Hello all, we wanted to release this article to address frequently asked questions by our community. Please join our community (https://t.me/theHodlDAO) and follow us on twitter at @dao_hodl
Our Genesis will begin on March 8th 2022 and run for two weeks. Exact UTC time will be announced in our community.
- Why do we need BTCH (i.e. what are the benefits)?
BTCH(odl), is a defi protocol that creates an index pegged by a 365 days moving average price of BTC.
Naturally, the wild price fluctuations of BTC has forced investors to reconsider their investment strategies. Many who have ventured into cryptocurrency have ‘washed out’ during the journey as Hodl(ing) is difficult to achieve and not as easy as it would initially appear.
The BTCH Index is designed to be stable and have significantly lower volatility than the coin itself. It is pegged by a 365-day moving average and designed to follow the increasing value of BTC over time. The intent of this effect is to help the investor HODL and, in turn, generate a greater return as a result.
So, the result in the short term, would be to help investors HODL by providing a less volatile BTC index, and in the long term, the index would provide stability and value and contribute to building the decentralized monetary system of the crypto world. In the end, it is designed to be a crypto native currency (essentially a crypto native stable coin).
2. Is BTCH fully backed by BTC?
BTCH is stabilized and pegged through the rebalance of a Protocol owned Liquidity (PoL) pool and is, in part, supported by a Vault of BTC. The protocol will continuously accumulate BTC by selling bonds.
The long-term value increase of BTCH is backed by the BTC value increase in the treasury. During price volatility, the value of BTCH may not be 100% backed and to encourage the investor to HODL, staking rewards will be distributed when rebalancing and bond selling.
3. What is the target price? How Does BTCH follow the target price? What happens when BTCH fails to peg the target price?
The target price is the 365-day moving average price of BTC divided by 10,000. BTCH is pegged by the target price with Rebalancing.
For more information about Rebalancing, please refer to the FAQ about rebalancing below.
BTCH is stabilized and pegged through the rebalance of a Protocol owned Liquidity pool. Since the protocol itself controls most of the liquidity, the BTCH would never fail to peg the target price.
4. What will happen if there is a bank run on BTCH?
The protocol is designed to encourage investors to HODL BTCH, by distributing staking rewards when rebalancing and bond selling.
Let’s take an example on how the protocol performs during a bank run hypothetically.
First let’s make several assumptions:
The current BTC price is US $39,326.00.
The current market and target price of BTCH are both US$ 4.4018.
Total stacked BTCH is 739,500, a 85% staking percentage.
The PCL owns 66.67 BTC and 608,657 BTCH as liquidity.
When a bank run happens, the stake percentage drops to 10% in the short term. That means that 652,500 BTCH was unstaked and sold in the market and now the PCL owns only 32.1761 BTC and 1,261,157 BTCH after the selling. Since the BTCH market price is far lower than the target price, a ‘Buy Rebalance’ will happen, which will push the PCL price back to the target price. After the rebalance, the PCL owns 32.1761 BTC and 293,748 BTCH. 1% of the 967,409 burnt BTCH from the PCL, i.e. 9674 BTCH will be sent to the reward pool.
Let’s assume the BTCH in the reward pool will award stakers across a 30-day duration, which would mean add 9674 / 87000 / 30 * 365 = 135% extra APY to the current staking APY (if the current APY is 48% then the total APY is 183%). This would create significant value and encourage the staker to continue staking!
Note: Please be advised that the above is just an example and is unlikely to happen due to the likelihood of investors buying and staking BTCH — especially after realizing the high APY value backed in the PCL.
5. What is bonding?
Bonding allows the protocol to trade BTCH for LP shares (BTCH/WBTC).
Bonding gives users the opportunity to buy BTCH from the protocol at a discount. The protocol compensates the users with more BTCH than they could receive on the market, but the users’ exposure becomes entirely to BTCH and no longer to BTCH/WBTC LP. This helps the protocol accumulate liquidity shares. The demand for bonds decides the discount.
6. What is rebalance?
Rebalancing is the mechanism the protocol used to move the market price of BTCH back to the target price, by adjusting the number of BTCH in the Protocol owned Liquidity pool (PoL).
In the event of the market price of BTCH trends below the Target Price, (for example 3% as initial setting) a Buy Rebalance of PoL would be introduced:
- Withdraw all PoL
- Buy BTCH with the withdrawn WBTC to bring price up to the Target Price
- Resupply the remaining PoL to the liquidity pool
- Burn the excess BTCH.
In the event of market price of BTCH trends above the Target Price, a similar Sell Rebalance would be initiated:
- Withdraw all PoL
- Mint and sell BTCH to bring price down to target price
- Resupply the remaining PoL to the liquidity pool
- Mint the corresponding BTCH and pair it with the excess WBTC, and then grow the Protocol-owned-Liquidity.
7. What is staking? Where do the rewards come from?
To encourage investors to Hodl, staking will be utilized as the dominant strategy for most. The easiest and best strategy to participate in BTCH will be to hodl, stake, and compound their funds. The BTCH protocol will profit from BTC (held by the protocol) value increase, protocol treasury income and transaction fee of the PoL. Staking is a profit distribution mechanism of the protocol, and potential future profits. Staking rewards are generated when selling bonds and rebalancing.
- When a Bond is sold, together with increase of PoL, a certain percentage (10% initially) of additional BTCH will be minted and sent to staking reward pool.
- When a Buy Rebalancing occurs, a small percentage (1% initially) of burning BTCH will be exempted and sent to the staking reward pool. This will mitigate any ‘downward spiral’ by encouraging staking with more rewards.
- When a Sell Rebalancing occurs, a small percentage (1% initially) BTCH of value of the excess WBTC will be minted and sent to the staking reward pool as the protocol treasury increases.
8.Is it reliable to use only BTC as a non-stable asset as a value support?
BTCH is pegged by a 365-day moving average price of BTC. The PCL holds BTC as the backup vault for BTCH. At this initial stage, we believe BTC is the right asset as the value support.
However, when the protocol evolves with the changing market condition, it’s up to the DAO to determine whether other assets could be added as the support.
9.How will BTCH be governed by DAO?
The following parameters may be managed by the DAO to fine tune the operation of BTCH protocol:
- Rebalance Range
- Buy Rebalance Reward Rate
- Sell Rebalance Reward Rate
- Bond Reward Rate
- Stake Reward Base
- Bond Discount Rate
At this time, the parameters are managed by a multi-sign ETH wallet address of the DAO, which consists of the development team, the market team and the operation team.
When the protocol matures, the DAO will include BTCH stakers who will have the right to vote for parameter update and other DAO proposals.
The Last
We are currently giving away 25% bonus for all the participators on Pre-genesis. More info can be found on last POST or visit our websit thehodl.org.
For more information feel free to contact the team at
Website: thehodl.org
Twitter: @dao_hodl
Email: team@thehodl.org
Telegram: https://t.me/theHodlDAO
