Executive Summary:

Evolving from a staking-driven model to one that prioritizes growth.
Improved revenue distribution model, focused on long-term growth.
Adjusted token liquidity dynamics to enable more favourable trading dynamics.

Houdini Swap: A New Era of Growth and Value Creation

As the leading cross-chain liquidity aggregator with compliant crypto privacy solutions, we’ve achieved remarkable milestones, including becoming a top 40 revenue-generating project in crypto. However, as we continue to grow, we must evolve to ensure long-term sustainability and ensure our capital is allocated in ways that create real value across our entire ecosystem.

During nearly 100 hours spent in strategy sessions to start off our year, it became pretty clear that the current staking model is not working.

Staking was designed based on two fundamental assumptions. Staking would:

Convert existing holders into stakers, reducing on-market supply.
Increase $LOCK token demand as people FOMO’d into staking. Revenue growth drove staking revenues and with it staking yields. The assumption was that new holders would buy $LOCK to take advantage of very high but fully funded yields.

We were confident our assumption about our staking model would work out, especially given our rapid growth in revenues. We were wrong. The wake-up call was when APYs went to 70% and then shot to 169% and nothing happened. The old adage “assume will make an ass of you and me” held true but this time it applied just to us.

Staking by the Numbers:

Total net staked principal: 19M+ tokens.
No significant increase in net staked principal since July 2024.
444 wallets currently staking.
319 wallets have exited staking permanently.
9M tokens in the staking contract bought back and issued as rewards.
APYs peaked at 160%, yet net staking didn’t increase.

Our stakers have supported the project since day 1, which we deeply value and appreciate and in return the staking program rewarded them handsomely in return. However, for where we are now, staking no longer works. It is not driving holding and it is not driving user growth or retention. With rewards ballooning to un-godly amounts, allocating hundreds of thousands per month to a narrow group of stakers, it’s now clear that a change is needed. To not do so is poor capital allocation strategy. It’s time to allocate this capital towards driving user growth into the next stratosphere and to reward our users rather than stakers.

Our total dollar spend on marketing for user growth since Houdini Swap first started is less than $10,000. We’ve growth-hacked our way to where we are but it is no longer enough for where we are going. This marks the dawn of a new era.

The New Model: A Growth and User Focus

Effective immediately, our revenue distribution model will be:

10% to staking; a token amount to reward loyal holders.
40% to buyback and burn; a mechanism to reduce supply and reward all token holders.
50% to treasury and growth initiatives; to fuel growth marketing and ecosystem expansion.

All staked tokens and accumulated rewards will be claimable on new shorter withdrawal terms of 14 days. Tokens that were unstaked more than 14 days prior prior to Feb 10th will be able to be claimed immediately. Tokens that were unstaked less than 14 days prior to Feb 10th will be adjusted to fit the new 14 day notice period e.g. if 9 days ago, then tokens can be claimed after 5 more days.

Buyback and Burn: New Token Value Creation

The buyback and burn mechanism is a new element in our revenue distribution. Allocating 40% of revenue to buybacks permanently removes tokens from circulation. It is simple to explain and understand which improves clarity for how token value is created through a deflationary effect benefitting all holders.

Here’s how it works:

BTC commissions from the prior week are converted to SOL.
SOL is used to buy back $LOCK tokens, which are then accumulated and ultimately burned in the following week on ETH mainnet.

Treasury Allocation and Growth Marketing: Fueling the Future

With 50% of revenue now allocated to the treasury, we’re doubling down on growth. Our goal is to supercharge adoption, onboard the next 100,000 users, and position Houdini Swap as the front-end for crypto in 2025.

This funding will support an aggressive marketing program to supercharge user growth and with it revenues and buybacks. We’re out to embed Houdini Swap and $LOCK into millions of minds which will also drive the expansion of our entire ecosystem, and the high value partnerships and integrations that come with it which will further supercharge users, volume and revenue.

We will drive network type effects by creating a transactional connection between users who swap and those that hold $LOCK. Our ~10,000 weekly users will soon deeply understand the connection between $LOCK and the swap platform. All of this will be enabled by building the Public Solana Marketing Wallet.

Here’s how it works:

BTC commissions from the prior week are converted to SOL.
The 50% of SOL that is not used for buybacks is converted into USDC-SOL
USDC-SOL is sent to the Public Solana Marketing Wallet to fund growth initiatives.

Liquidity Profile: Simplifying for Token Success

We’ve rethought our approach to liquidity management. Last year, we experimented with a firm called Arrakis, which enabled dynamic liquidity management. It was a complicated technique that boasted more efficient utilization of liquidity. . The efficiency was clear, but over time, it became so efficient that $LOCK basically became a stable coin. Time to shift things up so we’re making changes.

We studied the liquidity profiles of 10 leading billion dollar projects, modeled their dynamics when they were our size, and applied them to our token. The result? A “set it and forget it” approach that creates a freer and more dynamic market.

Key changes:

ETH and SOL pools: Carbon copies of each other.
Liquidity range: V2-style pool inside the band of $0.05 to $5.00.

This new model will introduce more volatility but also more opportunities for buying and selling and with it greater trading volumes. Liquidity is no longer over-managed, it is now about simplicity and long-term success.

Conclusion: A Bold New Chapter

This is a pivotal moment for Houdini Swap, your trusted privacy swap. We’re evolving from a staking-driven model to one that prioritizes growth. By reallocating revenue to burns, and growth initiatives, we’re laying the foundation for our next phase, one we intend to be our most impressive yet. We’re out to supercharge our user community and together we’ll build an ecosystem that rewards all you, drives adoption and cements Houdini Swap as the front-end for crypto.

Let’s make more magic happen.

— The Houdini Swap Team