# HEY tokenomics

The HEY token serves our community’s best interests, as it redistributes revenue to active, reliable network members.

# Objectives of the HEY Token

### Create a profit-sharing system

Currently, a handful of powerful players own ⅕ of the global advertising revenue. Even as they reap all financial rewards, their business model relies on users to create and share their online advertising content for free.

There are a scattering of exceptions to this rule. Influencers from platforms like Youtube and Spotify do manage to earn profit from the content they create thanks to distribution systems that benefit most active users of the platforms. With the HEY token, our goal is to follow this model—to redistribute revenue so that users get a larger slice of advertising income.

### Align user interests and stimulate community growth

The token-revenue link makes it easier for everyone to agree on a shared goal: network growth and development. Our team and users are all bound together to work toward HEY’s long-term success. We know valuable content is key to users engagement with the app, as well as token holders' revenue generation. And yes, it is considerably easier to progress when everyone’s interests are aligned.

### Build value

The HEY token’s value is intrinsically linked to our revenue model. By buying a token, you pre-order an ad placement. The more users we have, the wider your ad’s reach expands. The wider your reach, the more valuable the token gets. You may also choose to resell your tokens to advertisers on cryptocurrency exchange platforms.

# Identifying the Key Actors and Components

Before defining expected token value, it is vital to understand all key stakeholders in the Hey ecosystem. Note that actors can embody more than one of the roles defined below.

### Exchange

An “exchange” is a platform on which token holders can trade HEY tokens.

### Users

A “user” is an individual who uses the Hey platform to create or consume content on the application. Within the application, a user gets rewarded for his/her positive behavior (creating quality content, inviting friends, etc) with HEY tokens. These tokens are initially stored on the user's sidechain wallet, and can be redeemed anytime for mainchain tokens. Users are only able to transfer tokens to their mainchain wallets and exchange platforms when the value of their HEY tokens exceeds the transaction cost.

### Pool

The “pool” is the reserve of HEY tokens used to remunerate platform users, incentivising them to be active and create quality content. A percentage of the token pool is distributed among users on a regular basis. As advertisers begin to purchase ad placement on the platform, the tokens with which they purchased the ad will be re-entered into the pool.

### Token Holder

A “token holder” is an individual who holds HEY tokens outside of the Hey application. These tokens might have been acquired through the Initial Coin Offering (ICO), trading on exchange platforms, or via the withdrawal of tokens from a user account.

An “advertiser” is an individual who makes use of the Hey platform to publish targeted content.

# Objectives and Expectations of the Key Actors

Each key actor identified in the previous section has different expectations of what value the platform and its tokens should bring them. Understanding these differences is crucial in order to structure the system.

### Users

Hey users gain access to an interactive community present on all web pages. Their peers help deliver relevant, high-quality information, answers to questions, recommendations, and warnings. Additionally, a reward system is set in place in order to incentivize users to interact with each other and drive community growth: users earn HEY tokens in return for valuable content creation. These tokens can then be transferred to an external wallet and traded on exchange platforms. Alternatively, people who do not wish to use tokens in such a fashion can trade them for promotions (e.g. discounts on online purchases).

### Token Holder

The objective of a token holder is to invest in the growth of the platform and therefore see an increase in the value of the HEY token. Meanwhile, he might trade tokens on exchange platforms, which will influence the value of a HEY token both in the cryptocurrency (Bitcoin, Ether, etc) and fiat currency (Euro, Dollar, etc) spheres.

The objective of an advertiser is to deliver content to a particular audience through a given medium. In the case of Hey, advertisers have the opportunity to reach a very specific audience by analyzing the web content they are viewing. Advertisers pay to print ads on a fixed number of pages and/or to reach a target number of users.

# Usage and Value of the HEY Token

With the objectives and expectations of various stakeholders in mind, we have defined the use of HEY tokens as follows:

“The HEY token grants token holders the right to print content on the platform until it has been viewed a fixed number of times. Token value, in this sense–that is, how many page views a HEY token amounts to–will be directly proportional to the number of users on the platform.”

Based on the definition above, one can make a direct link between the value of a HEY token and the potential to advertise content to the community. By offering a fixed number of HEY tokens at launch, the number of page views purchasable per token will increase along with the size of the community.

In order to demonstrate this value increase, consider the following example. Let’s say that Hey offers 1,000 tokens at launch, at which time the community consists of 10,000 users, all of whom visit 10 pages per day. In this scenario, we total 100,000 page views per day. If 1 HEY token grants access to 1 out of 1,000 of the total daily page views, then 1 token is worth 100 daily views. If the community doubles in size, 1 token becomes equivalent to 200 page views. If the community triples, 1 token is worth 300 page views. The token’s worth, then, grows proportionally to the community’s size.

### Defining the Value of the HEY Token

In order to compute the proportional growth of the token’s value, a formula should prove the most straightforward. The relationship between community size and token growth is defined as follows:

$HEY(t) = f(t) / T$

where f(t) is a function of the number of page views at a day t, and T is the total number of tokens which have been offered.

### Function f(t)

In order to not make public sensitive information about the usage of the Hey platform, the function f is defined as a weighted sum of the following parameters ρi : number of daily page views during the last week, number of users, etc.

$f(t) = ∑ ⍵i ρi$

The weights ⍵i are invariant over time ensuring that the value of the HEY token is not arbitrarily defined.

# Interactions between Key Actors and Components

Now that the key actors and components of they Hey platform, as well as usage of the HEY token, have been defined, it is possible to analyze their interactions. These are shown in the Figure below.

When advertisers wish to print content on pages, they use the Hey platform to buy advertising space by exchanging their tokens against a given number of page views, as defined in the previous section and illustrated via the purple arrow on the Figure above. In case the advertiser doesn’t hold HEY tokens at the time of the transaction, he/she has the possibility to pay upfront using conventional currencies. The platform will automatically conduct a transaction that exchanges the conventional currency with HEY tokens. These tokens will be the official currency used to purchase the advertisement. This process is outlined via pink bi-directional arrows between “Hey” and “Exchanges” on the Figure above.

The payer’s account will then be credited with a set number of page views equal to the value of the exchanged tokens on the day of the exchange. This credit will not fluctuate over time, as the purchase is a one-time, fixed transaction–any increase or decrease in token value, then, will not impact a past purchase.

### Redistribution Process

The tokens that Hey collects by selling ads are split into two parts. The first portion, which accounts for 50% of tokens, is sold on exchanges in order to make the tokens publicly available once more. The resale of these tokens is what will allow us to pay our developers and other internal team to keep the platform alive. This relocation of tokens is demonstrated via pink bi-directional arrows between “Hey” and “Exchanges” on the above Figure.

The second portion of tokens, which accounts for the remaining 50% of advertising revenue, is placed in the pool and is redistributed to users according to platform engagement. These redistributed tokens are stored in users’ Hey sidechain Wallets (defined below)–illustrated by dark blue arrows on the above Figure.

### Hey Wallets

Tokens earned by users on the platform are stored in wallets on the sidechain. When a user has accumulated a number of tokens that exceeds transaction costs, he/she is given the opportunity to transfer them to his/her mainchain wallet. Here, he/she can exchange HEY tokens as with any other cryptocurrency. Users who are not interested in this functionality can exchange their tokens for promotions and additional in-app features, as outlined via purple arrows on the above Figure.

# Redistribution Process Deep-Dive

## Objectives and Challenges of the Process

The purpose of the revenues redistribution process is to foster user engagement in the Hey ecosystem by redistributing to them a fair share of revenues derived from ads sold and displayed in the application. In setting the rules and parameters governing this distribution, one has to account for the following challenges:

• Early adopters of the platform should be generously incentivized for kick-starting the community.

• Users joining at a later stage should also be given a chance to earn their fair share of rewards.

• The process should be as transparent and assessable as possible in order to enable future adoption of a more decentralized system (Blockchain/smart contract-based).

• The number of tokens distributed should never completely deplete the pool.

• The number of tokens distributed per user should allow the most valuable contributor to generate income on par with other social engagement activities (e.g. blogging and vlogging) in order to provide an incentive to use Hey as opposed to other platforms.

• Token distribution should not attract specialized bounty hunters, as we believe such actors have no real attachment to the long-term success of the community.

## Key Aspects of the Process

Considering the above challenges, the Hey team has devised a redistribution scheme based on the following principles:

### Karma as proxies for reputation and tokens

When Hey users gets recognized by the community for their contributions, they will not immediately receive tokens as a reward. Instead, they will first receive a certain number of Karma points, which will function as a direct indicator of their reputations in the community. Karma points are non-transferrable and do not expire, but rather accumulate over time to improve member reputations and therefore their number of tokens received. How to earn Karma points is outlined later on.

### Proportional, periodic token distribution

At the end of every period (typically 24h), the Distributor (the system in charge of distribution) computes how many Karma points have been earned by each user during the last period. Once computed, the total payout of tokens sent by the system will be spread across users proportionally to Karma earned during that period.

This demonstrates the importance of using total Karma points to calculate token distribution, rather than distributing directly after each like, comment, and other interaction. If tokens were distributed immediately after each recognition by the community, the token pool could be depleted too quickly, leaving no tokens left to reward later users. Using Karma points allows us to make sure that the total payout remains stable whatever the users' activities. Each user can earn as many token points as they'd like; at the end of the 24h period, the Distributor will distribute a set number of tokens proportionally among all users who have earned Karma points. This ensures predictable tokenomics. This system of distribution also fosters user engagement in an opportunistic way: the fewer active users there are on a given day, the more payout will be available for those active (as they represent a bigger proportion of Karma points earned and there are fewer users to distribute to).

### Demand-invariant number of tokens for payout

In order to make user rewarding as fair and transparent as possible for the community, we will maintain a token payout that will not vary based on user demand. That is, the payout will not be directly influenced by the number of users active on the platform. We fear that conducting payout based on number of users active during a certain period would corrupt user activities, as they may artificially inflate the degree of engagement to increase payout.

Rather than using a demand-driven model, the payout will begin with a fixed number of tokens (see corresponding section below) and will ultimately evolve into a supply-driven model. In the supply-driven model, the number of tokens available for payout ultimately depends on the number of tokens contributed to the pool from advertising sales.

Given that the HEY token value is proportional to the number of users on the platform, the token usage value should grow with a rate very similar to that of the Hey community. Even as the number of users grows—and thus the competition for the payout reward—the mean payout per user should more or less retain its value when converted into usage (that is, ads impressions on the Hey platform). While we cannot promise perfectly linear growth in token value, we can do so in considering usage value. Consider ad purchasing:

1. The daily sidechain tokens payout is set at 100, and each token has a certain value X based on the number of users on the Hey platform (explained earlier in this document) - let's say each token grants its holder the right to print an ad for 10 viewers.

2. A small Hey community of 10 users is granted a payout based on their Karma points earned. For simplicity's sake, let's assume all users earned the same number of Karma points. In this case, each user is granted 10 tokens.

3. When converted to their usage value, the tokens of each holder would grant her the right to print 10 x 10 = 100 ad views.

4. The Hey community begins to grow up until a new payout period. For now, let's say it's one month later. There are now 100 users in the community. Let's assume again that all users earn the same number of Karma points. In this case, each user is now granted 1 token.

5. Because the Hey users community has grown tenfold, each ad that was previously purchasable for 1 token now has a viewers reach that has grown tenfold as well.

6. When converted to their usage value, the 1 token payout of each user thus still grants them the right to print 1 x 100 = 100 ad views.

7. When converted into fiat currency, each one of these tokens would still have the same value (USDXX), under the assumption that token value grows with the community size.

While the number of HEY tokens earned during the payout process decreased from 10 to 1, the size of the Hey community has increased by 10, and thus the value of the token respectively. When converted to fiat currency, then, the initial 10 tokens and the 1 token offered a month later are worth the same in fiat currency.

This statement, of course, relies on the assumption that the ratio of passive users (those driving the token value, as they are the users who see advertisements) to active users (those receiving the payout when they produce original content on the platform) remains constant over time. We believe this will directionally hold true.

Regardless of the payout amount, we expect user engagement to grow organically. This is based on social mechanisms like peer recognition (materialized in part by Karma points).

### Dynamic Karma earnings tables

The root of the distribution system is the mechanism that grants Karma points to users based on recognition from the community for their content and social interactions (e.g. when they receive likes, follows, etc.). The number of Karma points distributed per action ultimately has no influence over subsequent token distribution, as this distribution depends on the relative number of Karma points earned by the users claiming the payout, which can change daily.

Hey's scale of Karma points distribution will be driven by 2 factors:

• As the community grows, points will initially be granted in order to encourage activities related to user acquisition. This will be carried out via mechanisms like referrals. Later, points will be awarded based on user retention through the contribution of qualitative content. That is, points will be awarded to those users who contribute valuable content to the platform, and so increase Hey's user retention. Regardless of the nature of each activity (user acquisition vs. user retention), the Hey team will ensure that engagement of any kind earns users Karma points.

• As new features are added, new opportunities to earn Karma will be incorporated (e.g., Troll Court participation), potentially shifting earnings balances accordingly.

The detailed Karma earnings table will be available at all times on each user's personal dashboard.

## Step-by-step Distribution Description

Taking the above into account, we can describe in detail a typical distribution round. Please note that all amounts mentioned in this section are purely illustrative. The actual Karma scales and payout amounts are specified in their respective sections of this document.

### 1. Karma earnings table

For demonstrative purposes, we'll suppose the following earnings table is true:

 Activity Karma payout Receive 1 like from another user 1 Karma Invite 1 new user to join the Hey community 2 Karma

### 2. User activity

Based on the table above, we can outline a hypothetical payout period. Assume we have 3 users on the platform: Alice, Bob, and Charles. During a given day, Alice gives a like to one of Charles' former posts, as well as to a post Bob just posted, and Bob invites David to join Hey. As a consequence, the Karma balance at the end of the day will look like this:

 User New Karma earned Alice 0 Karma Bob 3 Karma (2 likes + 1 invite) Charles 1 Karma (1 like) David 0 Karma

### 3. Payout distribution

Once Karma points have been allocated, payout distribution can be executed. If 100 HEY tokens are reserved for this day's payout, then tokens will be apportioned as follows:

 User % of this day's Karma points HEY tokens payout Alice 0 0 HEY Bob 75 75 HEY Charles 25 25 HEY David 0 0 HEY

### 4. New Karma balances reset and new period begins

After the tokens have been allocated, the day's earned Karma points are added to each user's total Karma balance, which will reflect their improved reputations on the platform. Concurrently, their daily point balances are reset to zero to signal the start of the new period.

## Deriving the Payout Amount

### General approach

Setting the periodic (daily) payout amount requires striking a delicate balance between short- and long-term objectives. On one hand, Hey must provide sufficient payout 'today' in order to reward early adopters and motivate them to kick-start the community. On the other hand, we must ensure that the project remains economically viable as the community expands over the long term. All this while taking into consideration the uncertainty of timing—that is, when user adoption and ad income will expand and at what rate.