Final Step For DAO Self-Sufficiency: Proposal to Empower Hydrachain’s Future

Economy Proposals
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Dear Hydrachain DAO Members,

I am writing today to propose a significant strategic initiative that is essential for the long-term sustainability, independence, and future growth of Hydrachain as a decentralized, community-driven blockchain protocol. This proposal marks a critical step in the protocol’s evolution, one that will allow Hydrachain to secure its core technical team, restructure governance through a legal foundation, and optimize its budget to prioritize the long-term interests of the entire community.

At the heart of this proposal is the transition of the core assets, operations, infrastructure and engineering team from LockTrip’s oversight to direct control under the Hydrachain DAO. The engineering team has been instrumental in developing Hydrachain and the upcoming HydraGon upgrade. Now, with the protocol maturing and entering a new phase, it is crucial to shift towards a more sustainable and independent development environment, ensuring transparency and alignment with the community’s long-term vision.

Proposal Overview

This proposal consists of four main components:

  1. Foundation and Administration: Establishing a non-profit foundation to manage key operational assets and engage with centralized structures where necessary.
  2. Infrastructure and DevOps: Securing infrastructure resources necessary for long-term validator and application support.
  3. Creative Content and Community Engagement: Allocating resources to drive engagement, content creation, and strategic integrations.
  4. Engineering Team Transition: Bringing the engineering team under DAO control to secure technical expertise and ensure long-term sustainability.

Part 1: Foundation and Administration

A non-profit foundation will serve as the legal framework that enables the DAO to interact with the centralized world in an efficient and legally compliant manner. This foundation will manage core operational assets, including domain names, GitHub repositories, validators, and contracts with key team members.

Cost Breakdown:

  • One-time setup cost: $4,000 (subsidized by LockTrip to ease the burden).
  • Annual fees: $4,000 for licenses and renewals.
  • Nominee director: $6,000 per year (appointed from a reputable legal agency).

Key Responsibilities:

  • Public Validator Setup: The foundation will manage validator setup and maintenance, including a ~10% fee public validator for the Hydra network.
  • LockTrip Specific Validator: A specific validator for LockTrip with a 20% delegation fee as per the existing HIP5 proposal. This enforcement will start to generate a steady stream of income to the DAO foundation, and will gradually reduce LockTrip as network share. The foundation could either decide to burn the income or repurpose according to the DAO preference.
  • Engineering Team Contracts: Contracts for the engineering team, as well as control of critical assets such as domain names, GitHub repositories, and server infrastructure.
  • Administration of the DAO’s open-source intellectual property, as well as all key web assets (domains, social media profiles, cloud accounts, github accounts etc).

Total Annual for Part 1: $10,000 + $2,000 Small Reserve for legal = $1,000 per month

Part 2: Infrastructure and DevOps

Infrastructure and server support is a critical component of Hydrachain’s operation. This section covers the necessary hardware and devops support required to maintain both the mainnet and testnet infrastructure.

Infrastructure Breakdown:

  • 2 testnet validators: Each running two nodes to ensure redundancy.
  • 4 mainnet validators: Each with one node to maintain network security and performance.
  • 6 additional servers: To support Hydrachain ecosystem applications such as block explorers, web interfaces, and development tools / devnet/

Server Typical Specifications:

  • 8 vCPU / 32 GB RAM / 6 TB Bandwidth / 640 GB Storage (average cost per server: $160/month).
  • Total monthly infrastructure cost: $2,000
  • Additional reserve for unforeseen technical needs: $500

Total for Part 2: $2,500 per month

Part 3: Budget for Content, Creative, and Partner Integrations

This section focuses on community engagement, content creation, and fostering partnerships to support Hydrachain’s visibility and growth. A budget is required to support activities such as explainer videos, design contests, and outreach to strategic partners.

Creative Budget Breakdown:

  • Partner integrations: Funding to establish new collaborations with blockchain projects and platforms.
  • Explainer videos: Educational videos to explain technical features, upgrades, and governance decisions.
  • Infographic contests: Community-driven contests to encourage the creation of infographics that illustrate Hydrachain’s technology.
  • Meme and Creative Campaigns: Community engagement through meme creation, design improvements, and strategic branding.

Total for Part 3: $2,500 per month with an average of ~1 mini project per 2 months for various creative works.

Part 4: Engineering Team Transition and Structure

The core of this proposal revolves around transitioning the Hydrachain engineering team from LockTrip’s oversight to full DAO control. This is critical for ensuring transparency and long-term sustainability while reducing reliance on external entities.

Engineering Team Breakdown Proposed for Funding →

  1. Rosen S.- Team Leader & Senior Protocol/Full Stack Developer
    Current Role: Full-time on HydraGon development.
    Responsibilities: Leading the development team, overseeing protocol design, and ensuring smooth deployment of HydraGon.

  2. Vitomir P.- Senior Blockchain/Smart Contracts/Front-End Developer
    Current Role: Full-time on HydraGon.
    Responsibilities: Developing smart contracts, front-end integrations, and blockchain-level functionality.

  3. Samuil B. - Senior Blockchain/Smart Contracts/Front-End Developer
    Current Role: Full-time on HydraGon.
    Responsibilities: Focused on blockchain infrastructure, smart contract development, and front-end implementations.

  4. Ivaylo P.- Senior Blockchain & Front-End Developer (Part-time on Bridge/Dex)
    Current Role: Part-time, working on specific components like bridge and decentralized exchange (DEX).
    Responsibilities: Ensuring the integration of cross-chain functionality and DEX components.

  5. Nenko A. - QA & Community Technical Support
    Current Role: Full-time QA for HydraGon and community support.
    Responsibilities: Quality assurance and bug tracking, assisting with community technical queries.

Already funded via separate program / no change →

  1. Myra - DAO Secretary, QA, & Operations
    Current Role: Already funded by the DAO, responsible for quality assurance and operational tasks within the community.
    No new proposed Funding: Already secured under the current DAO budget.

Vested interest that does not generate any ongoing cost / no change →

  1. Nikola A.- Product Lead Design & Lead Research (Vested Interest)
    Current Role: Contributing based on vested interest in HYDRA.
    Responsibilities: Leading product design and strategic direction, without direct financial cost to the DAO.
    No new proposed Funding: No direct cost.
  2. Florian P. - Advisor & Data Research (Vested Interest)
    Current Role: Contributing based on vested interest in HYDRA.
    Responsibilities: Providing strategic advisory and data research for the project.
    No new proposed Funding: No direct cost.

Key Objectives of Engineering Team Transition:

  • Transparency: Full control under DAO management ensures a transparent development process, aligned with community goals.
  • Cost Efficiency: With a highly skilled team based in Sofia, Bulgaria, the DAO secures expertise at a fraction of typical costs.
  • Long-Term Sustainability: By bringing the team under direct DAO oversight, we ensure long-term technical independence, reducing reliance on third-party entities.
  • Smooth Transition: The current engineering team has successfully developed HydraGon and will continue to deliver on future milestones.

Total for Part 4: $21,000 per month for the 5 additional members

Emissions Breakdown: Past vs. Future

The sustainability of the proposed plan hinges on its efficiency in managing emissions. Below is a comparison of emissions before and after the HydraGon upgrade, illustrating how we would potentially achieve lower systemic inflation while securing the critical infrastructure needed for long-term growth. It also intends to illustrate the major progress we have all achieved together in rebuilding Hydra.

Before (Pre-HydraGon for illustration purpose):

  • Circulating Supply (as of May 1, 2024): 23,894,461 HYDRA
  • Staking APR: ~32%
  • Monthly Staking Emissions: 637,185 HYDRA (~91.45%)
  • Liquidity Mining Incentives: 20,000 HYDRA per month (~2.87%)
  • Monthly Marketing Budget: $27,000 (~39,700 HYDRA at $0.67, ~5.70%)
  • Total Monthly Emissions: 696,885 HYDRA

After (Post-HydraGon, Hypothetical future):

Assuming a systemic staking inflation rate of 5%, emissions are significantly reduced:

  • Monthly Staking Emissions: 99,560 HYDRA (~47.96%)
  • Marketing Budget: $17,000 (~34,000 HYDRA at $0.50, ~16.38%)
  • Liquidity Mining Incentives: 20,000 HYDRA (~9.64%)
  • Administration, Foundation, Servers, Creative Content, Engineering Team, Key Assets Ownership: $27,000 (~54,000 HYDRA at $0.50, ~26.02%)
  • Total Potential Monthly Emissions: 207,560 HYDRA

This represents a 71% reduction in overall emissions, while securing all strategic operations under the DAO’s control. Importantly, the lean structure will allow the DAO to thrive in a lower-emission environment, unlocking long-term value and reducing inflationary pressures. The top management is vested heavily into the project, which contributes to the efficiency as well as aligns it with the interest of the community.

Final Breakdown and Strategic Alignment

Total Grand Budget: $27,000, of which $17,000 is proposed to be repurposed from the marketing budget. This results in a marginal increase of only $10,000 in new emissions to cover core operations and unlock future opportunities for the Hydrachain community.

As a result, for a mere additional $10,000 allocation to existing setup, the marginal improvement in overall setup, operations, and long-term risk protection will be significantly improved.

Implementing the program will also repurpose meaningful budget from the marketing program, which can be put towards the long term sustainability of the project and the core operations.

Vote Summary:

  • Repurpose $17,000 from Marketing Program to this current proposal
  • Approve additional budget of $10,000, thus total budget impact will be $27,000 when combined with the repurposed funds from the marketing program.
  • Locktrip to Subsidize $4,000 as a form of contribution for the one-time setup of the foundation
  • Establish a non-profit foundation to manage key assets and operational requirements.
  • Transition the core engineering team to direct DAO control to secure long-term technical expertise and independence.
  • Migrate all key assets into the foundation, which will act as a legal extension of the DAO and will always act according to the DAO’s will
  • Secure infrastructure and creative budgets to maintain operational stability and community engagement.
  • Manage emissions efficiently post-HydraGon to achieve long-term sustainability.
  • Hydra becomes a full-blown community governed and managed project with no external risk to its core

There is technical time in the implementation, since the very first step is the foundation setup which could take 1-2 months to complete.The additional $10,000 emissions, if approved will start gradually over this period.

By embracing this proposal, the DAO ensures the continued development of HydraGon, reduces third-party risk, and positions Hydrachain as an independent and innovative blockchain protocol.

Executing While Price is Low:

Executing this proposal while prices are low makes the plan more resilient and enforces a more reasonable and lean approach. It ensures that resources are allocated efficiently, with a stronger focus on minimizing costs and maximizing sustainability. By acting now, when times are tough, we subject the execution to stricter financial discipline, positioning the DAO to secure key assets without excess. The calculations presented incorporate a weighted average HYDRA price of $0.50 over the last 6 months, grounding it in current market realities.

If the price of HYDRA improves, the budget and emissions impact on fiat expenditures will improve significantly, offering long-term psychological upside by acting now, rather than delaying into the future.

If on the other hand, the price remains in the low $0.3 range, then the additional $10,000 of monthly emissions will be higher, but should still be manageable, relative to the market cap and community size due to the synergistic setup and overall lean scale.

I believe this proposal represents the final major milestone in HYDRA’s restructuring, marking its transition to a truly independent, mathematically-driven, and community-governed system.

Upon approval, the execution plan would be executed in the following sequence:

  1. Foundation setup via legal agency
  2. Onboarding of engineering
  3. Setup of foundation emails and entity contacts
  4. Migration of repositories and ownership rights on key digital assets (domains, Github codebase etc)
  5. Migration of social media profiles ownership
  6. Migration of validator nodes with 10% and 20%
  7. Migration of all server infrastructure
  8. Setup of a company profile on freelancer.com for digital content contests and post the first contest for infographic and a professional HydraGon explainer video
  9. Administrative maintenance and annual servicing with proper annual filing

The whole plan can be executed within 2 to 4 months and considering the time needed for debate and subsequent voting that precedes execution, I think it is a good moment to start things. Also Hydra’s system inflation will be close to 0 during the HydraGon migration, which makes the buffer period suitable for incorporating the emissions.

At first it may seem it creates a burden on Hydra, but in reality, the difference is just a $10,000 in “costs” which is offsetted by the recent reduction in staking emissions. For a difference of $10,000 we have the opportunity to finalize the DAO setup and turn it into a fundament for future growth and expansion. To remove all “IFs” in the context of operations and empower every potential community member to participate in the operations.

This is an invitation for a public discussion. All members are welcome to provide constructive criticism and suggest any ways to improve.

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Wow. This is really a huge step. I feel it’s both exciting and scary at the same time, and leave me with so many questions…

I understand the concept of delegating all responsibility to the community, but there’s always someone in charge of the regular decisions that need to be made. Who would this person be? The mentioned director? How would such figure be elected?

By delegating such responsibility to the DAO, and knowing that currently the decentralisation in terms of voting power is quite limited, couldn’t we be risking that important decisions could be compromised?
For example, wouldn’t this make it possible for Kucoin, as a major holder, to vote against listing on another tier 1 exchange?

How can we be sure that the extra costs will not result in additional emissions, since the expected average APR could very well get above 5%, and there’s an extra cost of 17k to be paid each month (assuming the 10k reduction with marketing expenses)?

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Leadership and management: The proposal does not affect leadership and management in any way. For example, the engineering team currently works closely in a Slack workgroup with the rest of the team, including Myra as DAO Secretary. Her role is highly efficient, as she communicates bugs directly and evaluates the deployed work for technical compliance with the project design.

Regarding project and product design, I have so far taken the lead, and I intend to continue contributing in this capacity.

The DAO migration of the team can only have a positive impact on leadership. Like you, we’re excited to know that everything being built will be properly structured and independent of third-party efforts (e.g., LockTrip as a business).

So, in terms of management risk, I would say there is none at this point.

Once the engineering team migrates, the role of the DAO Secretary can be expanded or upgraded, distributing my responsibilities for greater redundancy. Until then, I believe we can all work comfortably under the current proposed structure.

As for the $10,000 in additional emissions (since we will repurpose $17,000 of the present $34,000 marketing program), this is a negligible impact on the economy—especially considering we used to issue 10x that amount in staking rewards. And if we consider that staking rewards scale together with the price, then the previous high APR could translate to 100x more from an economic standpoint without any essential benefits.

The downside is that the emissions are fixed in fiat, which can become more noticeable when the token price goes lower. However, while we are at a ~$6.5M market cap, there’s a presumption that the present downside risk should be somewhat limited. Many projects plan their budgets when they’re at their peak, making it difficult to build resilience during tougher times.

We should also recognize that LockTrip will eventually need to generate emissions to cover this cost, as it can’t subsidize it forever (and there’s no reason it should). Therefore, making the change and securing the necessary talent under the DAO’s framework even more strategic.

Overall I believe the upside far outweights the risks and this can only strengthen the appeal of Hydra.

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Thank you Nikola, for your reply. I’m very happy to know that leadership and management won’t change as much as I initially thought.

Either way, I totally support this step because it’s the natural evolution of a project like Hydrachain. It needed to happen sometime along the way, and the economic situation is actually favourable.

Let’s do this!

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Based on the overall agreement on this expressed here as well in the Telegram group, I would propose this to be included for a DAO vote as part of the next possible session.

There’s a lot of work ahead and the sooner we initiate the processes the better it would be.

@planetoid

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This is an amazing proposal and a natural step for the DAO and the community :clap:

I have one question regarding the budget. Are the costs mentioned estimated or firm and does it contain a sufficient buffer? If not already then I think we should add some buffer value to take care of any minor fluctuations. Any amount unspent or remaining can stay unspent or maybe used to enhance something else within the scope of this proposal.

It is reasonable to expect some fluctuations based on real world inflation, change in costs for services etc, especially for Legal or infrastructure and possibly the others too.

Would we be reviewing the budget on this HIP on an annual basis or can it be reviewed ad-hoc as well depending on changing situations or additional requirements towards administration of the DAO and it’s functions? @nikolaalx

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Hello David,
most of the items in the budget have a fixed and predictable nature (e.g. the core engineering payroll + the administrative cost of renewing the foundation).

There is a small administrative buffer for trivial and unexpected administrative tasks.

The creative content item is variable and several months of its stream can be pooled together for bigger items which fall in line with the scope of the program. OR alternatively if there is no immediate need for creative content spending, that item can be alocated as an additional reserve cushion for the future (similar like the community decided to “save for later” item in the marketing program).

Overall the proposed budget is balanced and I am confident will not need reviewing in the next 12 months.

The DAO can review ad-hoc at any point in time it decides to, if there are solid arguments to do so.

Based on this I think it is a great start forward.

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CONGRATS ALL! Its Official!!

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