Holdex Protocol: a community incentives ecosystem

Abstract

Whether we are trading commodities, currencies, capital, collectibles, or utilities – the community is paramount to the success of any such market.

The Holdex Protocol is a novel system for community incentives based on the dynamics of trust and influence across Crypto, which we consider a community-powered phenomenon. The purpose of this system is to:

• provide a way to assess engagement from real users;
• reward meaningful engagement with real value; and,
• provide utility to other Blockchain applications that rely on decentralized reputation.

The basis of the system is the use of a personal blockchain-based token named ki which is unique to each user and represents the level of a user's influence and participation within the community.

The system is meant to address, from its design, three issues found with existing incentivized community platforms:

• prevent community-level Sybil attacks i.e. fake accounts and manipulation by sockpuppetry;
• provide token-agnostic rewards whose value is directly tied to positive community actions; and,
• provide a flexible infrastructure that supports decentralized reputation, from which use cases like referrals, content creation, and governance should benefit greatly.

No other platform or protocol is designed to address all these issues simultaneously. The above-named issues (together with poor user experience) have so far seen other blockchain-based incentivized community platforms unable to gain widespread adoption, including by "Crypto teams" (i.e. protocol developers and managers) who should be a natural fit for early adopters. The result is that, in the age of nascent "web3" platforms, Crypto teams still rely heavily on a variety of "web2" platforms to carry out the bulk of their community management processes, which are increasingly more important to the success of any protocol in a saturated attention market.

To represent trust in the system, an endorsement action named kudos facilitates users exchanging their ki. A user that receives many kudos has a ki that is more trusted within the system. As more users give kudos to each other and become interconnected, personal ki converges in a standard to measure positive community actions which can be anchored within the system with real value, for the benefit of users and protocols alike. A third variable named karma reinforces these dynamics by introducing the concept of "consistency": users with good karma can grow their ki faster; conversely, users with bad karma see their ki stall.

The system also accepts external tokens and makes them compatible with its internal community incentives economy. Thus, real value can be injected into the system in a permissionless manner. The system is integrated with DEXs in order to provide convenience to all participants so they can enter and exit the internal marketplace with the tokens of their choice.

What is the Holdex Protocol?

Since the launch of Bitcoin, the Internet of Value has become an ever-possible realization within our lifetimes.

At its core, the Internet of Value presents us with an opportunity to create online spaces without middlemen, where people can freely exchange value amongst each other, eliminating third-party costs without a single-point-of-failure. This is naturally a social phenomenon, a community endeavour, as commerce always is. Whether we are trading commodities, currencies, capital, collectibles, or utilities – the community is paramount to the success of any such market.

Building a community and maintaining a community-oriented ethos in any new, growing, or mature Blockchain market is one of the main challenges of any team pushing forward the success of a particular cryptoasset. There are thousands of teams working with increasingly complex stacks of tools to maintain high community engagement. To effectively conduct community-building these teams must:

• onboard new members and provide support in communication channels;
• launch campaigns to increase awareness and support advocacy;
• conduct governance.

Often, explicit incentives are implemented. But programs to correlate incentives with good community outcomes are complex and expensive to implement, so most teams forgo them – casting aside the potential of a strongly-engaged community.

The Holdex Protocol is Blockchain's native community incentives protocol. It is completely permissionless, so anyone can join the network without approval. It is designed to complement the existing reality of the Blockchain space, where cryptoassets can be plugged-in to anchor the value of the ecosystem rewards. Users who perform meaningful community actions are eligible to receive ecosystem rewards. The protocol is based on a social graph with a trust-building mechanism that protects against fake accounts and other attacks that would aim to malignantly seize the value in the system. In this latest regard, we have been inspired by the implementation of the Circles protocol for a Universal Basic Income (UBI).

The overall result is a highly composable way of rewarding any crypto community or single community member for its continued support and engagement.

Earning incentives

The incentive system is made up of the interactions between individual users in the system. Individual users band together to form communities within the system. A community action is an action that has an effect on other members of the community. Whenever a beneficial community action is performed within the ecosystem, a user is said to earn ki. Each user's ki is a personal asset, which operates under a defined set of rules. Whenever a new user enters the ecosystem, a ki personal to himself is created. As a user performs community actions, new units of ki (i.e. tokenized "points") are minted and awarded to that person.

Joshua joins the ecosystem, creating 'JoshuaKi'
Joshua performs some community action, worth 5 'ki points'
Joshua now has 5 'JoshuaKi'

Note that a user's ki is personal to that user. The example below illustrates that.

Joshua joins the ecosystem, creating 'JoshuaKi'
Joshua performs some community action, worth 5 'ki points'
Joshua now has 5 'JoshuaKi'
Artur joins the ecosystem, creating 'ArturKi'
Joshua transfers his 5 'JoshuaKi' to Artur
Joshua now has 0 'JoshuaKi' while Artur has 5 'JoshuaKi'
Both Joshua and Artur perform some community action, worth 5 'ki points'
Joshua now has 5 'JoshuaKi' while Artur now has 5 'JoshuaKi' and 5 'ArturKi'

Internal economy: the tokenomics of ki

The number of ki in the ecosystem is based on the number of community actions done by users and the value of each action. No ki is minted outside of providing positive community actions. There is no cap to the supply of ki. The "inflation" in the system happens as more users join and as users become more active. The only way to get "diluted" is to remain inactive for long. This is meant to reward activity in the system.

In order to turbocharge these natural dynamics of "inflation" and "dilution", a karma parameter is attached to each user. Positive karma can provide a multiplier to each "ki point" earned so that the velocity of earning ki increases, whereas negative karma will act as a divider to each "ki point" earned so that the velocity of earning ki decreases. At any given time, a user will have a single karma value. This karma will be either positive, negative, or neutral.

Both positive and negative karma come in a degree. The karma scale thus runs from -10 to +10, passing by 0. All karma under zero is negative, and all karma above zero is positive, with 0 karma being the neutral state. Using the Fibonacci sequence, we obtain both the multiplier or divider for karma, so that a karma of 10 equals a multiplier of 55, while a karma of -10 equals a dividing factor of 1/55.

All users start their journey with no ki and ki cannot be bought from a reserve or a pre-mined source, it can only be earned within the system by performing positive community actions. Likewise, users start with neutral karma, which can only change through the frequency of one's community actions. Users who perform positive actions with high frequency will enjoy a higher karma.

These are examples of actions that earn ki. The exact actions are set by protocol governance:

• receiving a pump or upvote on a post or comment.
• starting a thread that receives high engagement e.g. a high ratio of upvotes, replies, or shares.
• bringing new users into the system, once these users receive enough kudos i.e. are trusted by other users.

Trusting rewards

In order to create a useful rewards ecosystem, users endorse each other. This endorsement is a proxy for trust. When a user trusts another in the community, it is signaling their community actions as "real". They tell the whole ecosystem that the other user's ki is as real as theirs. We call this endorsement action a kudos. Any other user whose ki you trust can automatically trade it for any ki on your possession at a one-to-one exchange rate.

Artur gives a 'kudos' to Charlie, so Artur trusts 'CharlieKi'
Artur has 10 'JoshuaKi'
Renée has 10 'CharlieKi'
Renée gives 5 'CharlieKi' to Artur and takes 5 'JoshuaKi' from him
Renée now has 5 'CharlieKi' and 5 'JoshuaKi' while Artur now has 5 'JoshuaKi'

Giving kudos prevents a trivial attack, however one that happens every day in other community platforms. Since any Blockchain wallet can join the system and start minting ki, someone can create multiple wallets and perform the same action multiple times to earn themselves a multiplier on ki rewards. This devalues the system. Protecting against such attacks is technically called Sybil resistance, and the kudos mechanism provides that resistance on the Holdex Protocol.

Transitive exchange

A wide network of users who give kudos to one another creates utility in the incentives as it allows for complete strangers to measure the chains of trust in the network and focus their efforts on earning access to those chains. A mechanism called transitive exchange allows the Holdex ecosystem to harness the transitive properties of both social networks and trust itself.

Artur gives a 'kudos' to Joshua, so Artur trusts 'JoshuaKi'
Joshua gives a 'kudos' to Charlie, so Joshua trusts 'CharlieKi'
Joshua has 10 'JoshuaKi'
Charlie has 10 'CharlieKi'
Charlie wants to give Artur 5 'ki points'
Charlie gives 5 'CharlieKi' to Joshua and takes 5 'JoshuaKi' from him
Charlie gives 5 'JoshuaKi' to Artur

This chain of trust can be extended indefinitely.

Artur gives a 'kudos' to Joshua, so Artur trusts 'JoshuaKi'
Joshua gives a 'kudos' to Charlie, so Joshua trusts 'CharlieKi'
Charlie gives a 'kudos' to Renée, so Charlie trusts 'RenéeKi'
Joshua has 10 'JoshuaKi'
Charlie has 10 'CharlieKi'
Renée has 10 'RenéeKi'
Renée wants to give Artur 5 'ki points'
Renée gives 5 'RenéeKi' to Charlie and takes 5 'CharlieKi' from him
Renée gives 5 'CharlieKi' to Joshua and takes 5 'JoshuaKi' from him
Renée gives 5 'JoshuaKi' to Artur

Of course, we do not expect these chains of trust to get very long as the system grows. We are informed by the idea of "six degrees of separation" popularized in John Guare's play, by the 'small-world' experiment of Stanley Milgram in the 60s, and more recently by Duncan J. Watts and Steven Strogatz at Cornell. Since the Holdex ecosystem finds the shortest route in a chain, a trustworthy individual may need no more than six "hops" in the chain to reach everyone else in the network.

Limits to trust

Through the kudos mechanism, as more trust is built within the Holdex ecosystem, the fungibility of ki in the system increases, driven by those users able to accrue the most trust / receive the most kudos. For new users, this presents the opportunity for a "shortcut": get a kudos from a "superconnected user" and then gain access to his chain of trust. This presents a dilemma for the "superconnected user",

25 people trust 'JoshuaKi'
Artur is new, so only Joshua trusts 'ArturKi'
Artur has 100 'ArturKi'
Joshua has 100 'JoshuaKi'
Artur gives 100 'ArturKi' to Joshua and takes 100 'JoshuaKi' from him
Artur can now give 'ki' to 25 people (and their friends, and friends of friends, etc)
Joshua can now only give 'ki' to Artur

The superconnected user may indeed have real trust in the new user (possibly know him personally even) and want to give him a headstart with a timely kudos, but doing so will potentially result in the superconnected user being locked out of his chain of trust. In order to encourage this type of interaction, the Holdex Protocol allows for qualifying a kudos by setting a limit to how much of the endorser's wallet can be taken by the recipient's ki. The limit can be relative (a percentage or share-of-wallet), absolute (a maximum amount), or time-based (e.g. a maximum per month).

25 people trust 'JoshuaKi'
Artur is new, so only Joshua trusts 'ArturKi'
Joshua qualifies his 'kudos' to Artur with a limit of 10 `JoshuaKi`
Artur has 100 'ArturKi'
Joshua has 100 'JoshuaKi'
Artur gives 10 'ArturKi' to Joshua and takes 10 'JoshuaKi' from him
Artur can now give one tenth of his 'ki' to 25 people (and their friends, and friends of friends, etc)
Joshua sets aside his 10 'ArturKi' to spend once Artur has received more 'kudos' from other users
Artur gets 10 people to give him 'kudos' and trust 'ArturKi'
Joshua raises his limit for Artur to 100 `JoshuaKi`

Qualifying a kudos with a limit makes it easier for new users to the system to build their reputation gradually.

Defending against fakes

As mentioned before, one of the main considerations in designing the Holdex Protocol is to protect against fake accounts. Let us see what happens when a fake account gets access or is connected to someone in your trusted network.

Artur gives a 'kudos' to Joshua, so Artur trusts 'JoshuaKi'
Joshua makes a fake account, and gives it a 'kudos', trusting 'FakeKi'
Joshua has 10 'JoshuaKi'
FakeJoshua has 10 'FakeKi'
Joshua wants to settle a debt to Artur worth 10 'ki points' using 'FakeKi'
FakeJoshua gives 10 'FakeKi' to Joshua and takes 10 'JoshuaKi' from him
FakeJoshua gives 10 'JoshuaKi' to Artur

Essentially, just like Artur in our example, a user only ever receives ki he trusts. Conversely, a user like Joshua can only transfer ki that other users trust. The kudos mechanism guarantees that, even if a malicious user were to create, say, 100 fake accounts, and give kudos to all of them, they would still only be able to transfer their own ki (e.g. Joshua would only be able to transfer JoshuaKi), since that would be the only ki other users have trusted. This is why giving kudos is (and should be) a big deal in the Holdex Protocol.

Anchoring real value

In order to provide a way to encourage users in the ecosystem to perform valuable community actions, we allow for a mechanism that allows incentivizers to "anchor" an external incentive (in the form of an ERC-20 token) to the ki mechanism. We call this mechanism value anchoring. A user who wants to be an incentivizer provides an incentive and sets a conversion factor between that incentive and ki. The Holdex Protocol will retain custody of the incentive and create a 'wrapped version' of the incentive for internal exchange. In combination with the kudos mechanism, value anchoring can be used to encourage "gatekeeping", or the protection of trust within the community, thus increasing the value on those chains of trust that the incentivizer belongs to.

Rune works for Maker and wants to be an incentivizer
Rune provides 1 'MKR' as an incentive, and a 'ki' swap rate of 0.01
The 'MKR' is held in a vault, known as the 'xMKR' vault, and is equivalent to 100 'xMKR'
Rune's 'ki' increases by 100, to 100 'RuneKi'
'RuneKi' can now be exchanged 1:1 with 'xMKR'
Rune starts a competition for a 'guide to the Dai savings rate'
Manny joins the competition is declared the winner
Manny has 100 'MannyKi'
Rune gives a 'kudos' to Manny and sets a limit of 100
Manny gives 100 'MannyKi' to Rune and gets 100 'RuneKi' from him
Manny swaps the 100 'RuneKi' for 100 'xMKR' with the vault
Manny redeems the 100 'xMKR' for 1 'MKR' at the vault

Notice that Manny had 100 ki to swap with Rune. He may have gained ki in the process of the competition (e.g. by receiving pumps or upvotes on his submission) or before. With the endorsement of Rune, Manny's ki becomes more valuable, as it is now indirectly connected to the xMKR vault within Holdex. As Rune and others in the Maker community seek to use the Holdex ecosystem more often to drive their community forward, initial contributors like Manny stand to gain more from the trust they gained early on. As this trust can be withdrawn or increased, Manny has an incentive to act as a gatekeeper himself, even though he did not start out as part of any Maker "team".

Anchoring value in Holdex is designed so that protocol developers or "Crypto teams" can grow out trust from their core team members and other stakeholders like official community managers, admins, and moderators to special community members and others who can build an ever-stronger "chain of trust". However, any user can become an incentivizer, and there is no requirement for an incentivizer use a particular ERC–20. For example, an activist member of the Maker community can create an incentive based on DAI, or wBTC, or wETH.

In order to further facilitate the participation of users and Crypto teams alike, convenience functions and native integrations with DEXs are built into the protocol so that entering and exiting the "internal Holdex economy" can be seamlessly done with any ERC–20 token.

Promoting promoters

As we have seen throughout, the kudos mechanism, essentially an endorsement or "vouching" mechanism between users, is the only way to give and gain trust in the Holdex ecosystem. The ability to give, receive, and qualify this trust, as formalized in the kudos mechanism, is also the feature that allows for combating fake accounts in the Holdex ecosystem. However, in order to facilitate and encourage users to build trust and interact in the absence of direct trust in certain situations, the Holdex Protocol provides a variety of trust-building features, as well as user controls for a permissioned exchange fee.

Manny is well-known, 100+ people trust 'MannyKi'
Adam is relatively new, only 5 people trust 'AdamKi'
Adam wants to be on Manny's 'chain of trust', asks for a 'kudos'
Manny only gives 'kudos' to long-time holders of Ethereum
Adam uploads his self-sovereign identity (SSI) to his profile
Adam verifies the Ethereum Name Service (ENS) address 'adam.eth' as his
Adam receives the 'VerifEyed™' status at Holdex
Manny sees Adam's updated profile, gives Adam a 'kudos'

Adam has become well-known, 500+ people trust 'AdamKi', and his 'chain of trust' includes many incentivizers
'AdamKi' is highly fungible, at the moment it can be redeemed for 'xETH', 'xBTC', and 'xUSD'.
Andre is relatively new but very active, he has 105 'AndreKi'
'AndreKi' is on the 'chain of trust' of 'xYFI'
Andre wants 'xETH' but isn't in any 'chain of trust' with 'xETH'
Adam has not given a 'kudos' to Andre, so 'AndreKi' cannot be swapped for 'AdamKi'
Andre requests Adam a 'permissioned swap' of 100 'AdamKi'
Adam sets the 'permissioned exchange fee' at 5%
Under the 'permissioned swap' rules, Andre will get 100 'AdamKi' from Adam, and give Adam 105 'AndreKi' (100 + 5% fee)
Andre accepts, gets 100 'AdamKi' and gives Adam 105 'AndreKi'
Adam swaps his 'AndreKi' for 'xYFI' and uses it to redeem 'YFI'
Andre swaps his 'AdamKi' for 'xETH' and uses it to redeem 'ETH'

As seen in the example of Adam, there are many opportunities for users to become superconnectors within the Crypto–Verse, acting as a link for many communities. Through the mechanism of the permissioned exchange fee, this status can be turned into a service where users can be compensated for their risks. The more connections a user has, the more in-demand he will be.

Governance

The Holdex Protocol, like other decentralized protocols, will allow its main stakeholders to jointly decide on the direction of the protocol, a mechanism known as governance.

As a primer, let us identify the main purpose of governance is to maximize protocol health, understood as:

• the capacity for the protocol to grow and to do so sustainably: in no. of users, total value locked (TVL), market capitalization or any other measure that is capable of accurately assessing the overall value of the protocol itself.
• the effectiveness of the protocol in farly rewarding its participants: like highly-active users of the protocol, developers who build on the protocol, and influential community members who take the lead on governance matters.
• the ability of the protocol to thrive when faced with external stressors i.e. shocks, volatility, noise, mistakes, faults, attacks, or failures. This property is known as antifragility and goes beyond mere resilience or robustness.

The following definitions should be kept in mind:

• governance token: a token whose purpose is to provide a right to participate in governance, usually by voting.
• protocol fees: fees charged by a protocol whenever a service is provided within the protocol e.g. swapping tokens, wrapping/unwrapping tokens, facilitating a trade. Protocol fees are usually called admin fees when the fees are directed to the protocol's treasury.
• treasury: in the context of governance, a wallet where funds belonging to the protocol are stored. The amount of protocol fees going to the treasury, and the destination of outlays from the treasury, are decided by governance.

Governance ethos and philosophy

The protocol will be community-managed by the holders of a governance token called HLDX. Holders of HLDX will be able to direct the future of the protocol, for example, by voting on Holdex improvement proposals (HIPs), retaining rights to determine whatever controls are built-in the protocol (e.g. for protocol fees), as well as the restructuring the process of governance itself (meta-governance).

The HLDX governance token will not be pre-mined or for sale, instead, it will be distributed to liquidity providers and users of the protocol in a liquidity mining program as well as community incentives program. A percentage of the distribution will be sent to a variety of protocol funds set aside for the purposes of operations, incentivization of the internal market, and promoting a healthy ecosystem of partners and dApps building on the protocol.

The holders of HLDX should expect to be actively involved in the success of the Holdex Protocol, and to support the mission and vision of Holdex of realizing the Internet of Value within our lifetimes.

The HLDX token: protocol tokenomics

Using continuous emissions and a genesis distribution lasting one year, the protocol will issue 1,000,000 $HLDX and distribute it as follows:

• 5% will be sent to the development fund to fund regular operations. The development fund reserves the right to conduct one or several public or strategic distribution events (e.g. Liquidity Bootstrapping Pools (LBPs), Initial DEX Offerings (IDOs), strategic investment partnership) to convert this $HLDX into a fee currency or reserve currency to be used for operational liquidity.
• 10% will be used as the genesis to the smart treasury (please read this excellent paper on smart treasuries by Placeholder VC), which will operate as:
  • a liquidity provider of last resort
  • an automatic buyback machine
  • a token issuance pool for:
    • a community incentives fund to provide for special community incentives programs as determined by governance.
    • an ecosystem fund to invite the financing of community proposals that aim to improve the Holdex Protocol.
• 20% will be distributed directly to contributors as as contributor mining program. The founding team will single out from the protocol's contributors a number to join or assist the core team by offering them vested grants of HLDX. All grants will be vested for one year, and the amount will lay solely at the discretion of the founding team. A portion of the contributor mining program will be set asides for the genesis xHLDX vault, detailed below.
• 65% will be distributed directly as protocol rewards to those who will help bootstrap the protocol's network effects, as follows:
  • 30% to liquidity providers, as a liquidity mining program to bootstrap the initial liquidity of the protocol. The main mechanism will be via an ETH–HLDX pool (i.e. the power pool), however governance may determine other pools to reward.
  • 20% to incentivizers, as an incentivizer mining program to directly reward to those who anchor real value into the protocol by providing ki-swappable token rewards (i.e. creating xERC20 vaults).
  • 15% to referrers, as a referral mining program whereby a referrer gets a matching amount of $HLDX for each referral he brings that earns $HLDX within the incentive systems.

The Holdex Protocol will collect protocol fees as set by governance. For example, at launch, the following fees will be set by default and come with governance controls that can be adjusted later on:

• a 5% admin fee for unwrapping a Holdex-wrapped token in a Holdex vault.
• a 3% admin fee for permissioned exchange transactions.
• a 1% admin fee for using convenience functions. The protocol fees will be collected in ETH as the native fee currency and (i) sent to market-buy HLDX to distribute as revenue-sharing and (ii) sent to the smart treasury. Both these mechanisms create buyback pressure by default. The smart treasury is controlled by governance so any use of the treasury funds for payments or direct transfers to say, the development fund, shall be approved by governance.

The regular operations to be funded by the development fund include:

• running costs of hosting and operating the protocol
• compensating the protocol's core development team
• compensating contractors brought from time to time to aid in the protocol's development
• funding research crucial to the advancement of the protocol
• compensating advisors to the protocol's core development team The budget of the development fund shall be handled by the protocol's governance.

The community incentives fund and ecosystem fund are meant to issue grants, the former to finance incentives to users of the Holdex Protocol as rewards for exceptionally positive community actions, the latter to individuals and teams working for the betterment of the Holdex Protocol and its community in the following "areas of improvement":

• integrations (e.g. with other community tools)
• UX/UI design (e.g. for improving the experience of using the protocol)
• tokenomics modelling (e.g. to fine-tune rewards and create an evermore robust ecosystem).
• tooling (e.g. for ease-of-development and novel use cases on the Holdex Protocol).
• growth, governance, and community (e.g. to foster the adoption of the Holdex Protocol). The issuance of grants shall be handled by the protocol's governance. The earmarking of funds from the smart treasury to either of the funds shall also be under the purview of the protocol's governance.

The genesis distribution timetable will consist of 20 tranches of 50,000 $HLDX each, divided into 12 epochs, each corresponding to roughly 1 month, as follows:

• in every epoch, a minimum of 1 tranche will be distributed – for a subtotal of 12 tranches
• an additional tranche will be distributed on the 6th, 9th, and 12th epoch – for a subtotal of 3 tranches
• during the first 3 epochs (the launch period) additional tranches will be distributed – for a subtotal of 5 tranches
  • an additional 2 tranches will be distributed on the 1st epoch
  • an additional 2 tranches will be distributed on the 2nd epoch
  • an additional tranche will be distributed on the 3rd epoch

After the first year, we will target an annual increase of 7% in the supply of HLDX in perpetuity, so as to reward active participants in the protocol over passive holders. The governance of the Holdex Protocol will decide the manner in which to continue the distribution.

During the first year, to steer the Holdex Protocol from launch towards a mature decentralized autonomous organization (DAO), a multisig "board of directors" will retain effective control over the protocol and its funds, starting with the founding team and adding community members throughout the course of the year, as follows.

• For the first 6 epochs, a 2/3 multisig wallet with all members coming from the founding team.
• At the end of the 6th epoch, the 2/3 multisig will be upgraded to a 3/5 multisig after the election of 2 community members to join the original 3 founding members.
• At the end of the 9th epoch, a 3/5 multisig will be upgraded to a 5/9 multisig after the election of 6 new community members to join the original 3 founding members.
• At the end of the 12th epoch, the 5/9 multisig will remain, consituted as follows:
  • From the core team, 3 members will take an ex officio role on the multisig: the Chief Executive Officer (CEO), the Chief Operating Officer (COO), and the Chief Technology Officer (CTO).
  • From the community, 6 elected members will join the ex-officio members.
  • From this point onwards, every member of the founding team will serve at the pleasure of the multisig. The multisig will determine the composition of the "core team" and oversee all hiring activity.
• After the 12th epoch, every 12 epochs, the community will elect a new slate of multisig "directors". The community may trigger a snap election via a proposal backed by at least 10% of $HLDX holders, if 40% vote to hold such snap election. If a snap election is held, the multisig therein elected will serve for the remainder of the replaced multisig's term, until the next regularly scheduled election (i.e. every 12 epochs).

Elections shall be the primary mechanism to change the composition of the multisig, which controls all admin permissions in the protocol as well as all its funds.

To directly participate in governance, HLDX holders vote-lock their governance tokens on a voting escrow contract. In other words, a vote-locking system will be implemented, where HLDX holders will receive a deterministic amount of veHLDX (voting escrow HLDX) by time-locking their tokens on the voting escrow contract. The more HLDX is locked, and the longer it is locked, the more veHLDX will be received. HLDX locked for 4 years will receive maximum veHLDX, which will be non-tradeable. A holder's balance of veHLDX is subject to linear decay, however, the lock can be extended at any time.

Holders of veHLDX will receive three (3) utilities from the protocol:

• voting power: one veHLDX will equal 1 vote.
• boosted protocol rewards: up to 2.5x boost in rewards from liquidity mining, incentivizer mining, and referral mining can be enjoyed by those who maintain a sufficiently high balance of veHLDX.
• revenue-sharing: 50% of protocol fees will be used to market-buy HLDX to distribute pro-rate to the veHLDX supply.

Tying ki and HLDX

As previous described, ki is a personal token earned by each user when performing positive community actions. Furthermore, real value can be anchored into the system by any incentivizer (e.g. a protocol development team, say Maker).

As part of the genesis distribution, 50,000 $HLDX from the contributor mining program will be set aside for a genesis $xHLDX vault. This means the same value-anchoring dynamic available to incentivizers will be used to inject 200,000 $HLDX into the internal economy of ki, with the Holdex Protocol itself as the incentivizer.

We expect the following community actions to be encouraged with these HLDX incentives (a detailed list will be available in due time):

• promotion of the Holdex Protocol to incentivizers.
• promotion of the Holdex Protocol to other users in the Crypto-Verse.
• guiding new users in understanding the mechanics of the internal economy of ki.
• becoming a superconnector that facilitates permissioned exchange within the ecosystem.
• actively participating in the governance of the protocol.

To this initial 50,000 $HLDX, ongoing incentives will be added, in the forms of grants from the smart treasury, as well as apportionements from the targeted inflation in later years. Therefore, from its very beginning, ki will be anchored by value with HLDX as the first use case of the value-anchoring mechanism.

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Conclusion

The Holdex Protocol is the future of Crypto community incentives and community-centered decentralized reputation, for a variety of reasons:

• Due to in-build Sybil resistance, it is capable of encouraging real community actions and measure them free of mass manipulation and fake accounts
• Through the value-anchoring mechanism, incentives that truly engage the community are possible. The same incentives that would be near-wasted on an airdrop or another mass distribution of valuable tokens can be implemented on Holdex, achieving higher true reach (by removing all the fake accounts from the distribution), plus uniquely reward community members who get involved early.
• With the permissioned exchange fee mechanism, highly-active users like promoters and other superconnectors across the Crypto community can monetize their influence and access.