HIP 2 - Token Swap & Ethereum Mainnet Deployment

[doug]

Summary

It is proposed that the HIFI Token smart contract be deployed on Ethereum Mainnet with a token swap rate of 100 MFT per 1 HIFI. A new legal entity, Hifi DAO, be established and all relevant intellectual property, domains, and social accounts be transferred from Hifi Labs to HIFI DAO. The Hifi Protocol be deployed on Ethereum Mainnet and control assigned to HIFI DAO governance. Approve a new market in the Hifi Protocol beginning January 2023. And, Allocate 25M tokens (19.8% of new token supply) vesting linearly over two years to Hifi Labs.

Background

After extensive testing, multiple audits, and several improvements, Hifi’s protocol is ready to go live on Ethereum mainnet. In addition to deploying the protocol on Ethereum mainnet several administrative items need to be addressed. This proposal is written to capture the technical changes being asked. Additional context outlining the thinking and strategy behind this proposal is found in an adjacent blog post, be sure you read it.

Problem

Sustainability, control, and ownership are the three major problems this proposal addresses. HIFI token holders need to control all material aspects of Hifi intellectual property, social and web properties, Hifi protocol, HIFI token, and Hifi governance. Hifi DAO needs the ability to allocate resources to cover its operating costs, growth strategy, and any future incentive programs.

Solution

Create Hifi DAO and empower HIFI token holders with ownership, control, and the ability to deploy resources. To accomplish this, Hifi Labs will deploy new governance smart contracts (forked from Compound’s Governor Bravo), a new HIFI ERC-20 token, supporting token swap smart contracts, and the latest version of the Hifi protocol on Ethereum Mainnet. Once deployed, HIFI token holders will control all aspects of these smart contracts. No one, including Hifi Labs, will have the ability to modify the contracts without Hifi DAO Governance approval.

In addition to the smart contract work above, Hifi Labs will transfer ownership of all Hifi-related social, web, and intellectual properties, along with any associated accounts to the newly created Hifi DAO legal entity.

Hifi Labs will enter into a two year contract with Hifi DAO with the specific focus of ensuring a smooth transition of responsibility to Hifi DAO and fueling growth of the Hifi protocol. The corresponding blog post goes into greater detail on this matter and it is highly recommended that you read it along side this proposal. Seriously, stop now and go read it.

Hifi Labs has been operating on funds raised privately during our token generation event back in 2017. Prudent resource allocation and profitable investments have allowed us to outlive our peers that launched during similar time periods. Going forward, however, new resources are necessary to fund a smooth transition of responsibility and pursue our outlined growth strategy.

For an understanding of the growth strategy, check out the recent blog posts that clearly outlines: Our Customer, Our Customer’s Biggest Problem, Our Solution, and Growth. Hifi Labs plans to take a two pronged approach centered in building NFT liquidity and playing an active role onboarding Real World Assets (RWAs) on chain and into Hifi’s Protocol.

MFT will be swapped for HIFI at a rate of 100 MFT to 1 HIFI. 100M HIFI Tokens will be redeemed by MFT token holders. As previously announced, 1.25M HIFI tokens will be airdropped to MFT holders who have participated in Governance votes, inclusive of this proposal. 25M HIFI tokens will be allocated to Hifi Labs, vesting linearly over 2 years. The total supply of HIFI will be 126.25M Tokens. The Hifi Tokenomics Lite Paper provides great high-level summary of all these changes.

Notably absent from this proposal is any sort of new token incentive or staking mechanism. This was a deliberate decision to push development of these important matters out into the open and more directly involve the broader community in the process. We look forward to sharing our best ideas with the community and participating as a part of Hifi DAO to decide together what’s best for Hifi. This proposal, however, does address the foundational changes that need to take place to allow for such mechanisms to be built. It presents token holders with a blank slate to build on top of.

Conclusion

This proposal is more than just a token swap and branding update. It’s a complete overhaul of our community. It’s a launch of the Hifi DAO, a shift in power to token holders, a clear defining of relationship with the core team, a pronounced line of accountability for how our community is structured, and a release of our codified smart contract based Governance to control both the protocol and token.

Hifi Labs has demonstrated excellence in transparency, accountability, and prudence in delivering the protocol to the community today. Handing over full control to token holders is a monumental achievement contributing to our decentralization. Voting to support this proposal gives Hifi the tools for sustainability, properly aligns Hifi Labs as a service provider to fuel growth, and lays a strong foundation for Hifi DAO’s future.

To vote on this proposal and qualify for the governance airdrop, you must withdraw your MFT from exchanges this week. Hold your tokens in a self-custody wallet like metamask or ledger. Voting on this proposal will go live on Snapshot December 5th. Watch our official social channels for updates and beware of scams working to mislead you. When in doubt, verify information in public channels on our official discord.

[Harvs]

Personally I am happy with the proposal over all. I personally would of preferred a 10:1 swap ratio however I support the team in their decision to recommend a 100:1 swap ratio and their reasoning behind it. I appreciate all the hard work the team has put in what they have accomplished so far.

[k98882]

Why does 20% of the quantity go into the developer’s investment cost when rebranding?
I think there are too many. Please answer on what basis the 20% came out.
Also, please notify the exact distribution time and ratio. ^ㅡ^

[doug]

I cover this in my AMA from yesterday. Check out the recording here.

[jaydubb.eth]

Overall, I feel I can make an informed vote due to the quality content that has been provided (including AMA) and this proposal is something that has been well considered.
We will all have thoughts or suggestions and some are more ‘tinkering’ type ones As an example,a personal thought relates to the Pawn Bot (PB) holders who hold less than 100 $MFT or those who joined our ecosystem via our NFT offering and are not in-tune with Defi/Hifi, Was there an opportunity to on-board or use as a promotional/retention tool for this segment via an airdrop or similar? $MFT holders were able to participate for free in PB but this does not appear reciprocal. PB holders will have an opportunity to engage in the future via the protocol use so understand why this may not have seemed necessary. Perhaps also, there are regulatory and/or other reasons I have not considered but regardless, this personal thought does nothing to diminish the overall genuine intent and merit of the proposal and I provide my full support towards HIP 2.

[Hollywood41]

Excited about the opportunities to build TVL, in an effort of intention to be the largest fixed-rate, fixed term lender in Web3; Hifi is raising the bar, and with that I encourage others to support and empower Hifi Labs in this proposal, by voting yes and turning us into a decentralized Hifi DAO; helping to continue our collaborative journey to enhance the TVL power/ volume of the Hifi protocol (let’s pump up the volume). By providing a yes vote, it is my individual respective intention to support the team that got us all here today & incentivize them, to continue transforming us via the Hifi DAO, into the protocol we intend to be and to change the world in the process. We have the opportunity to open doors, provide access to capital for people in-ways that until now was never possible & we’re pushing the boundaries and we’re lucky enough to be alive now at this place and time, to help make the world a better place. Am so excited to be a part of this feel good/ work hard group and more specifically, am excited to hear more on what Real World Assets we are going to be going after as collateral. Thank you for hearing me out. Please vote yes on 12/5/22.

[muchfungible]

I fully support this proposal.

After watching the protocol being built by this team during the last two years, I have a lot of trust for the product and the team itself. They have always built things in a thoughtful way, doing all due diligence for safety of the protocol and for token holders. From that perspective, I have good confidence that the product being transferred to the HifiDAO is well built, safe and manageable.

They are delegating all future responsibilities to us right here with that proposal, along with the token swap from MFT to HIFI with a 100:1 ratio. I have supported this ratio from day one. (See my first comment in the Token Swap Ratio Discussion here: https://forum.hifi.finance/t/token-swap-ratio-discussion/93/23?u=muchfungible

[Littlesweet]

If HiFi can mimic the 2021 ATH of Aave and Comp then who wouldn’t be happy? There is no reason why it won’t and many reasons it could be higher (given a normal market lol) Since I don’t have twiiter to answer the “probably nothing” riddle I’m gonna out it here: Helium which makes sense since we will be running on Ethereum.

[Mainbrain]

I understand Harvs concern, which was addressed in the AMA. If you have discord, you can read my original thoughts on the matter here Discord otherwise, i’ll copy/paste and add some additional new thoughts since then.

Im not a fan of the 2 year runway, which is why i asked that question for the AMA and Doug answered. I understand the concern that the original 2017 raise got MFT from 2017 to 2022 and now they have to decentralize as a USA based project and as such, need to self-sustain via a fresh infusion of cash. This market is horrendous to raise, and even if they did raise from VCs, people would be concerned over the VCs owning such a large percentage of the supply. With this solution, they are forced to sell and as a result anybody can buy from the secondary markets. Anyways, while im not super excited about the new mint/dilution, i understand why and it makes sense. I’ve advocated for something like this before in discord and the hifi forum as being an acceptable solution, if its needed. In this case it appears its needed.

The alternative is, that we the community do not accept this proposal. Then we have to go down the path of reducing the money they need. If they accept the side-effect would be less employees and that means that work continues but at a slower pace. Everybody has complained in the community that they work too slow. Even I. This is the risk we take. a ~20% haircut over 2 years with a chance to ‘make it’ or try to renegotiate with HiFi labs over salary. Then we haggle

I suppose the next question would be, has a team ever minted more tokens and had success? I would say yes and there are 2 big examples that come to mind. Yearn with YFI and AAVE with AAVE.

Yearn article https://cointelegraph.com/news/yearn-finance-team-proposes-225-million-yfi-token-mint about increasing the token supply by 22%

AAVE’s flashpaper Aavenomics. The moment we’ve all been waiting for… | by Stani Kulechov | Medium saying that the original supply is 13m tokens after 100% of all the tokens get swapped and now it will be 16m tokens, which 3m tokens being generated as part of the AAVE Safety Module (which is colloquially known as staking as a backstop or staking to provide insurance if something fails)

The reality is, nobody has ever said “Mainframe/HiFi is moving too fast, they need to slow down.” infact, the opposite has been said many times on telegram, discord and twitter. That they move too slow. This is an opportunity for them to double the team and presumably double the output of the team as a result having them work twice as fast. Wouldn’t that be nice for a change of pace? We are finally getting our dream and are now encountering resistance that this dream has a cost.

If someone has an alternative way to raise $10m for HiFi in a bear market, without minting more tokens i’d like to hear it and explore the idea together.

[Mainbrain]

This seems to be a bit timely, in this discussion. Sushi’s payroll. They have 15 members for $3.9m a year, and HIFI has 11 at ~$2.5m based on the recent AMA of Doug saying that they want $10m to double the team for 2 years. They are going through their own governance right now as they are redirecting revenue back to the team to pay for payroll. Something that I wish HIFI could do, but since the protocol is not yet live on ethereum and has no usage, minting tokens becomes the easiest way to do this since the vote passed.

I want to stress this again. If we want to see HIFI succeed, we will need to use the protocol and more importantly, provide the collateral that NFT lenders desire, such as wBTC, ETH and USDC. And we need lots of it. Millions of dollars worth. At least $5m to be minimally competitive.