Maybe add some logic that causes more buying over a shorter period of time if the price goes lower. Having it kick in between 0.004 to 0.007.

[@7PAU...Zqrk](7PAU47SuWQwTBwdLi42m1RyCKAvfSPhf5MaYqGExtKzoZqrk-hydradx) Come to the dark side—we have cookies. And maybe a little chaos

I didn’t mind the 11days for the last ref so would have been happy if was 11days again but wanted to comment that it’s great to see that the feedback was listened to and the time extended this round.

[@Crane](7L1jebaeGNykbey5gZhZCD4PLVLtjPm5RKpKXRYV4NXsF6TM-hydradx) Like I commented above I agree the 11days was fine. I also would vote for the 3 batch starting before this batch has finished if the longer timeframe is proving to be a poor choice

[@Crane](7L1jebaeGNykbey5gZhZCD4PLVLtjPm5RKpKXRYV4NXsF6TM-hydradx)

explain.  persuade.  I'm listening. 

[@7JWv...EwfT](7JWvgjH7q6u3aGT9jcWf2s6q8R4fax7gQHwiVk949PpNEwfT-hydradx) [REDACTED] 

I am **against these buybacks**. 

As a marketing tool, the ‘Green candle strategy’ is untested, mainly, and an irresponsible use of protocol capital. 

Historical data is limited, and perfect analogies are even more so, but promotional buybacks like this tend only to create short-term gains. They appear ineffective at helping spark sustainable growth and are generally neutral or negative long-term. 

Try to find an example where a non-sustainable promotional buyback like ours resulted in growth. TRON, StakeLayer, DeepBrainChain, and TokenPay all tried promotional buybacks. Do you hold any of them today? Did you first learn about the overlooked gem 💎, CPChain, from their $2.5M buyback in 2018? Oh, you’ve never heard of CPC? Well, that would make sense, I hadn’t either and they don’t exist anymore. How is your Aragon portfolio since they announced their $1.6M buybacks? Wait waat?? The guy from LOTR has a cryptocurrency!? No wait, Aragorn != Aragon.. Our current buyback program follows the sustainable gold standard of MakerDAO, Binance Coin, OKB, and others. I see no evidence we should go beyond that, and anecdotal evidence we should not. 

These buybacks have an opportunity cost. Every H2O spent could have gone to development, partnerships, listings, integrations, strategic reserves, hackathons, ecosystem grants, targeted marketing, beneficial smart contracts, or interest earning liquidity provisioning. I read that a senior blockchain developer makes about $190k annually. With $1.75M we could hire more like dmoka, enthusistmartin, jak-pan, jvonasek, mrq, nohaappav, roznovjak, vgantchev, and vkulinich. Mayyyybe we could even afford another lolmcshizz. **Consider the opportunity cost of lost meme potential.** If I had someone else to DM constantly, Ben would be free to apply his talents. 

I also see some signaling risk in these buybacks. When I see startup projects buying their token above intrinsic value, I wonder if there’s underlying weakness and/or lack of confidence. While incessantly nitpicking the community on Discord, I have seen glimpses of fear and desperation. Though they may have just been afraid I would never shut up.. I also feel these buybacks signal to potential investors we lack proper foresight and planning. We sold HDX bonds less than a year ago for non-HDX assets (DOT). Now we are buying HDX with an asset backed mainly by DOT? The time to contract developers is fast approaching - will we sell HDX we just bought? 

In the long run, genuine innovation, efficiency, and strong product offerings will create sustainable value – promotional buybacks cannot achieve this and they undermine our longevity. We should be spending our capital on things of proven productive value. 

I have heard it argued: 

```“If we buy anything other than HDX with H2O, it’s harmful to our liquidity providers because there will be fewer tokens than what they supplied when they remove their liquidity - while arbitragers take profits”.``` 

For example, if we swap H2O for stablecoins, when liquidity providers remove their assets, they end up with fewer stablecoins and the small amount of H2O is worth less. Meanwhile, because there is realistically nowhere for HDX to be arbitraged, we can buy it without the excess H2O being dispersed across the omnipool (its price will increase relative to other assets in the omnipool). 

This argument fails to account for two things: 
1. HDX sold back to the omnipool also drains liquidity providers (think frontrunners, weak hands)
2. The treasury has the unique ability to beat all arbitrage competitors because it pays itself the priority fee. (We also can give treasury priority via code).

If you care about minimizing harm to liquidity providers but want to buy something with H2O, the optimal buy would be a proportional omnipool bag, unless you can guarantee no HDX would be sold back at higher prices. The treasury **cannot** protect liquidity providers from being drained by frontrunners and weak-handed HDX holders. We **can** protect them from arbitrage losses. 


If unsustainable promotional buybacks are what the community decides, I <ins>implore the community</ins> to consider implementing them more efficiently. A DAO is easy to front-run and our treasury capital is needlessly being transferred to **people who would harm the project if it means they can profit**. HDX involved in frontrunning drains our protocol owned liquidity and that of our liquidity providers. If more than $1.75M worth of HDX is sold back to the omnipool, our liquidity providers end up worse off than had we bought stables. Please consider allowing GC to implement the buybacks covertly to help minimize this waste of our capital and that of our liquidity providers. 

I think there is more to be said, but this is TLDR already. <3 <3 <3

Edit: I had hoped to keep this about buybacks being a poor use of capital without suggesting an alternative. Some will criticize any alternative I recommend, which will be used as ammunition against the point I want to make: <ins>buybacks are a mistake</ins>. With that said, I've had four people ask me what I think we should do. An individual whose opinion I value suggested offering no alternative is avoiding responsibility. 

So, though I know it will not be popular... 

Regardless of what we do, buying HDX, or anything else, our liquidity providers will have less of the asset they supplied. We can out arbitrage anyone, but that requires us to bring whatever we want to buy from off chain. Buying HDX obfuscates losses to liquidity providers by changing the middleman. It has the advantages but also disadvantages. If we pump price and add more HDX LP (which we almost certainly will), then there is a real risk that our liquidity providers get hit for more than just the 840k-ish (amount after taking fees, protocol liquidity, etc into account). 

**Here is what we should do**: Allow the Treasury to sell H2O at fair market value for stables via OTC or better yet a fancy OTC that can track fair value. If fancy OTC is too complicated, just let GC manage it. Some would like to hold an index asset, especially because the v35 upgrade left an H2O burn, meaning H2O's value will appreciate versus the onnipool from where it is now. Whatever doesn't get sold after whatever length of time the community finds reasonable (I am in no rush), we batch distribute across all liquidity providers and take the proportional fair value of their asset. This forces H2O on liquidity providers who do not want it, but it is the fairest choice and the choice of least harm - both to us and our liquidity providers. It would also show support of the ecosystem and give a new ETF product offering. 








[@Parakeet](7KejvRw4GZvVjFQEDefAsBRd9iaTjVeUWczB44Mgu8Bue8JW-hydradx) 

**Sustainability**.  I don't think this is a key factor to debate around,  right ?  We're not deciding whether to continue these buybacks into perpetuity,  we're deciding what to do with treasury H20 that we have currently.  These buybacks,  if they continue,  will stop once that H20 is exhausted ?

**Marketing/signalling**.  Also tangential.  You essentially agree that HDX is currently undervalued.  If so,  we should buy more.  Whatever marketing effect isn't important to that question ?  
- But to indulge this point directly,  buybacks are generally perceived as a company expressing confidence in its future.  The biggest companies in the world do it all the time.
    - This doesn't refute all your more specific/surgical points about the marketing/signalling 

**arbitrage+front-running**.  you actually describe solutions or partial-solutions to both those problems,  right ?

It seems like HDX buybacks,  as currently implemented,  is an action we can take **now,  which doesn't cost the team any time**,  so we're taking it.  The only problem with your solutions to the downsides is that they are _not_ implemented.

So the factors we're juggling are:

- doing something with H20 now or not
    - buying HDX or Stables
    - using H20 in some other way that you listed,  most/all of which will compete with team time spent on other work
- implementing buyback improvements vs. implementing other dev work




[@timbo_timboa](7MKPvLBQwWJggsbZFNu1Tk6LTYoFDxkzrVR1hWK7DzBSqGeJ-hydradx) 

I appreciate your reply and consistent thoughtfulness.

**@Sustainability** Yes, these buybacks will stop once the subset of H2O set aside is exhausted. If we were to continue spending capital, it would be worse in terms of harming our project’s ability to withstand hard times – but even doing one has a negative impact. However, I agree with the point I perceive you to be making: These buybacks are being considered a marketing ploy, not a sustainable approach moving forward. I don’t view our sustainability as ever being tangential – it is something we must consider in all situations. We are not sitting on a giant warchest, especially when $5-10M is removed for development soon. 

**@Marketing/signalling** I disagree that this is tangential, assuming I understood correctly. I think these buybacks are a marketing technique to attract new users. The anecdotal evidence I have come across suggests it may not be the best marketing approach. The signals we send to new potential investors matter. There is value in attracting more thoughtful investors who can understand the value of our product and help us continue to make intelligent decisions regarding our use of capital. 

Companies typically engage in buybacks when they have excess funds, the return on investment (ROI) for alternatives is believed to be lower, or the stock/token drops below fair valuation. Our project does not have excess funds, and the funds we do have are put to good use earning interest and deepening the Omnipool’s liquidity – making us more competitive. The ROI for startups is almost always better with money invested in growth and development. Can you find an example of an innovative startup buying shares in themselves without excess funding and above fair valuation? I have never seen such a thing from a serious company/project. That doesn’t mean it doesn’t happen and even if it doesn’t, it could still be a good idea. However, a study by Davidsson et al. (2009) found that small and medium-sized enterprises are more likely to achieve both high growth and high profitability when starting from a position of high profitability and low growth, rather than the other way around.

I agree, Hydration is undervalued compared to the valuations of so many useless crypto projects. However, I do not believe it’s as simple as, ```if you think HDX will go UP, treasury should acquire HDX```. The treasury is sitting on some two billion HDX. In my opinion, we do not need more HDX; we need more assets that can pay for our management fees, bug bounties, servers, and continued development and get us through hard times while avoiding sell pressure. 

Stock buybacks **can be either a signal of strength or weakness**, depending on the circumstances. When a financially healthy company repurchases shares because it sees them as undervalued and has no better use for the cash, it’s generally sending a message of confidence – and the market usually responds in kind with a higher stock price. Such buybacks can enhance shareholder value by increasing each investor’s stake in a profitable business. Conversely, when a company underinvests in itself or overstretches its finances to fund buybacks, it may be warning of trouble – an implication that management is more concerned with short-term metrics or that it lacks growth ideas. These cases often destroy value, as the underlying weakness eventually outweighs the temporary stock boost.

Companies also typically obfuscate the details in a way that DAOs cannot. A company might say something like ```Our Board has authorized the repurchase of up to XXX million shares (or XXX billion dollars) of our common stock over the next 12-24 months, subject to market conditions.``` Companies almost never advertise precisely what they will do in the way that decentralized governance must. Given that the community has trust in Galactic Council to behave ethically, we have the option to approve XX amount of H2O for them to spend at their discretion on buybacks. In my estimation, the cost of such an approach is minimal – but if others disagree, please say so and explain. 

**@arbitrage+front-running** Yes, I am offering what I believe are alternatives that are likely to improve issues of arbitrage and frontrunning partially. You aptly and intelligently point out that my alternatives require time and money to implement. The community should assess the benefits and costs of spending resources on a more efficient alternative. I have not talked to anyone who has done this, and I believe such options would be net beneficial. I would love to hear objective analysis suggesting otherwise and am entirely open to having my mind changed. 

I continue to see individuals say buying HDX is the only moral choice. Still, I have not heard anyone address the fact that selling HDX back into the Omnipool also hurts liquid providers, including the treasury LP. In discussions with community members before my Subsquare post, I have not seen anyone quantify or compare the impact of buying HDX versus stablecoins to liquidity providers. If we are going to have a discussion on what’s best, we need to consider both sides and the obvious indirect impacts.


[@Parakeet](7KejvRw4GZvVjFQEDefAsBRd9iaTjVeUWczB44Mgu8Bue8JW-hydradx) 

Thanks.

I think exploring your proposal and others (mcshizz floated a Hollar support fund in the OP) are more important than continuing these buybacks right now.

buyback： h2o -> hdx
H2O is an index of our liquid assets, which is a neutral indicator and more like a tool.
And hdx is the soul of our protocol, governance, etc.

So constantly buying and holding HDX is obviously a better thing, and this is a long-term process, don't take shortcuts.


Of course, when we need funds for development/marketing, we can also spend on HDX. We are not misers, we need to develop.




[@xupanweb3](7J44S3oFMw8UEoaTciaLm7nVWEVVEf4g1TCT8U5gisbCFjfB-hydradx) Treasury has a sizable warchest of its own protocol token when un-minted HDX is included. Buying HDX right now results in a transfer of wealth from the protocol to *`Frontrunners`*

If you want the treasury to hold more HDX, let's at least acquire it via OTC near intrinsic value. 

TLDR: 
![image.png](https://subsquare.infura-ipfs.io/ipfs/QmSovkd5a3PJ1nek8eTotGZUwC5pNamZw6czVVsj8QgqWc)


The first tranche of HDX buybacks with Treasury H2O is set to complete in the coming days - so this proposal, if passed, would initiate tranche 2 after a few day's break.

Feedback on the initial proposal (https://hydration.subsquare.io/referenda/15) indicated that HDX holders would prefer a slower schedule for the buybacks, so in this tranche I have doubled the number of periods between execution from `22` to `44`.

I will continue to propose these buybacks in small 10K tranches in order to allow for the strategy to shift over time - including whether a portion of these H2O should actually be reserved for a type of "HOLLAR defence fund" 👀

The specifics of the schedule are:

- Swap `10,000` H2O for HDX
    - `2.222` H2O per trade
    - every `44` blocks
- `1.5%` slippage limit
- `9` max retries
- estimated to last for `~22` days (there is currently some noticeable drift on Hydration block times, in reality this will likely extend by a few more days)

- HDX buybacks with Treasury H2O are happening in small steps called tranches.
- The first tranche is almost done, and the second one will start soon.
- HDX holders wanted a slower schedule, so the time between buybacks has been doubled.
- Each tranche will swap 10,000 H2O for HDX.
- The swap will happen every 44 blocks with a small amount of H2O each time.
- There’s a limit on how much the price can change (1.5% slippage).
- The process will take about 22 days, but it might take a little longer.

call

Executed

Submitted

DecisionDepositPlaced

DecisionStarted

ConfirmStarted

Confirmed

treasurer

HDX buyback with Treasury H2O - Tranche 2

root

whitelisted_caller

referendum_canceller

referendum_killer

general_admin

spender

tipper

omnipool_admin

economic_parameters

Origin able to dispatch a whitelisted call.

 Origin for spending very high amounts of HDX(<= 50M HDX) from the treasury as well as generally administering it.

Origin able to spend up to 2,222,222 HDX from the treasury at once.

Origin able to spend up to 50K HDX from the treasury at once.

Origin able to perform specific Omnipool-related actions.