Dear Community! This year, especially the last few days have certainly been painful and difficult to comprehend for everyone. We see once again how the bad actions of individual companies can bring down an entire sector and in this case we will see the aftermath for months to come. The insolvency of FTX will keep the whole industry busy for a long time and surely more projects will stumble or disappear completely due to the connections to FTX and Alameda. Fortunately, we had no funds on FTX nor were we affiliated with them or any subcontractor. We had to realize a loss of about 150k on our FTT holdings when we opted to sell them. Due to the current market situation, we also increased our Stable holdings a few days ago and reduced positions in volatile assets. We are closely monitoring all developments in order to maintain an agile position during these uncertain times.. The next few weeks will certainly be challenging. However, one thing is clear, the technology backing blockchain will continue to find its way into many areas of life. We will now see market consolidation and a changing Blockchain landscape, towards more security, trust and accountability.
We will see increased efforts to regulate the crypto market, in the hopes of better protecting users and investors. While we could not have predicted such a catalyst, we did believe one would present itself, thus solidifying the Defi journey to regulation. To this end, months ago we began a regulation focused plan to secure Hector Networks position, not simply as a survicer, but as a leader. Once the fallout from the recent weeks have settled we can further finalize our proposal and bring it to you, our community. In addition to the current market situation, we would like to talk about the developments at Hector Network over the last few weeks, which have certainly given rise to discussion and disappointment. The rollout of the Emission Plan did not go anywhere near as well as we had imagined. We would like to formally apologize to the community for this!
The security of the contracts was never in question and the audits by Certik confirm this. However, we have seen that our internal processes regarding planning, development and communication need to be reviewed and significantly improved. In the short term, errors have already been corrected and improvements implemented. In the medium term, changes to the process flow will be implemented and the communication structure changed to secure the project in the long term. At this point, we would like to briefly discuss the challenges in the Emission Plan, as well as the short-term measures we have taken:
Normal Staking Farm: Throughout the development process focusing on the Emission plan we overlooked an early graphic which showcased details we had committed to in a HIP promising staking models in addition to the farms.. Midway through the project development our entire development team restructured, this shift was due to the lack of organization on the original dev teams part, and needless to say the handover was not as smooth as we would have liked, causing cracks for documents to slip into. When we announced the discontinuation of the old staking system we started receiving questions and were eventually pointed to that graphic. We conducted an assessment on the impacts of the amount of staked HEC in sHEC and came up with a new contract rendition to maintain the sHEC and wsHEC contracts honoring the original graphic. We could not simply keep things in tact as the Emission Plan contracts relied on the Distributor which was not able to split between the original bonding contract and the new Emission Plan contract. We created an alternate, low APR staking program which launched shortly thereafter to meet our prior commitments. As always, the Hector Network team is committed to honoring our obligations to our community, and will continue to foster your good will.
wsHEC would disappear from our ecosystem: This was a direct correlation and result of the Normal Staking farm impacts, as wsHEC depends on sHEC. The new staking contract however, retained the existing sHEC and wsHEC contracts ensuring that they work as originally intended.
Wrapped Version of the EP: After the release of the Emission Plan we had multiple messages regarding a wrapped version of the EP with regard to tax purposes. We are taking these requests in consideration and are in discussions with our Development Team.
Voting System: The voting system was incredibly complicated to manage between the FNFT, moving APR, and HEC. We tried to create as much flexibility as possible and inadvertently created a voting issue by enabling HEC, which proved to be unfair as an addition and inaccurate in calculation. We also had some usability issues that were raised about "missing FNFT's" which were not available in the drop down despite being locked. We corrected the calculations, removed HEC as an option to vote and expanded the UI to be more informative of the FNFT's in locked voting periods.
Manually Claim of Rewards: Another thing that has been developed slightly differently from the original plan has been the claiming of the rewards. The original scope for the Emission Plan was that no rewards could be claimed until the end of a user’s lock period. Now, as you surely know, users can withdraw their rewards at any time throughout their lock..
We strongly believe that this “new system” will help HEC in the long-term. This feature allows users the security of a longer lock, since some tokens will be readily available throughout their lock.
The Calculator The calculator uses a complex set of variables that were unfortunately miscommunicated and misconfigured with the wrong token price (in the HEC-USDC farm) and insufficient explanation to its use case was provided during its roll out. Depending on how a user approached the calculator it had the potential to drastically change the perceived reward outcome of their linear lock. Unlike the old system, where the token price and current APY had offered a linear path for reward prediction, the Emission Plan’s complex fluctuation is based on multiple variables such as token price, current APR, how much is locked into each farm, and how votes are distributed. While the calculator was only ever intended to give users a rough idea to help understand the process better, it was rolled out with insufficient education and disclaimers, causing confusion. Further, diligent users discovered an actual inconsistency with the calculations as a whole.
After a few hours of discussing and researching, we identified the mistake. After creating the HEC-USDC farm contract, the wrong PricePerToken (it used the HEC price) was used in the calculations, which then sorted in a way to where it was too high APR for the HEC-USDC farm.
While investigating these issues we also discovered some incorrect coding in the calculators, which was why there was how the wrong reward amount was calculated in both farms if a particular amount of HEC was set to be locked.
To be clear, the contracts work exactly as they should, the bad news is that incorrect information was displayed on the Emission page for several days regarding the APR (on the HEC-USDC Farm) and the calculators (for both farms). We addressed all 3 faults by correcting the PricePerToken, the APR and a more informative message on the dApp.
Zap Function: Due to an internal misunderstanding, the Zap function was released prematurely. Despite the feature being thoroughly tested and working correctly, it was released with the incorrect liquidity pair (wFTM-USDC) which had very low liquidity. As a result, the swap slippage was very high. We have since removed Zapfrom the dApp, corrected the liquidity pair, refunded the impacted users in full, put it back into testing and refined the internal release and unit testing process. In addition to the short-term changes and measures that we have implemented as quickly as possible, we will also implement measures that ensure and further expand our long-term stability. Among others:
Restructuring the Development Team We have taken every single situation that has come up and addressed it as quickly as possible for the community. We acknowledge all the shortcomings in the process, delivery and impacts they caused. We have taken a very serious stance, conducted a GAP analysis and adjusted, expanded, improved or modified our internal dev, unit testing and QA processes significantly. Additionally, we’ve introduced a gated release management process accompanied by multiple sign offs with resource accountability across multiple tiers to ensure we aggressively reduce the amounts of bugs released with releases that impacts the community. We have further taken drastic steps to adjust, restructure and expand our team to fill the gaps that significantly contributed to long hours and unfortunate oversight in code quality checks, PR reviews, and overall impacts in the existing processes. These changes will slow releases but enhance quality, usability and limit future impacts as much as possible.
Establish a Board Structure In the wake of Hip 37 several community members suggested implementing some oversight measures to further increase our transparency and allow decisions to be discussed very early. After considering these suggestions thoroughly we agree that formalizing an “oversight” board in conjunction with all the additional reports we’re committed to providing does nothing but strengthen the project. In addition to the Core Team, the Head of Development, Artistic Director, Team/Community Manager, a representative of the moderators and an Oracle will be represented. How these additional representatives will be selected is TBA.
Continue with Transparency: Our weekly recaps, which have been established for several months are a regular commitment to highlight current developments to the community. In addition, we have now also released the first monthly report, which provides detailed insights into the project and its figures. If you haven't seen it yet, here is the link again:
https://drive.google.com/file/d/1KRpWQaS94QM7K5P7tK0eyz4Z7qAToxlU/viewTransparency is the only way forward and it is our ambition to continue to expand and strengthen the communication with the community. To this end, we will now also implement regular AMAs with the core team to answer questions and provide insights into current developments.
We still believe that this is the right time to build. Our roadmap is unchanged, and development for the next 6 months continues as planned. We will continue our goal of delivering utility and value to our users. Innovating on the blockchain and making use of our solid foundation. As always it is our privilege to work for this company and behalf of our community.
