Hector Finance has become the world’s first deflationary rebase project as it edges ever closer to the general launch of its hotly anticipated stablecoin, TOR.
Hector Finance has spent the last month setting its ambitions to become the world’s first deflationary rebase token — something achieved mere days ago thanks, in part, to the successful beta testing of TOR.
How does TOR work?
TOR works similarly to TerraUSD (UST). The underlying token — in this case, Hector’s native token, HEC — is burned in exchange for TOR, which can be staked for competitive rewards. As the TOR project expands, the demand for HEC will also grow since it is required to gain access to TOR. As the price of the HEC token increases, Hector Finance can expand its treasury through bond offerings, increasing the available rewards for TOR staking, creating more demand and an even higher price for the HEC token. This feedback loop will support significant growth for the Hector ecosystem during the coming year.
How is TOR backed?
There are two main layers to TOR’s backing:
Layer 1: Smart contracts and the HEC-stable liquidity pool
The underlying forces of supply and demand will be used to govern the price of TOR and maintain a peg of $1.
When the demand for TOR is high relative to supply the percentage of TOR in the curve pool decreases, which increases the price of TOR against Dai and USD Coin (USDC). Therefore, users can mint TOR with Dai and USDC for a profit, rebalancing the curve pool and bringing the price of TOR back to $1.
When the demand for TOR is low the percentage of TOR in the curve pool will increase, which will lower TOR’s price against Dai and USDC so it becomes profitable to redeem TOR and rebalance the curve pool, bringing TOR’s price back to $1.
Layer 2: The Hector Finance Treasury
While layer 1 will be the main backing mechanism to the TOR token, the Hector Finance Treasury of more than $100 million will periodically mint or redeem TOR tokens to bring TOR’s price back to the peg of $1. In case the HEC price becomes too volatile, the treasury can be used to stabilize it through buybacks and burns.
TOR is yield-bearing
TOR tokenholders will be able to stake their tokens in exchange for regular rewards of Fantom (FTM) tokens. Hector Finance aims to offer rewards of at least a 20% annual percentage rate, but the beta test has regularly yielded rewards of more than 40%, making it one of the most lucrative stablecoin farms in the crypto space.
Hector Finance is also working toward bringing TOR to its Hector Bank lending and borrowing network, allowing users to lend and borrow the token for interest rewards.
Hector Finance is making great strides toward its goals this year, and with much in development, the project’s future may be very bright. Hector Finance is truly one to watch in 2022.