The Hydro team received funding in January. This is our second quarterly report and you can find the first one here. Since April, we’ve been sharing weekly product updates in our Telegram channel and weekly growth reports with Interchain Labs.
Real-time reporting is available on our /metrics page. Below is also a top-line summary:
| Value of deployments | 1,683,000 ATOM |
|---|---|
| Number of deployments | 20 |
| Number of bids | 28 |
| Number of protocols | 12 |
These numbers only include 3 rounds (6 to 8)
These figures have remained steady over the last few rounds. We believe they set a baseline for what Hydro is able to generate under difficult conditions (self-imposed low risk tolerance, limited economic activity in Cosmos and challenging market conditions). That said, the latest round (8) had 13 bids, surpassing our previous record of 12 bids achieved in round 5.
On the technical front, here’s what we delivered in Q2:
| Feature | Description |
|---|---|
| Stream | We built tooling to orchestrate Hydro programs, open-sourced Valence libraries for Mars, Elys, and Nolus and integrated deployment flows for Mars, Elys, Nolus and Osmosis. |
| Vortex | We finished the implementation of the first version, incl. a monitoring solution to ensure availability of liquidation data. We also developed a web-app to test Vortex parameters |
| Floodgate | We implemented a customizable whitelist system to enable different caps for different wallets as well as the ability to update lockup conditions over multiple phases. |
| Current | We worked with the Moonkitt team to integrate the Current marketplace, including the ability to transfer LST-based lockups and a web-app allowing users to buy & sell lockups. |
| Outposts | We removed Neutron’s dependencies to reuse the contract logic on outposts on other chains with a new architecture that allows these outposts to share a core set of contracts. |
| Web-app | We implemented a large number of performance & UI improvements with a focus on loading times and frequent data refresh to give users a real-time feel, particularly in the lock-up flow. |
| Mobile UI | We redesigned Hydro with mobile experience top of mind. This includes a full revamp of the bids pages, a restructured frontend/backend interface for faster load times. |
| Atomic bids | We implemented support for paired bids on two different liquidity buckets (e.g ATOM & USDC), the corresponding UI updates and a new deployment process with extra checks & risk analysis for atomic bids. |
| LST lockups | We designed and implemented a new architecture to allow for multiple tokens to be locked into one Hydro contract and developed integrations for stATOM & dATOM lockups. |
| Hub oversight | We implemented the ability for the Hub to control all of Hydro’s DAO (remove/add committee members, claw-back funds, release lockups, upgrade the Hydro smart contract etc.) |
The core team remains stable: 6 full-time members (5 product, 1 growth) working at 100% capacity, and 4 part-time (technical reviews, design, operations, finance) at 50% capacity. Hydro’s total Q2 expenditures amounted to $229,026.
Hydro is now fully independent from Informal. A new entity has been incorporated in the BVIs, and most employment contracts have been transferred. We opened a bank account in May and processed most June expenses from it.
During the quarter, Hydro also paid $150,801 via the Hydro Grant DAO. This number includes items that were started in Q1 and delivered in Q2 (it is also an estimate as we are waiting to receive final invoices from grantees)
| Grant | Description | Value |
|---|---|---|
| Hydro committee | Liquidity deployments & general advisory | $8,700.00 |
| Testing & security | Testing & audit analysis for 3rd party venues | $800.00 |
| Indexing & deployments | Liquidity deployments & indexing | $11,000.00 |
| Front-end refactor | Restructuring of the frontend / backend interface | $18,777.67 |
| Floodgate & LSTs | Wallet filtering and LST support | $26,413.92 |
| Valence libraries | Valence open source libraries & Stream integration | $21,589.49 |
| Vortex | Off-chain monitoring solution & simulation logic | $23,519.93 |
| Current | All NFT features in the Hydro contract & front-end | $40,000.00 |
The Hydro team has operated under budget over the past six months. Additionally, all rewards generated from Hydro deployments have been directed back into the Hydro treasury. If Hydro governance approves the use of these funds, we estimate that the current team may be able to continue operating at the same capacity for another 4 to 6 months without requiring additional funding from the Cosmos Hub (this estimate assumes an ATOM price above $4).
Our top priority remains becoming self-sufficient and reimbursing the Hub for our initial funding. Over the past 6 months, Hydro generated an approximate average of 5,000 ATOM per month in revenues (this is after the distribution of tributes to ATOM stakers). Within the current market conditions and with ATOM around $4, Hydro is roughly 4-5X away from breaking even, since our burn has been approximately at $110,000 per month.
- Approx $80,000 per month on the Hydro Team for the development of the core Hydro contracts, architecture & integration of all components, code reviews of deliverables etc.
- Approx $30,000 per month distributed via Hydro Grants to a handful of third party teams for the development of specific features
We believe we would be able to reduce the overall protocol costs by hiring more engineers on the Hydro team and reducing the budget of the Hydro Grants.
| Description | Budget |
|---|---|
| Sizing down the Hydro team and going into “slow mode” on the product side. We would continue to review & post bids, deploy funds, upgrade the core contract & improve the existing set of features (Current, Floodgate, Stream & Vortex v1) | $80K |
| Keeping the current Hydro team and contracting several of the engineers that have been working via Hydro Grants during the past two quarters full-time to continue building out Riptide, Inflow, Raft & Vortex v2 | $100K |
| Sizing up the current Hydro team to rebuild Hydro in Solidity and migrate the core contracts to the upcoming Hub EVM platform in parallel. We would also be able to integrate all of Hydro’s features with Eureka. | $120K |
| Scaling up the Hydro team further to do all the above, but also deploying Hydro outposts on multiple other chains to start new buckets of liquidity and pursue the ATOM market-maker vision aggressively | $140K |
We estimate that Hydro must scale to deploying approximately $30M in assets at a minimum 5% yield. Our plan to get there is anchored in three levers:
- Higher-risk deployments with voter-backed insurance. Riptide allows Hydro to access more profitable strategies, while protecting deposits with insurance provided by voters who put up their locked tokens as collateral. When these strategies perform well, voters earn a share of the upside. If they underperform, voters are penalized
- Non-ATOM liquidity buckets. Through Inflow and Hydro outposts, projects will be able to bid for liquidity not just in ATOM, but in stablecoins and other high-demand tokens. Inflow enables retail and institutional users to deposit into Hydro in fiat or crypto, while outposts with partner L1s allow them to seed token buckets directly into Hydro.
- Deployment expansion via IBC Eureka. Hydro can import and export liquidity across multiple ecosystems, allowing capital to be routed to wherever it earns the highest yield and increasing the number of protocols Hydro can access for deployments,
Over the past 6 months, we’ve built a solid operational and technical foundation. The goals and roadmap are clear and the team is ready to execute.