HOT Takes Monthly Gains to 199%; A Quick Primer on the Holo Fuel Token Swap
The price of Holo (HOT) shot up by 30% leading into the first day of February, as the ERC20 token proved quickest to rebound following a week of general descent.
Monthly growth now stands at 199% for a token which is moving ever closer to completing a major milestone outlined in its Green-Paper – namely, the launch of the Holo mainnet; its departure from Ethereum, and the introduction of a new network currency, Holo fuel.
Anticipation of the Holo fuel launch appeared to be driving HOT’s monumental ascension throughout the month of January, as suggested here one week into the surge. Holo’s rise was also likely aided by some very positive reviews in early January’s edition of the Weiss Ratings.
So what is Holo fuel, and what does it mean for HOT holders?
Holo fuel will be the internal network currency which powers the Holochain mainnet, and will be backed by the hosting capacity of the entire Holo ecosystem. As explained in Holo Fuel Economics 101, the concept arose in an attempt to find long-term price stability:
“From an economic perspective, we need price signals that are both stable AND accurately reflect underlying activity, so that users and hosts can make long term plans with confidence. We assert that this requires a currency that is backed by the hosting capacity of the network.”
Holo fuel will be exchanged at a 1:1 ratio for HOT tokens – however, unlike many mainnet swaps, the HOT token won’t be going away. Instead, when users purchase Holo fuel in order to host on Holochain, their HOT will be locked up in a vault, to be redeemed and cashed out again for fuel at any point. More from fuel 101:
“Given the extreme volatility and issues facing existing cryptocurrencies, we hesitate to link Holo fuel to them. Using HOT as a reserve currency provides Holo users with a path to cash in and out of cryptocurrencies, while preventing Holo fuel prices from being bound to the volatility and issues of other projects.”
Similar systems have been attempted on other platforms, such as Steemit (STEEM). Steem Dollars (SBD) were supposed to act as a stablecoin makeweight against the fluctuating value of STEEM coins. That experiment failed as SBD sunk along with the rest of the market, plunging to almost half the value of its supposed dollar-pegged status.
The Holo fuel system looks different in that one unit of fuel will be decided by the market rate for an equal amount of hosting power. From the green paper:
“If the price of Holo fuel rises significantly, people are incentivized to connect more computing power to the network. And since trades on exchanges are not likely to deviate wildly from the prices for which people can buy computing power, this incentivization structure places a decentralized throttle on massive price pumps.”
Note: while fuel may be somewhat shielded from the general swaying movements of the crypto market, it will still have to reflect the changing prices of electricity, internet power and hardware costs. According to the green paper, significant testing has already been carried out on basic consumer hardware such as the Raspberry Pi – a $35 dollar piece if kit that apparently handled fifty simultaneous Holo apps at one time.
Competition, Regulation and KYC
While hosting prices will have a base value, the market value of fuel will be dictated by competing hosters on the network, each seeking to loan out Holo fuel for the lowest profitable price.
After a period of three months on the network, a credit rating will be formed based on your overall activity, thus introducing a reputation system among loaners and loanees. This calls for more personal information from users, likely enough to comply with KYC regulations:
“At this point I want to point out that while this requires the removal of anonymity from hosts, that is needed anyway to comply with global AML/KYC regulations.”
The Holo documentation is refreshing in that it refrains from making bold promises or predictions. Instead, we find a four-point checklist which details some of the reasons why Holo might fail. Briefly summarized:
“ 1) Something better beats us to market
2) We make it to market, but an unforeseen bug/failure negatively impacts the brand
3) We fail to deliver on ICO promises
4) Holo arrives on market, but the user base isn’t ready to leave existing centralized services…”
The closed alpha testnet is scheduled to get underway this month, although a specific date hasn’t been named. With three major steps between closed alpha and beta mainnet still to be taken, HOT holders probably won’t have to pay attention for at least the next six months.
The HOT:fuel swap will be open for six months after the launch of the beta-net, according to this January announcement.
Holo Price – HOT/USD
In the day leading up to Feb 1st, HOT climbed 30% in value, from the daily low of $0.001002 up to $0.001302.
Weekly gains now stand at 36%, but most of the recent growth came in the first three weeks of January. A low of $0.000435 at the start of the month climbed all the way to a peak of $0.001627 by Monday, Jan 28th – marking 274% monthly gains at the time.
The market plunge on the same afternoon wiped billions from the global market cap, and swiped 37.5% from the value of Holochain. That was only a few days ago at time of writing, and it took less than a day for Holo to return to its old north-bound pattern.
Over 82% of HOT’s daily trades came from Binance alone, via the HOT/BTC and HOT/ETH pairs. Daily volumes in the range of $17 million are a fraction of the close to $50 million recorded earlier in the week – a near four-month high at the time.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.