HOPE Founder Flex: A Detailed Explanation of HOPE's Economic Model, Ecology, and Imagination Space

On March 22, the distributed stablecoin project HOPE held its first AMA on Twitter Space, where founder Flex discussed various aspects of the HOPE stablecoin and the HOPE ecosystem that are worth looking forward to with the audience.

This article excerpts Flex's insightful points from the AMA.

1. From CeFi to DeFi, Flex's New HOPE

1.1 HOPE will strive to make DeFi more user-friendly, easier to use, and more universal

The thinking behind this project stems from the recent collapse of the CeFi ecosystem, which has affected many well-known companies. The rapid and large-scale growth of DeFi highlights the demand for more user-friendly infrastructure and applications. To enable more people to use DeFi, the focus should be on creating universal payment tools and building user-friendly applications.

The second reason is the importance of stablecoins in the DeFi environment. Despite the emergence of many stablecoin attempts over the years, recent events have exposed the problems and risks faced by centralized stablecoins. I believe we need a crypto-native stablecoin that is not only backed by fiat currency or algorithms but should be backed by widely recognized assets.

1.2 The future of stablecoins belongs to crypto-native

Finally, the escalating geopolitical tensions and trust issues in cross-border payments and financial activities necessitate a decentralized stablecoin solution. I hope the HOPE ecosystem can provide frictionless financial services for everyone, bridging traditional finance with the new digital age.

In a gradually polarized world, blockchain technology and applications are a natural choice for solving many real-world problems.

1.3 HOPE's short-term goal is to become an important collateral

First and foremost, HOPE is a crypto-native distributed stablecoin. In the initial phase, it will be backed by Bitcoin and Ethereum, synchronizing with their price trends. The main goal of the first phase is to establish HOPE as an important collateral in the DeFi world and connect it with use cases in CeFi and TradFi.

2. HOPE aims to become the most important payment-oriented cryptocurrency globally in the future

At the launch, HOPE's reserve price will start at around half a dollar and will rise as the value of reserve assets like Bitcoin increases. During the 2023-2025 cycle, we will establish a robust liquidity market and interest rate market for HOPE by creating a series of application scenarios. This will help HOPE develop into a reliable collateral choice in the DeFi space.

Collateral is the infrastructure for creating financial instruments and enhancing trading credibility, playing a key role in TradFi, CeFi, and DeFi. Previously, stablecoins like USDC have been used as collateral in DeFi. However, a series of recent events indicate that centralized stablecoins may be vulnerable to traditional financial issues. The emergence of HOPE can address this problem.

From 2026 to 2029, as the value of HOPE's reserve assets increases, HOPE will become an over-collateralized stablecoin backed by native assets, with an expected collateralization ratio of around 110%. The goal during this phase is to transform HOPE into a payment tool that provides financial services to everyone, including the unbanked population. For example, farmers in Africa currently face high commission rates when dealing with intermediaries in the supply chain. Through HOPE, these individuals can bypass high intermediary fees and access fairer financial services.

In summary, with the support of the ecosystem's dual-token mechanism, HOPE will first focus on becoming an important collateral for DeFi, CeFi, and TradFi, and ultimately transform into a global payment tool.

3. Hope, born towards the "light"

Next, let's talk about the economic model.

As the value of HOPE's reserves grows, governance becomes crucial. Since HOPE is a community-driven stablecoin, we need a governance token - LT (Light Token). The value of LT will increase with the growth of HOPE's reserve scale, issuance scale, and ecosystem scale. Additionally, as the value of Bitcoin, Ethereum, and other reserve currencies rises, HOPE's price will achieve anchoring, and the overflow value from the continuous rise in reserves will be reflected in the value of LT. LT will play a key role in the growth of HOPE's reserves, benefiting all LT holders.

LT holders can participate in various aspects of governance, including HOPE's monetary policy, such as maintaining the peg and managing reserves. For example, if we initially issue 10 billion HOPE, the total reserve value will be approximately $5 billion; as the value of assets like Bitcoin increases, the reserve value may grow to $50 billion, resulting in $40 billion of excess reserves. The community will decide how to handle the excess portion through proposals.

One possible proposal is to convert the reserves into stable assets like Hong Kong bonds and Singapore bonds to increase HOPE's application potential. Having a stable reserve of $50 billion means we can issue more HOPE and allocate more excess value to LT holders. Furthermore, 50% of the fee income generated by various protocols within the HOPE ecosystem will be distributed to liquidity providers, while the other 50% will be allocated to community members holding LT.

4. The HOPE ecosystem is a real-world block

I know the above content may be a bit confusing. Next, I will continue to explain. As mentioned earlier, we hope HOPE will become a universal collateral for TradFi, CeFi, and DeFi in the first phase; essentially, we aim to build bridges between these fields to provide a broader and less damaging application space for crypto-native collateral or stablecoins. To achieve this goal, we are building a DeFi ecosystem that integrates various applications and protocols. LT will capture the value generated by the entire ecosystem.

In April, we will launch the first application, HopeSwap, followed by the lending protocol HopeLend. After that, we will introduce two protocols aimed at connecting the DeFi world with TradFi and CeFi: HopeConnect and HopeEcho.

You can think of HopeSwap as a sophisticated office building, while HopeLend is like a residential building. In this ecosystem, those who want to rent these buildings need to pay rent or service fees to the landlords. Initially, the landlords are the management team building the ecosystem. However, as the project develops, 70% of the management shares will be allocated to tenants. These tenants can gain community governance rights through rewards earned from participating in activities.

Different protocols within the community will charge service fees, such as for residential buildings, office buildings, hospitals, etc. As land value increases, the value of community governance rights will also rise, benefiting the tenants. Tenants pay rent and receive fee subsidies, ultimately gaining management rights over the buildings. As real estate values grow, the value of management rights will also increase, further subsidizing the tenants.

We are building an ecosystem that combines various protocols. This combination creates higher value for the community than individual buildings. When different buildings come together, such as office buildings, hospitals, schools, and residential buildings, their total value will be greater than that of separate real estate projects.

I would also like to highlight HopeConnect, which acts as an on-chain custodian, enabling asset movement and settlement. This will help reduce counterparty risks associated with centralized trading platforms and custodial services.

We acknowledge that fully decentralized trading platforms like dYdX may be the trend of the future, but centralized trading platforms can still provide better liquidity and more efficient order matching engines. By combining the advantages of DeFi and CeFi, we can offer customers more valuable services, allowing them to trade on trading platforms without entrusting their assets to centralized institutions.

Through HopeConnect, users can first conduct safer and more efficient transactions on centralized trading platforms using on-chain deposits; the second function is to provide management products for non-custodial assets, so users do not need to entrust funds to centralized platforms; the third, and more critical phase, is to connect TradFi with DeFi. Through the HopeConnect protocol, users will be able to access global financial services.

DeFi is a means, not an end. The ultimate goal of HOPE is to provide everyone with low-friction and transparent next-generation financial infrastructure and services.

5. Asset security is the top priority

Asset security is one of the most concerning issues for everyone. Our team has taken various approaches to ensure asset security. First, we have partnered with three auditing firms and invited white-hat hackers to conduct comprehensive audits of our protocols. This is completed at the protocol level before assets are introduced into the system.

We have also collaborated with several centralized custodial service providers to offer custodial services and enhance asset security. While this may be seen as a centralized compromise, it is crucial for attracting traditional financial institutions to join our platform. By providing regulated products and partnering with reputable custodians, we can attract more cryptocurrency communities and traditional financial institutions.

In the initial five years, the team will hold and lock a certain proportion of LT to ensure early project governance rights. During this period, we will strive to establish self-custody protocols and gradually achieve decentralized custody. However, initially, we will use regulated custodians to ensure asset security and attract traditional investors.

6. HOPE will not be limited to Ethereum

We all know that Ethereum users often face high transaction fees. I want to clarify that the application scope of HOPE is not limited to Ethereum; the essence of HOPE is a stablecoin backed by distributed custodial reserves. The protocols of the HOPE ecosystem can also be very distributed. Initially, these protocols will be built on Ethereum. However, we also see a demand for distributed reserves on other blockchains.

Distributed reserves mean that different projects can mint stablecoins on different blockchains by reserving Bitcoin, Ethereum, or other assets. For example, if other blockchain Layer 2 solutions want to establish their own stablecoin DeFi ecosystem, we would be more than willing to assist, but they first need to become a distributed custodian. They can reserve crypto assets and mint HOPE on their chain, using it with various applications. While we start with Ethereum, we certainly hope to expand to other blockchains. This largely depends on the demand for HOPE from other blockchains. In short, as long as there is a blockchain that needs reserve assets and mint stablecoins, we will provide support.