Launched in February 2018 by Huobi.Pro, Huobi Autonomous Digital Asset Exchange (HADAX), is a hybrid cryptocurrency exchange which enables users to vote for the projects they want to see listed, with Huobi performing a minimal audit, and investment firms conducting their due-diligence – ensuring that projects are compliant with regulations and have a minimum quality standard. We refer to it as a hybrid cryptocurrency exchange as the platform is centralised to the extent that Huobi audits the projects to be subject to users’ votes, but is decentralised as users have the final choice in regards to the projects that are ultimately listed.
According to Huobi, the exchange was created due to the fact that the team couldn’t perform thorough due diligence on all projects which asked to be listed on their flagship exchanges. In order to hasten the process of being listed and to propose low cap coins to their users, the team decided to propose a platform where they would only perform a minimal audit, and let institutional investors (more on that later) and the general public to ultimately choose the projects to be listed.
The process for a project to be listed on Hadax is as follows. First, projects indicate their interest to be listed on the exchange and then Huobi audits the company and the project – ensuring that all projects are following regulations and the minimal listing criteria.
Secondly, the projects are reviewed by established companies (institutional investors) called supernodes, which vote for their favorite projects among the ones proposed. The fact that investment firms are to choose which projects are subject to users’ vote is the cornerstone of Hadax. The supernodes ensure that all projects have a minimum standard, but also that their business model is viable.
Thirdly, the projects which passed the audits and the selection from the specialised companies are subject to users’ votes. Each voter can cast up to 100,000 votes using Huobi’s native token (HT), with one vote “costing” 0.1 HT. Once a voting round is finished, a scoring is performed; 70% of the mark comes from voting and 30% from the security deposit (more on that below), and the 2 winning teams are listed on Hadax, with the winning projects being audited by Huobi to be listed on Huobi.Pro later. If one project doesn’t win the contest, the HT are refunded, while the tokens used to vote for winning projects are retained by the exchange and sent to the Huobi Investor Protection Fund. It is worth mentioning that to avoid cheating, voters need to pass Huobi’s advanced verification process.
Hadax first characteristics: Supernodes
The role of supernodes within the Hadax ecosystem is to ensure that the projects proposed to the public have a certain quality. The name of these funds are publicly disclosed to the public once projects are subject to users’ votes (as shown in the picture below). This system ensures that some risks are downsized, and minimum standards are met in comparison to any and all tokens being available on Decentralised Exchanges (DEX).
The complete list of current nodes can be found on the Hadax website. For instance, we can see, among others, ZhenFund. The fund dominates China’s early-stage VC scene, with over 150 high growth companies within their portfolio, such as OFO (world-leading dockless bike-sharing company) and Hero Entertainment. Another notable VC is the Draper Dragon Innovation fund, which is an early backer of VeChain and Ethereum. Nevertheless, their votes do not mean that those funds have invested in the projects, only that they preferred them to others, as their votes uniquely represent “listing recommendations”, and not investment recommendations.
Hadax second characteristics: Security deposit
Teams that wish to be listed on Hadax are required to pay a deposit in HT tokens. The purpose of the deposit is to be able to pay users back if the project is delisted from the exchange for one reason or another (token forked, legal violations, exit scam, etc). The deposit is repaid to the team, with 12 installments over a one year period.
Hadax third characteristics: Voting Incentives
To encourage users to vote, the exchange enables projects to set up their own incentive rules, as for example PXC, below, which decided to airdrop 10 PXC for every vote. If the project wins the round, the airdrop comes in four installments over a one month period, and the HT tokens are reversed to their owners. Teams can increase their incentives during the voting process if they want, in order to increase their likelihood of being listed. The system is transparent, unlike with other exchanges where airdrops are performed through Telegram or others means.
The aim of Huobi with Hadax is to hasten the listing process by delegating due diligence to the public. Additionally, the exchange enables projects with a good user base to be listed due to the fast-moving nature of the cryptocurrency market; some projects might need to wait months in order to be listed on a purely centralised exchange, increasing the opportunity costs for ICO token holders, and “screening” advantages for others.Despite being similar to Binance’s process, Hadax provides some advantages due to the asking of a security deposit from the teams, the approval of VC firms, and transparency in regards to the voting system.
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