February has been an exciting month for Hector Finance: The project has released a slew of updates, the largest being the Tor stablecoin and farm where users can reap rewards of more than 30% in annual percentage rate.
Tor works similarly to TerraUSD (UST): Users can use Dai or USD Coin (USDC) to mint Tor, which in turn burns Hector Finance tokens (HEC). When Tor grows, so does HEC. A growing HEC ecosystem allows Hector to grow its treasury reserves and invest more into yield-bearing products that allow for more Tor rewards, leading to greater demand for Tor and more growth for HEC. This creates a cyclical feedback loop where both tokens support the growth of one another.
Tor’s peg is maintained through arbitrage: Users are essentially paid a small commission for helping to maintain Tor’s price at $1. When Tor’s price is above the $1 peg, users can mint Tor directly for $1 per token and then sell it at a profit, reducing its price until the peg is re-established. Inversely, when Tor’s price is below the $1 peg, users can purchase TOR from the Tor Curve pool for less than $1 per token and redeem each token for exactly $1 worth of HEC tokens. This means that arbitrage traders can make a small profit for maintaining the peg. When necessary, a portion of Hector Finance’s $90-million treasury can also be used to help maintain the peg.
The main focus of the Hector Finance team now is to bring as many use cases as possible to Tor to steadily grow demand and usage. Tor has already been integrated into MyCryptoCheckout, a payment gateway that allows e-commerce store owners to accept crypto payments through WooCommerce, one of the world’s largest e-commerce platforms, allowing Tor to be used for payment at stores such as Orange Amps, New Zealand’s All Blacks and others. This is a broad step to bridge the worlds of cryptocurrency and traditional finance, contributing to further expansion in the future.
To further drive adoption, the Hector Finance team is also running a marketing promotion: For the first ten partners who integrate Tor into their service, Hector will donate $1,000 each to charity.
Tor’s effect on the Hector ecosystem
In late 2021, the Hector team announced its plans to transform HEC into a token that wasn’t only a rebasing token, but one with a deflating supply — making it the world’s first deflationary rebase token. The team has delivered on this goal, because HEC has been deflationary since Jan. 26, and more than 210,000 tokens — or about $4,200,000 — have been burned.
The team aims to maintain HEC’s deflation by using revenues from a collection of subprojects to buy and burn tokens from the market, soaking up the excess tokens generated by HEC’s annual-percentage-yield rewards. This will create an indirect profit-sharing model where HEC holders can share the benefits of the entire Hector ecosystem through a rebasing token that is not only sustainable in its emissions but also has a reducing supply.
If Hector’s progress so far in 2022 is anything to go by, this will truly be an exciting year for the project and its community.