What’s stopping decentralised finance from going mainstream? For many users, the answer is complexity, fragmented liquidity, and a lack of tools that work seamlessly together. Hydration Network is trying to fix that.
Built on Polkadot, this decentralised protocol brings trading, lending, and stablecoins under one roof. It removes the need to jump between platforms and solves common pain points like slippage, liquidity gaps, and governance centralisation.
With a focus on usability, security, and community involvement, Hydration is shaping up to be a core part of Polkadot’s DeFi ecosystem.
What is Hydration?
Hydration is a fully decentralised financial protocol designed to make DeFi easier to use and more efficient. As a Polkadot parachain, it takes advantage of shared security and native cross-chain communication to operate in a connected, scalable environment.
At the heart of Hydration is the Omnipool, a new kind of automated market maker. Rather than needing a separate pool for each trading pair, all supported assets are placed into a single shared pool.
This means users can trade one token for any other in a single transaction, cutting down on slippage and unnecessary steps.
For liquidity providers, the benefits are clear. Instead of contributing two assets, they can deposit just one, like DOT or USDT, and gain exposure to the entire pool.
The Omnipool handles the trading logic behind the scenes. This single-sided liquidity design lowers entry barriers and gives providers better capital efficiency.
Hydration is also serious about security. It has undergone external audits, runs a bug bounty programme, and includes safety features like circuit breakers and liquidity caps.
On top of that, the platform’s design helps reduce impermanent loss, giving liquidity providers a more stable experience.
What Are Its Products?
Hydration offers a full suite of tools that cover trading, lending, staking, and (soon) stablecoins. The Omnipool is the foundation of its trading system. It combines features from different trading mechanisms to give users the best swap prices with minimal slippage.
Users can also automate their trades using on-chain dollar-cost averaging or place limit orders directly on the platform. For larger trades or more privacy, there’s an over-the-counter option as well.
Lending and borrowing are powered by the Hydration Money Market, which is based on a fork of AAVE v3. Users can deposit assets to earn interest or borrow by providing collateral. Interest rates adjust automatically depending on market conditions.
One unique feature is how Hydration handles liquidations. On most general-purpose blockchains, liquidations can be delayed due to network congestion, increasing the risk for lenders.
On Hydration, which controls its block production, liquidations are prioritised at the start of every block. This ensures they happen quickly and reliably, even during times of market volatility.
Hydration also manages to keep more value within the protocol. When a liquidation takes place, the platform can use its flash loans to repay the borrower’s debt.
It then sells the collateral and uses the profit to repay the loan. Any leftover value, what would normally be captured by external bots, is retained by the protocol and can be redistributed to HDX stakers through governance.
Staking is another core product. Users can lock up their HDX tokens to earn rewards, but they need to actively participate in governance to maximise returns. The more a user engages, by voting on referenda, for example, the faster their rewards become available.
If users try to claim rewards too early or without engagement, they receive only a small portion. The rest is returned to the reward pool and shared with more active participants.
Hydration also plans to introduce its own native stablecoin, called Hollar. Though not yet live, it is designed to complete the protocol’s ecosystem by tying together swaps, borrowing, and stable savings into one financial stack.
The HDX Token
HDX is the native token of the Hydration Network and plays several roles. It gives holders the ability to vote on governance decisions, claim protocol rewards, and participate in staking.
When Hydration launched, HDX had a maximum supply of 10 billion. However, this was later reduced through governance to 6.5 billion. As of now, around 2.6 billion HDX are in circulation.
Here’s how the initial token supply is distributed:
- 30.5% to Launch Participants (about 1.983 billion)
- 27.6% allocated to Growth (around 1.796 billion)
- 12.5% to Founders and Team (810 million)
- 10.6% to Investors (690 million)
- 7.6% to the HDX Crowdloan (about 494.6 million)
- 5.5% to the DAO Treasury (around 354.5 million)
- 3.9% to Collators (roughly 251.5 million)
- 1.9% to the BSX Crowdloan (about 120.7 million)
HDX rewards are distributed through staking, but it’s not a set-and-forget system. Rewards are subject to a bonding curve that rewards those who remain staked and actively participate in governance.
Users can claim a small portion of the rewards early, but the majority is unlocked only over time, especially for those who vote and use conviction multipliers. These multipliers lock tokens for a fixed period in exchange for more influence and faster reward unlocking.
This structure discourages passive staking and promotes an engaged community. It also ensures that staking rewards come from protocol revenue, not from inflation, making the system more sustainable in the long run.
The On-Chain Governance
Hydration is governed entirely on-chain. This means all decisions about protocol upgrades, treasury spending, and technical changes are made by HDX holders through transparent voting processes.
Anyone holding HDX can propose changes or vote on referenda. These proposals are discussed openly and passed or rejected based on community support. Votes use a conviction multiplier, meaning the longer you are willing to lock your tokens, the more weight your vote carries.
Governance participants fall into three main groups:
- Public: All HDX token holders. They can propose and vote on decisions.
- Technical Committee: A group of engineers appointed through community referenda. They ensure protocol stability and can take emergency actions, such as pausing certain assets or fast-tracking critical proposals.
- OpenGov: The overarching system through which proposals are submitted, voted on, and enacted.
The protocol’s Treasury is managed through the same governance system. It holds a large HDX reserve that can be used for growth initiatives, liquidity incentives, or integrations with other platforms.
Every use of treasury funds must be approved by the community, making Hydration a truly decentralised and transparent protocol.
Conclusion
Hydration Network is not just another DeFi project, it’s an attempt to simplify and strengthen the decentralised finance experience from the ground up.
With its Omnipool, lending platform, staking system, and future stablecoin, it offers a well-rounded set of tools that are deeply integrated.
The HDX token ties it all together, giving users both a stake in the protocol’s future and access to rewards. Its design choices, from internalised liquidations to non-inflationary staking, reflect a long-term view focused on sustainability and user control.
As Polkadot continues to grow, Hydration is likely to play a leading role in shaping its financial infrastructure.