Project Hydro is excited to announce that Hail, a core phase of protocol development has been completed, advancing the Hydro ecosystem and roadmap one step further into DeFi.
What is Hydro Hail?
Simply put, Hail is tokenization on the blockchain. Under the hood it is a framework of Solidity Smart Contracts which work on top of the Hydro Snowflake protocol. Those smart contracts allow a validated Snowflake address to create standardized Security Tokens that can be issued, bought, sold, validated, transferred, paid as dividends, and destroyed.
In February of 2019, Project Hydro brainstormed and drafted up a set of requirements for what an ideal security tokenization contract using Hydro as its utility would look and function. After multiple sessions and fine tuning, it was made an official HCDP task and posted to our community Github for Hydro ecosystem developers to apply for the bounty to build it out.
What We Knew:
- – Security tokens are estimated to be a multi-trillion dollar market opportunity.
- – A few companies have created security token platforms, but they have very large flaws – they only solve for small parts of the overall ecosystem, they are closed architecture, they do not tie to user identity, authentication, and on-chain KYC
- – The other security token platforms are highly centralized and they have too much control over token issuance, permissioning, and approvals
- – The Hydro ecosystem contains all of the complementary components to make it the largest and most robust security token marketplace globally, such as legal document frameworks, subscriptions, authentication, and most importantly, the most open architecture identity framework.
What We Did:
After posting the bounty and allowing the closing period to end, each applicant was manually researched and vetted. This included Google hangouts, linkedin message, chats and more.
We selected Ethernity.live for the designation of building this as their track record of industry work showed they were up for the task. We quickly put an engineering team together on the Ethernity and Project Hydro side to see this through.
Our close collaboration spanned things like weekly Google hangouts, Discord chats, an AMA, blog post updates and much more.
We collaborated weekly and sometimes daily going over code, seeing its evolution and getting to a point where we could preview its testnet version. At that point, once all functionality was in place, it was audited and reviewed.
Just as a note, all Hydro smart contracts are audited. Just like the assignment of the bounty, we source an auditor, and collect their recommendation on both the security side and ways to optimize gas cost. Once the audit was complete, we passed along a few gas cost saving optimizations and they were implemented by the team.
Today we are happy to announce, after weeks of collaboration, Hail, including its dependency contracts are now on mainnet. So let’s dig into it a bit…
As with many more advanced or complex smart contracts, there usually are a few contracts working together as a whole to do the heavy lifting. As you can see below, we sketched out a collection of smart contracts to do just that. It is a bit truncated, but you can get the picture.
The architecture diagram is comprised of 4 core smart contracts:
- – HSTBuyerRegistry.sol – A buyer registry to hold EINs of buyers for any security token.
- – HSTEscrow.sol – This contracts stores any funds sent by the token creator and the funds that users pay to participate in the issuing. It distributes any refunds, and the corresponding dividends and interests to their receivers.
- – HSTServiceRegistry.sol – The Service Registry contract has an array of token address, and holds EINs of service providers for tokens, this simplifies the creation of an ecosystem of service providers.
- – HSTokenRegistry.sol – Keep track of contracts for the issuance of Hydro Securities
The sum of these contracts allow a fully operational security tokenization suite allowing the ability to…
- – Create Security Token – unique IDs are attributed to each token, called a Hydro Security Token or HST
- – Define HST Rules – create a dictionary of rules that can be applied to the HST
- – KYC Approval – on-chain KYC approval from off-chain KYC provider(s) of token issuer and buyers/sellers for defined ruleset
- – AML Approval – on-chain AML approval from off-chain AML provider(s) for token issuer and buyers/sellers for defined ruleset
- – Limit Owners – limit ownership percentage, or HYDRO amount for any HST
- – Legal Approval – on-chain legal approval from off-chain legal providers to prove rightful creation, ownership, and structure of security token
- – Legal Contracts – tie the HST to legal contracts and terms/conditions written off-chain via Hydro Ice.
- – Restricted Transfers – override normal ERC-20 transfer methods to block transfers of HST between wallets if not on a KYC/AML whitelist
- – Lockup Periods – set rules to lock token transfers and buy/sells for a period of X time
- – Admin Function – an admin or issuer can modify rules, whitelist/blacklist, lock, freeze, or stop token transfers at any time
- – Participant Functions – send and receive a token tied to ERC-1484 wallet ID, lockup, freeze, blacklist any ID
- – HST Escrow – keep HYDRO tokens in escrow contract within ERC-1484 of issuer, until the offering is closed, release back to ERC-1484 wallet ID of subscriber from escrow if conditions in legal contract aren’t met
- – Subscription – use the Snowflake Subscription task to create a framework for payments and recurring subscriptions to a securitization
- – Authenticate – use Hydro Raindrop to authenticate issuance, purchase/sale, transfer
- – Carried Interest – calculate carried interest based on the Interest Smart Contract utility function (link when posted)
- – Interest Payout – payout carried interest/management fee to token issuer on a set schedule to defined wallet IDs on the whitelist
- – Dividend Payout – payout dividend from admin pro-rata to Snowflake wallet holders in HYDRO
As you can see, it is quite the full-package framework.
We don’t have any screenshots as it is a set of solidity smart contracts, but all of its code is 100% open-source and viewable to the public on our community Github. We encourage developers or agencies out there to create a front end (or two) for all to use and enjoy. The protocol is out there, so get at it. For more information on Hydro or its official roadmap, check out our website.
CTO Hydro Labs