BHA - Bonded Holdings Agreement
A Treasury Business Services product offering a greater degree of trust in a project for potential investors.
From our time in this space we have all witnessed or been victim of our fair share of rug pulls. If there is money to be had there will always be someone less honest than you to take that shortcut. This is no less true in crypto, and particularly popular models adopted by these individuals are the slow rugs and hard rugs.
A slow rug is a project that launches like most token-issuing projects do, by distributing a % of their supply, and when their token is finding some traction on the chart through often (but not exclusively) aggressive marketing, the project is unwittingly and without any hint of it being part of their financing model, selling tokens from under their holders' feet.
A hard rug in contrast is much more aggressive. Launch project, issue token, circulate through air drops, incentivise additional investments and when the market cap valuation is right, they dump the entirety of their witheld supply to their unsuspecting holders and scoop up all the buy offers before disappearing to plan their next rug.
This is often magnified in instances where projects run IDO (initial dex offering) and are filling their coffers that much quicker with the intention of doing either a slow or a hard rug to fill their boots further, at the expense of those that put their faith in the project and the team behind it.
What is the solution to this long-standing issue, and how can we build our confidence in a new project starting up?
BHA – Bonded holding agreements.
Simply put, BHAs take the temptation away from those running projects, by limiting access to the huge share of issued supply projects ordinarily withhold for team payments, future marketing, development etc.. as part of their tokenomics whilst also offering an added level of trust in the fledgling project by potential investors.
How does it work?
Utilising the multi-sig wallet feature the XRP Ledger offers, control of that witheld supply is restricted through the BHA agreement.
Multi-signing in the XRP Ledger is a method of authorizing transactions for the XRP Ledger by using a combination of multiple secret keys.
So rather than a transaction requiring just a single individual who has access to the wallet that holds the tokens you are looking to transact with, the transaction would require authorisation by any number of trusted individuals (defined as the quorum when setting up the multi-signing), with a set of conditions that need to be met for the transaction to go through. This would allow Treasury XRPL to step in as a trusted third party and be required to sign the transaction to free up the tokens for use by the project.
BHAs would be agreed on a project by project basis and structured to suit the project and it's roadmap. Part of the process would be identifying the triggers which are actionable events typically laid out in the whitepaper and roadmap, which would lead to a countersigning by Treasury XRPL officials to enable the freeing up of the necessary supply to fulfil the requirements when those conditions are met.
Properties of a BHA
Self custody is hugely important for both individuals and projects retaining control of their wealth. Entering into a BHA does not require Treasury XRPL to take custody of any of the other projects’ holdings. Instead custody is shared through a signer list and a defined quorum as part of the signed agreement to ensure that the quorum is met for any transaction to occur.
Public record: A public repository of all BHAs will be available on the website for anyone to consult at any given time. In addition to this all BHAs will be minted as burnable, non-transferrable PDF NFTs on the blockchain for public record.
An illustrated example
Tokenomics will vary from one project to another but in many instances there will be a proportion of the total supply that will be withheld. In these instances, a BHA can ensure that supply is only made available to the project as and when it is necessary.
In the example above a BHA would be structured with the following triggers:
At token issuance (T): 54% of the total supply would be available to the project, for Marketing (38%), the first public Air Drop (10%) and early Team Payments (6%) At T+2 Months: release of 20% for the second Air Drop At T+3 Months: release of 15% for the third Air Drop At T+6 Months: release of 6% for the second wave of team payments At T+12 Months: release of 5% for CEO payment
A flexible model to ensure all bases are covered
The beauty of a BHA is that it can be tailored to suit any project, regardless of their tokenomics.
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