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Hector Network

Hector Network was a (DAO) and ecosystem comprising the and its complimentary token, . [1][2]

In July 2023, the Hector Network community voted to enter into liquidation mode after the project reportedly lost $8 million worth of assets. This loss occurred when funds were removed from the treasury of the crypto bridge protocol, . [6]

Overview

Hector Network focused on creating solutions and cross-blockchain expansion. Projects within the Hector Network ecosystem ranged from services and platforms, gaming, marketplaces, , & hyper staking, decentralized bonds, governance, and more. [3]

The Hector Network was built on top of the Opera Chain ecosystem. Like Fantom, it used Opera Chain’s (DAG), which leveraged Fantom’s Lachesis Asynchronous Byzantine Fault Tolerance (aBFT) consensus algorithm. Hector Network was compatible with the Ethereum Virtual Machine (EVM), , and smart contracting languages Solidity and Vyper through its integration with the Fantom Opera Chain. This gave it the ability to integrate with a variety of Web3 applications across some EVM-compatible chains. [3][4]

Hector Network partnered with the Borussia Dortmund Football Club, and Binance Smart Chain, to pioneer a multichain ecosystem. [10]

History

In late 2021, the Foundation launched an initiative to boost the Fantom Opera Chain's growth through incentive grants. The program funded projects within the Fantom ecosystem based on governance consensus. In January 2022, Hector Network became a tier-3 project under the incentive grants program. [3]

Hector Network utilized the grant funding to develop and enhance rewards for the . TOR, a fully collateralized stablecoin, operates as a sister network to Hector. It plays a role in Hector Network's deflationary by positively impacting the price of the HEC token each time a TOR coin is minted. [2][3]

Technology

Hector Network employed Fantom’s Lachesis aBFT consensus mechanism to validate transactions and secure the chain. Lachesis, a unique implementation of Byzantine Fault Tolerance (BFT), was designed for applications requiring high throughput, rapid finality, and bank-grade security. [3]

The validator in Hector Network operated on a aBFT consensus, rewarding validators for executing required hashing algorithms and adding valid transactions to the chain's immutable ledger. Running a validator on Fantom’s Opera Chain, Hector Network secured its transactions and generated revenue through transaction fees ().

Additionally, Hector Network employed a Staking and Bonding system. Staking was used to secure the network and the HEC token, with users earning APR or APY in HEC when crypto was staked. Bonds on Hector Network served to raise funds for the treasury, providing users the opportunity to access discounted token purchases directly from the project in exchange for specific coins. Bonding rewards were paid in sHEC, and the tokens could be staked once fully vested. [4]

Hector Token (HEC)

The is the primary utility token for Hector Network, working alongside its counterpart, the . HEC, the world's first non-dilutive rebase token, is used for governance, staking, bonding, TOR tokens, , wrapping assets, and trading on the Hector DEX. This ensures that HEC holders can engage with the network without diluting the token's utility or value. [5]

was a stablecoin collateralized by the Hector Institute treasury with and and maintained stability through a dual layer of security. Native to the Fantom Opera chain, TOR facilitated cross-chain transactions and asset transfers. As an token, TOR was minted or redeemed based on conditions determined by TOR , designed to make HEC tokenomics deflationary and resist dilution. [3]

Tokenomics

Through community governance, the Hector Network community decided to establish a fixed supply cap for the HEC token. This involved adopting an emissions plan to carefully manage token minting, ensuring a capped supply while allowing strategic adjustments to the . [3]

Liquidation

In July 2023, Hector Network voted to liquidate its $16 million treasury and distribute the proceeds to HEC tokenholders. The Hector Network team’s decision came after the project reportedly lost $8 million worth of crypto assets after funds were mysteriously removed from the coffers of the crypto bridge protocol . [6][8]

“Hector Network has suffered significant damage to its ability to operate,” a community manager with the screen name MayoMyke wrote in the project’s Discord on July 14, 2023. [6]

Amidst the $16 million liquidation process, Hector Network’s official Discord server was shut down. Some investors feared the team engineered a hard — where a project’s funds are abruptly removed, abandoning investors with worthless tokens. [8]

Following collapse[7] which occurred on July 6, 2023, due to the detention of Multichain's CEO Zhaojun and his sister by Chinese police, the Hector Network community voted to liquidate the treasury and distribute the proceeds to HEC token holders. The redemption process for HEC tokens began on September 12, 2023, and concluded on December 31, 2023. The redemption process began in January 2024. [9]

However, on January 18, 2024, the Hector team announced on its website that there was a security breach when the protocol was redeeming token holders as part of the liquidation, and approximately USDC 2.7 Million was stolen on 15 January 2024. [2][12]

Hector Network explained that before the contract deployment, Hector Network engaged , a blockchain security firm, to conduct a thorough security analysis. [2][11][13]

"A production test transaction of the claim process was also successful. All assets were secured in a Redemption Vault prior to the launch of the production claim process. Despite these precautions, Hector Network’s system was compromised" - the website stated[2]

As a result of the breach, the team postponed the redemption process.

"Preliminarily, the redemption process is expected to resume when the investigation is complete and the redemption process has been fortified against further potential vulnerabilities. Hector Network is working tirelessly to address this, is committed to maintaining transparency throughout this process and will keep you updated on any developments" - the update concluded[2]

On February 19, 2024, a court order by the Eastern Caribbean Supreme Court appointed Mr Drury and Mr Pretlove of the firm, Interpath (BVI) Limited to take full custody of the Hector DAO treasury. According to announcements on the protocol's Telegram channel posted on February 19 and 21, 2024, the company has also taken control of the Hector DAO's social media channels to communicate with investors going forward. [14]
According to the Feb. 19 announcement,

“Mr Drury and and Mr Pretlove both of Interpath (BVI) Limited [...] were appointed by the Virgin Islands High Court (Commercial Division), Eastern Caribbean Supreme Court as joint and several interim receivers (the Receivers) over all of the assets held by or on behalf of Hector DAO.”[14]

“The Receivers have control of the communication channels of Hector Network and will provide more information as to the next steps and how Tokenholders can contact the Receivers to discuss any concerns and all aspects of their appointment,”[14]

Drury confirmed that Interpath has sole custody of Hector DAO’s treasury.

“All previous multi-signors have been removed from the old wallet and none are involved in the new wallet,” Drury said. “The multi-signors are employees of Interpath.”[15]

In addition, the post stated that Interpath will conduct an investigation into the January hack and attempt to recover investors’ funds. [15]

In March 2024, it was revealed that a group of investors under Newton AC/DC LP filed a lawsuit in the US to freeze the project’s funds. The lawsuit was filed days before Hector Network went into receivership. James Drury told DL News that the decision to appoint Interpath was taken without knowledge of the US court proceedings. Interpath says the lawsuit will come at a significant cost to Hector tokenholders. [16]

However, the investor group who initiated legal proceedings in the US says their actions are justified given the events that have unfolded in the Hector Network's ecosystem. The US lawsuit listed three defendants: Farooq Hassan, Hector DAO, and an unidentified co-respondent. Hassan is purportedly one of the Hector DAO principals who controlled the treasury assets. [16]

The suit also alleged that Hector DAO principals misspent treasury funds and failed to protect the project’s reserves from malicious exploits. As such, investors are left with only $9.3 million to share among themselves when the project was worth over $100 million in its heyday two years ago. The lawsuit is still ongoing. [16]

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Hector Network

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Edited On

March 18, 2024

Reason for edit:

added recent legal news

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