Bonded Holdings Agreement (BHA)
From our time in this space we have all witnessed or been victims 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.
The repercussions of a project rugging are so much greater in the instance where projects run an IDO (initial dex offering) as they first sell their tokens for XRP, before typically having a large proportion of the maximum supply of the token issued witheld, which they then also dump on the market once the token has gone through price discovery, further allowing them to fill their coffers before they cut and run leaving those that put their faith in them at a loss.
Wouldn’t it be great if new projects starting up had the means to offer potential investors the added security of being able to demonstrate that a good deal of the total supply of the issued token is vested through a trusted third party for a set period of time.
This is where Treasury XRPL’s Bonded Holdings Agreement (BHA) come in. 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.
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.
BHA’s 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.
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 PDF NFTs on the blockchain for public record.
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 that supply is only made available to the project as and when it is necessary.
In this example a BHA could 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
In this example a total of 46% could be secured through a BHA and released as per the vesting schedule.
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Contact us today so we can discuss how a BHA can work for you and your project.