The FHM Protocol (originally FantOHM) is an elastic-supply reserve asset launched in October 2021. The FHM Protocol maintains a treasury that includes both stable and volatile assets built from bonds purchased during the early phase of the protocol. The FHM token is a receipt of the treasury. These assets are managed by the balance organization and are used for furthering the development of the protocol. As the treasury grows, the book value of this receipt will rise. The treasury is made up of a spread of Crypto assets as well as stakes in other business endeavors that the balance organization partakes in.
Value enters the system through bonding and FHM tokens are minted in returnBy bonding users deposit assets into the treasury and then an equivalent amount of the FHM token is minted. This in turn increases the total size of the treasury. Income from bonding is either used as a reserve or invested into other projects in the balance.
This FHM can either be staked in order to grow your percentage shareholding through staking rewards or sold on the open market.Staking is a mechanism to reward long-term holders of the FHM token by increasing their total shares in the protocol, growing their portion of the pie. It is in a sense an equity rebalancing mechanism skewed in favor of long-term holders.When a user stakes their FHM, they receive the equivalent amount of sFHM (1FHM = 1 sFHM). During the time this FHM is staked, the user will receive additional sFHM tokens which are paid out through a rebasing mechanism. As the rebases continue, each holder's sFHM total will increase. This sFHM can be unstaked at any time to give the user the equivalent amount of FHM tokens which can be sold on the open market or restaked.
Staking rewards paid out are derived from treasury income as well as revenue generated by treasury investments. A portion of these profits generated will be used to buy back tokens on the open market, which allows Balance to tune the rate of inflation either through burning those tokens or simply removing them from circulation. Both actions can help ensure that staking rewards paid out don’t excessively deflate the token price.
As treasury income increases, burn rates will eventually surpass staking rewards achieving a deflationary state for FHM. At this point, bonding will become more profitable. This creates a cycle of inflation and deflation that can be used to help meet the ever-changing needs of the Balance ecosystem and the role that FHM plays within it.We are moving into the next phase of growth and are excited to continue contributing to the Web3 Space, always returning value to the FHM holders.