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Last updated: Aug 15, 2023
Honeyswap is a decentralized exchange deployed on the Gnosis chain and Polygon with plans to expand to other EVM-supporting networks and rollup solutions in the future. The DEX consists of liquidity pool contracts deployed to different Ethereum Virtual Machine (EVM) compatible chains, managed by the 1Hive community.
Honeyswap utilizes a multi-token model to manage its so-called global and local benefits. Here, global benefits refer to benefits derived from development, support, and maintenance work. These benefits are funded using Honey tokens from the 1Hive common liquidity pool. On the other hand, COMB tokens are used in the case of farming rewards, where benefits are localized to one supported chain. The token’s value is taken as a derivative of its trading volume on the supported chain. This farming incentive token is issued per network. For Gnosis, it is xCOMB, while for Polygon, it is pCOMB.
Honeyswap’s front-end is an open-source interface for trading and pooling liquidity. Furthermore, it also supports routing trades to third-party liquidity pools. Thus, using the dApp, according to Honeyswap’s claims, allows users to be sure that they are getting the best execution on their trades. Users can connect to Honeyswap from any supported chain and start interacting with the pools on that network.
To use the Honeyswap app, users must first set up their crypto wallet for the Gnosis network. Currently, the list of supported by Honeyswap wallets includes MetaMask, Coinbase Wallet, and any wallet supporting the WalletConnect protocol.
Users wishing to transfer ERC tokens from the Ethereum Mainnet to the Gnosis network can do so by utilizing one of the two bridges on the Gnosis network - xDai Bridge and OmniBridge. The former is used for transfers made from Ethereum to Gnosis, while the latter is used for vice versa operations. Once the right network is selected, users need to input their desired DAI/xDai values. After hitting the “Transfer” and “Continue” popups, the dApp opens up the user’s wallet from where they can adjust the gas fees, if necessary, and then hit “Confirm”. As soon as the transaction is confirmed, the tokens should appear in the user's wallet. Honeyswap fees are split as follows: 1/12 to Honey, 1/12 to the local Comb token for that chain, and 5/6 directly to the pool of liquidity providers facilitating the swap.
Yield farming in the 1Hive's universe is known as “honeycomb”. Users can earn additional rewards on their LP tokens by adding them to one of the project’s farms. To do so, they must unlock the farming interface by clicking the “Unlock Wallet” button in the HoneySwap dApp. Then, they must choose between types of farms, i.e., active, or inactive, add their LP tokens and confirm the transaction on their wallet. Staked tokens appear on the interface once the transaction is confirmed. Users can harvest the accumulated Honey anytime by clicking the Harvest button and confirming the transaction from their wallet. Honey is then transferred to the user's MetaMask wallet. After a June 2, 2021 update, users can farm at 1hive.io.
HNY holds critical importance in the 1Hive ecosystem, and its issuance and distribution are regulated by smart contracts. From an economic point of view, the native token's supply is managed by a policy, while the demand is influenced by participation in staking proposals. These proposals allocate and distribute Honey from the common pool to contributors. Productive allocation of Honey is said to increase its value as inflows to the common pool will eventually exceed outflows, resulting in demand outpacing supply. On the other hand, unproductive allocation has the opposite effect on the token's value since its circulating supply will increase without any corresponding increases in demand. Increasing the token’s value is one of the primary objectives of the system and its participants. Stakers need to hold Honey over time so that they can influence proposals and have a vested interest in supporting proposals that maximize the value of Honey. Contributors need the token to be a high-value asset so that there is a sustainable reward for their contributions.
HNY’s total supply keeps fluctuating since it is automatically minted and burned from the common pool reserves. The token supply adjustments follow a policy that mints HNY when the common pool balance dips below 30% of the total supply. Conversely, it burns HNY when the common pool balance exceeds 30% of the total supply. That way, the ratio between the circulating supply and the common pool reserves remains stable. The token distribution depends on the conviction voting process, which allows proposals to be created & considered simultaneously.
In May 2022, Honeyswap's front-end was hacked, leading transactions to malicious addresses. The Honeyswap team was unaware of the problem for two days, before identifying it on May 10, 2022. The next day, the DEX's team announced the recovery of the original Honeyswap domain. Careful estimates suggested that around $20,000 worth of digital assets were stolen due to this hack. Users who lost funds were reimbursed by the Honeyswap team.
According to an audit conducted by CertiK in 2021, an inaccuracy in the calculations performed for an event within the ReferralRewarder function was identified. Furthermore, the audit also found certain issues with calculating locked rewards. While some changes have been implemented to the contracts post-audit, core mechanisms are not changed yet. Hence, the audit's findings about the state of security of main contracts are still valid.
1Hive, the DAO responsible for issuing and distributing HNY tokens, isn’t exactly a company or a team. The DAO believes in “creating a free, fair, open, and humane future”, which is why there has never been a crowd sale to raise funds for managing the project’s operational costs. Since 1Hive is an open community, anyone can join and participate in its activities by checking out the onboarding calls on the platform’s Discord server.
1Hive has a Bug Bounty Program in which members can report bugs or any vulnerabilities in the smart contracts and earn as much as $40,000 in reward. Further details about this program can be found here.
Currently, Honeyswap’s list of partners and integrations includes CryptoKeK, DeHive, CoinGecko, LiquidityFolio, and CoinMarketCap. Honeyswap’s partnership with DeHive achieved two goals, which are the HNY token’s listing on the de-xDai Cluster and the inclusion of the Honeyswap exchange bar in the DeHive app with full built-in functionality.
Courtesy of the concept of conviction voting, users shape the future of all 1Hive projects, including Honeyswap. Brainstorming is always happening at the 1Hive forum. As of now, the DEX is intent on integrating new wallets and adding support for the Arbitrum network.
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