With the advent of DeFi on Hedera, we have seen an overwhelming number of Hedera Token Service (HTS) tokens flood the ecosystem. When put into a broader context, this phenomenon is not uncommon — Ethereum, Binance Smart Chain, Avalanche, etc. all experienced a surge in token creation as they burgeoned into the now behemoth smart contract platforms.
Figure 1. Daily token transactions spiked in late August / early September amid the influx of HTS tokens on the network.
However, unlike these L1s, whose standards for fungible tokens implement an API within smart contracts, Hedera defines a new token standard independent of smart contracts. The Hedera Token Service, or HTS, leverages existing network primitives to allow users to define and interact with tokens as native network entities. HTS therefore inherits HBAR’s performance and predictable fee structures. These tokens are mappable to ERC-20 and ERC-721 standards such that interoperability with existing smart contract applications is not compromised. Moreover, HTS extends beyond the limitations of the dominating ERC standard, with features such as built-in configurable compliance and programmability (e.g., custom token fees and scheduled transactions).
This is all to say that token creation on Hedera is robust and accessible to all. While a low barrier to entry is generally good, it is not without drawbacks. The near-negligible cost of creating ($1.00) and minting ($0.001) fungible tokens through HTS, coupled with the permissionless nature of SaucerSwap and a tight-knit, easily mobilized community, can exacerbate rug pulls in the absence of checks and balances.
Project Sentinel
Given the aforementioned challenges, the Hashgraph DeFi Alliance (HDA) concluded that a formalized process for whitelisting tokens was needed. SaucerSwap has collaborated with IDO launchpad and fellow HDA member, HeadStarter, to conceive of Project Sentinel. HeadStarter has created a set of questions that examine various aspects of a project, ranging from business model to tokenomics.
Figure 2. A preview of the Project Sentinel questionnaire.
These questions were designed to be as objective as possible. In addition to responding yes or no, the project must provide supporting evidence for each question. For example, suppose a project responds ‘yes’ to having received an audit — for this to be verifiable, a link to the report must be provided. Upon submission, HeadStarter will generate a report, which will be published on the Project Sentinel website.
SaucerSwap Voting
Once a report has been published, the project may complete a token listing form, which SaucerSwap will add to their GitBook once HeadStarter begins processing requests. A poll will then be created in the SaucerSwap Discord server. Those who have purchased one or more Planck Epoch Collectibles, either during SaucerSwap’s NFT sale or on a secondary market like Zuse, will have exclusive access to the voting channel once their account has been linked. They may cast a vote on whether a project should be whitelisted, using Sentinel reports as reference.
If the project receives a passing vote by >70% supermajority after 24 hours has elapsed:
- The project moves on to the final step in the whitelisting process.
- The project’s team then has 48 hours to create a liquidity pool, in which $1,500 of their token and $1,500 of a common base (e.g., HBAR, SAUCE, USDC) is provided. This is primarily to minimize slippage when swapping in the trading pair.
- If this LP is funded within the specified window of time, SaucerSwap will promptly whitelist the token.
Whitelisted tokens appear in Saucerswap’s default token menu and analytics section. This makes tokens more easily tradable and increases project visibility. It also allows users to analyze the tokens more readily using tools such as liquidity, volume, and price charts.
Summary
In light of Hedera’s emerging token economy, the HDA has deemed it necessary to introduce a responsible and inclusive method of verifying the legitimacy of projects, with the end goal being to whitelist quality tokens on SaucerSwap. HeadStarter will score a project using a set of criteria, after which point it will be voted on by SaucerSwap Planck Epoch NFT holders. Finally, on the condition that the project receives a passing vote by supermajority and has provided $3,000 of liquidity to the relevant pair, their token will be whitelisted on SaucerSwap.
About the HDA
The Hashgraph DeFi Alliance allows industry-leading projects to connect, collaborate, and contribute to the emergence of a healthy and sustainable global DeFi ecosystem built on Hedera.
