$HALO: The Charitable Token — part 2

A desirable token possesses two key attributes:

1) It offers utility: using it will create clear and timely value

2) It enables governance: the ability to vote on decisions that will shape a project’s future

Here’s how $HALO works.

Imagine yourself as a donor. You’d like to make a donation to charity. Maybe you see pain in the world and want to help out. Maybe you’re looking for tax advantages. Maybe you’ve made so much money on $LUNA that you’d like to give back.

First, you select a charity from Angel Protocol’s charity marketplace. Let’s say that you’d like to help power life-saving water purification systems, provide education, and enable access to communities without electricity.

So, you select the Solar Electric Light Fund (SELF). Then, you make a tax-deductible $500 donation. Angel Protocol’s smart contracts manage your donation — US dollars, Korean won, or any other fiat or crypto-currency; purchase 500 $UST stablecoins; and deposit those stablecoins into SELF’s charitable account. (For more on why Angel uses UST, go here.)

From there, three things happen:

1. Your $500 donation goes into a charitable endowment that will both grow in perpetuity and provide support for SELF today, thanks to the behind-the-scenes magic of Anchor Protocol. (Want to learn more about Anchor Protocol and how it works? Go here.)
2. Your donation — like every other donation flooding into Angel Protocol — creates new demand for $UST.
3. Last but not least: you receive $HALO tokens from Angel Protocol’s donation matching program. 30% of available $HALO is dedicated to this program, which will help bootstrap charitable giving as Angel expands to new charities and markets.

The story could end here. You could hold onto that $HALO, or sell it on a secondary market. But you have another option: staking that $HALO, i.e. locking it up with a charity in exchange for “charity shares” allocated according to a bonding curve that determines the correct ratio of shares to donation.

These charity shares provide numerous benefits. For example, they include the ability to boost a charity’s visibility on Angel’s charity marketplace as part of a ‘charitable index’ — meaning that your donation to a favorite charity makes it easier for others to find and donate to that charity as well. These indexes represent an easy avenue for donors who wish to promote a broad goal, such as climate action or poverty reduction, and are based upon the 17 UN sustainable Development Goals.

For example: if donors make gifts to the Renewable Energy Index, the Solar Electric Light Fund would receive a percentage of each and every donation, as long as it was a member of that index.

$HALO holders also receive a percentage of the yield from whichever charity they stake with. This is the foundation of $HALO’s value. Let’s explore exactly what it means.

Figure 1. $HALO Staking & Charity Shares

Value Flow diagram

As stated, each charitable endowment produces yield via the Anchor Protocol. To explore how that yield rewards stakers, let’s imagine a specific charity, which we’ll call “Charity A”. (You’ll recall from our litepaper that $HALO holders can select a charity and deposit $HALO into the charity’s bonding curve, in exchange for a Charity Share. These Charity Shares can be redeemed for $HALO at any time, subject to the standard 21-day unstaking period).

When donors give to Charity A, those donations flow into Charity A’s endowment, where they earn a yield. 90% of that yield goes to Charity A, which reinvests some of it in the endowment and uses the rest for its operating expenses.

Half of the remaining 10% yield — 5% of Charity A’s total endowment yield — is used to reward those who stake $HALO in Charity A. This 5% allocation goes to purchasing $HALO tokens on the open market. The purchased $HALO is then deposited into the bonding curve for Charity A.

When this occurs, the $HALO is exchanged for Charity Shares, which are subsequently burned. As a result, the remaining Charity Shares can be redeemed for more $HALO than before the burn. In other words: by depositing $HALO into the Charity A bonding curve, the remaining shares increase in value — they can be exchanged for more $HALO.

In sum: part of the yield that each charitable endowment generates goes to reward those who have staked $HALO with that charity.

In article 3 , we discuss $HALO’s utility.