter in the world.
Animoca Brands - The largest crypto gaming company
Hex Trust - One of Asia’s largest custodial wallet providers
LimeChain - A highly respected and skilled systems integrator within the DLT space

The signers on hashport do not change

Removing the token pause feature from the contract is something that is technically possible, however, in order to safeguard users assets should an event of theft take place having this safeguard measure in place has been viewed as forward thinking in many respects.

Much in the same way UDSC and Circle have this capability to stop malicious events from taking place, so too would hashport via the current 9 member validators swarm voting with a minimum of 7 out of 9 signatures for such an event to transpire. I the case of USDC, this action only requires one unilateral body to make such a decision. It is a far more stringent threshold to be met with HBAR[eth] should the need arise.

In the long run, Bancor DAO having assets residing on its platform that have built in safety measures for its users to counter potential security breaches that could arise in the future, mitigates against scenarios such as the one just witnessed with the Wormhole exploit on Solana. This in turn makes Bancor an even more trusted platform to transact on and increases the platforms volumes over time as a result.

Happy to answer any more questions that you may have!

3 Likes

Hi MBR,

Thanks for the response!

Much of your sentiment is echoed in Ashachaf’s post previous to yours and so much of my response will fall in line there. Please do take a read if you have a moment.

Allow me to elaborate on a few items that you brought up which I think might be insightful.

The premise of having the pause function that is multi signatured to a super majority set of validators is meant to be a best of both worlds scenario. One where there is a heightened level of security placed on users’ assets while at the same time remaining decentralized. In these efforts, hashport accomplishes this.

In order to onboard much of the worlds population to DeFi in the coming years and decades, decentralized infrastructures will most certainly require a healthy balance of safeguards in place in order to assure these users their assets are truly secure.

You have posed the question of if a freeze function is really, truly, required. I suppose that the answer to this lies somewhere in the middle. Ultimately, until we figure out how to prevent smart contract exploits altogether (an extremely tall, if not impossible task) our only available measure of compromise in the meantime is to architect multi signatured solutions with decentralized parties being required to sign off.

The caliber of the validator swarm members on hashport is one of its greatest strengths in that these organizations reputations act as safeguards to the proper functioning and usage of such pause functionality used in unison. The same unlikeliness for USDC/Circle to want to attack Bancor is present in hashport and all of its validating members.

What is ultimately needed for the Industry as a whole and DeFi in particular to continue growing at such a rapid pace is the assurance and comfort of increased security typically only associated with more traditional markets and institutions, married with the power of decentralized applications. This need will only continue to grow with time.

As a hypothetical, can you imagine going to a traditional financial institution and having them tell you that your funds have been taken and there is no way for them to freeze or reverse the offending transaction(s) in the event of a theft? In nearly all cases this would never be acceptable. Neither should it be with decentralized finance where we have the power place trust in multiple parties working together simultaneously to validate.

Ultimately the Bancor platform and community will decide what is best for itself but I can’t help feel that in order for the next groundswell of opportunity to be captured, it is going to require some form of balance from a security safeguard perspective. At present this is best accomplished via multi signatured pause functionality.

Thanks again for the great questions and dialogue mbr!

2 Likes

Hi, to clarify. I’m asking what would happen if the multisig that controls HBAReth gets compromised?

I’m understand this is not likely, but I want to understand what the implicated on your LPs would be.

1 Like

If keys were hypothetically lost no future adjustments to the tokens could be made. There would be no impact to tokens or LPs unless the keys were lost immediately following the pausing of HBAR[eth]. This scenario is extremely unlikely however.

1 Like

Thank you for the detailed answer.

Can you perhaps explain the use of HBAR[eth]?
Why would people want to trade it?
Would it be a mirror token to HBAR on hedera?

1 Like

Hi Ashachaf, thanks again for the great questions! I will answer them here in reverse order as I think this will provide a better breakdown.

HBAR[eth] is a representative version of the native HBAR token that resides on the Hedera Public Network. This relationship is 1:1 meaning 1 HBAR[eth] will always be exchangeable for 1 HBAR.

People will want to trade/hold HBAR[eth] due to the rapidly increasing usage and demand for HBAR on the Hedera public network in the coming months and years.

There are currently more real world, at-scale use cases being developed on the Hedera Public Network than nearly every other DLT in existence: Decentralized on Hedera | Hedera

In addition, many of the worlds largest, most well known organizations comprise the Hedera Governing Council and are actively developing use cases that will run on Hedera (Hedera Global Governing Council | Hedera)

All dApps running on Hedera require HBAR for their operation: HBAR (ℏ) | Hedera

As a result, Hedera, and by extension HBAR is one of the most blue chip DLT networks and token respectively in the market today with futures as compelling as any.

If the value proposition of Bancor is to provide its user base with great assets that have an incredible potential for long term growth then HBAR[eth] as the representative token of HBAR and the Hedera Public Network is one of the best tokens currently available in market that has not yet been listed on the Bancor platform.

1 Like

@jwhiteside,

Thanks for posting this proposal. I have no reason to doubt the legitimacy of the project as it has been around almost as long as Bancor itself (2017). There is a large number of companies in the governing council that are well known on the global stage backing the project including IBM, Google, Chainlink Labs, Boeing, etc… The full list can be found below:

From a market perspective, since the beginning of the year on average, the total daily volume for HBAR has been ~$80.8m. This volume is mainly driven by the USDT pairs (and to a smaller extent BTC) and given the liquidity for both tokens on Bancor, I think that the demand will probably be there if we list the token.

Regarding the token freeze functionality, I think the OP has made a good argument for why this is required for Hedera:

Removing the token pause feature from the contract is something that is technically possible, however, in order to safeguard users assets should an event of theft take place having this safeguard measure in place has been viewed as forward thinking in many respects.

and given that this is a 7 out 9 multisig, my confidence is fairly high with listing here. I also think that we will encounter similar tokens in the future from other L1s that are bridging their tokens to Ethereum and we might have to create similar exceptions as well. Our bar should definitely by high enough before listing such tokens and I think that has been met here.

Source Data (coingecko)

snapped_at price market_cap total_volume
2022-03-06 00:00:00 UTC $0.21 $4,141,415,407.31 $27,841,673.50
2022-03-05 00:00:00 UTC $0.21 $4,048,902,587.18 $49,338,361.34
2022-03-04 00:00:00 UTC $0.22 $4,374,093,030.49 $54,803,285.61
2022-03-03 00:00:00 UTC $0.22 $4,389,267,257.38 $65,043,680.54
2022-03-02 00:00:00 UTC $0.23 $4,456,849,771.66 $87,440,838.06
2022-03-01 00:00:00 UTC $0.23 $4,520,274,087.61 $69,111,379.89
2022-02-28 00:00:00 UTC $0.21 $4,113,215,868.13 $54,628,825.68
2022-02-27 00:00:00 UTC $0.22 $4,361,375,383.12 $47,327,941.80
2022-02-26 00:00:00 UTC $0.23 $4,406,742,237.11 $83,068,153.47
2022-02-25 00:00:00 UTC $0.22 $4,221,338,369.05 $147,771,359.36
2022-02-24 00:00:00 UTC $0.22 $4,307,111,067.25 $115,585,029.17
2022-02-23 00:00:00 UTC $0.24 $4,580,860,663.36 $201,273,312.51
2022-02-22 00:00:00 UTC $0.20 $3,869,882,555.14 $71,947,121.92
2022-02-21 00:00:00 UTC $0.22 $4,209,015,904.20 $58,364,567.72
2022-02-20 00:00:00 UTC $0.23 $4,520,722,968.78 $38,233,816.55
2022-02-19 00:00:00 UTC $0.23 $4,471,659,720.96 $57,520,836.75
2022-02-18 00:00:00 UTC $0.23 $4,568,452,735.90 $83,545,716.80
2022-02-17 00:00:00 UTC $0.26 $5,117,347,155.06 $78,376,521.51
2022-02-16 00:00:00 UTC $0.26 $5,008,052,688.51 $140,233,240.99
2022-02-15 00:00:00 UTC $0.24 $4,710,422,738.68 $72,391,319.22
2022-02-14 00:00:00 UTC $0.23 $4,421,350,006.54 $39,557,784.32
2022-02-13 00:00:00 UTC $0.23 $4,508,894,313.92 $53,297,856.65
2022-02-12 00:00:00 UTC $0.23 $4,543,614,035.73 $64,324,097.96
2022-02-11 00:00:00 UTC $0.25 $4,817,803,813.24 $75,596,500.64
2022-02-10 00:00:00 UTC $0.26 $4,999,010,368.00 $55,513,548.35
2022-02-09 00:00:00 UTC $0.25 $4,929,107,936.36 $96,786,792.23
2022-02-08 00:00:00 UTC $0.26 $5,093,622,997.60 $90,617,028.33
2022-02-07 00:00:00 UTC $0.26 $4,903,893,845.25 $50,321,746.60
2022-02-06 00:00:00 UTC $0.26 $4,957,734,338.01 $73,161,064.15
2022-02-05 00:00:00 UTC $0.25 $4,716,849,694.52 $97,044,628.33
2022-02-04 00:00:00 UTC $0.24 $4,509,357,392.82 $153,570,751.83
2022-02-03 00:00:00 UTC $0.22 $4,201,280,842.44 $42,945,594.50
2022-02-02 00:00:00 UTC $0.23 $4,391,495,776.50 $51,513,710.47
2022-02-01 00:00:00 UTC $0.22 $4,224,013,686.86 $45,912,050.60
2022-01-31 00:00:00 UTC $0.22 $4,151,789,034.68 $37,164,469.44
2022-01-30 00:00:00 UTC $0.22 $4,188,116,323.44 $39,329,558.98
2022-01-29 00:00:00 UTC $0.22 $4,086,706,973.79 $41,404,652.40
2022-01-28 00:00:00 UTC $0.21 $3,953,823,974.28 $60,223,908.82
2022-01-27 00:00:00 UTC $0.21 $4,014,130,947.06 $79,274,072.80
2022-01-26 00:00:00 UTC $0.21 $4,015,019,064.46 $68,226,752.18
2022-01-25 00:00:00 UTC $0.21 $3,909,856,768.75 $124,561,456.09
2022-01-24 00:00:00 UTC $0.22 $4,170,076,949.72 $79,771,178.47
2022-01-23 00:00:00 UTC $0.22 $4,186,442,554.29 $124,445,432.73
2022-01-22 00:00:00 UTC $0.24 $4,391,370,044.14 $132,811,850.74
2022-01-21 00:00:00 UTC $0.26 $4,901,488,193.38 $109,719,283.61
2022-01-20 00:00:00 UTC $0.27 $5,011,103,034.76 $66,778,574.19
2022-01-19 00:00:00 UTC $0.27 $4,968,736,927.68 $59,322,695.36
2022-01-18 00:00:00 UTC $0.27 $5,061,214,794.29 $65,988,664.12
2022-01-17 00:00:00 UTC $0.28 $5,213,834,382.63 $42,584,159.80
2022-01-16 00:00:00 UTC $0.28 $5,227,419,046.23 $41,988,990.45
2022-01-15 00:00:00 UTC $0.28 $5,228,268,020.65 $59,497,740.85
2022-01-14 00:00:00 UTC $0.28 $5,210,336,072.07 $82,682,192.99
2022-01-13 00:00:00 UTC $0.30 $5,534,656,599.45 $89,701,507.22
2022-01-12 00:00:00 UTC $0.28 $5,130,063,215.76 $75,051,417.96
2022-01-11 00:00:00 UTC $0.26 $4,876,672,031.12 $79,844,026.62
2022-01-10 00:00:00 UTC $0.27 $5,072,143,947.37 $58,916,358.71
2022-01-09 00:00:00 UTC $0.27 $4,993,373,400.43 $94,812,142.46
2022-01-08 00:00:00 UTC $0.27 $5,083,131,308.19 $147,090,971.05
2022-01-07 00:00:00 UTC $0.30 $5,510,442,037.76 $129,951,359.07
2022-01-06 00:00:00 UTC $0.29 $5,414,349,270.03 $182,113,783.89
2022-01-05 00:00:00 UTC $0.33 $6,235,540,413.53 $200,598,910.41
2022-01-04 00:00:00 UTC $0.31 $5,732,532,453.77 $74,324,069.73
2022-01-03 00:00:00 UTC $0.31 $5,860,917,106.06 $89,135,975.89
2022-01-02 00:00:00 UTC $0.30 $5,615,159,721.34 $47,235,770.91
2022-01-01 00:00:00 UTC $0.29 $5,448,936,261.52 $72,791,677.98
4 Likes

Thanks for your feedback and insight Glenn!

2 Likes