Huobi’s new voting rules not sitting well with supernodes

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Last Friday, Huobi published new rules for its HADAX cryptocurrency exchange in a paper called “HADAX Super Nodes and Voting Rules Updates and Subsequent Arrangements.” The paper specifies that two separate groups of funds will be used to decide on which new projects are listed on the exchange, a move that didn’t go over well with the platform’s so-called supernodes.

The Singapore-based company introduced a concept called a “standing node,” a node that would be operated by a large venture capital firms. So far, Huobi planned to invite 14 such firms, including Draper Dragon, Unity Venture, ZhenFund and FBG. There will also be 31 “selected nodes,” which are chosen through a careful review process based following the submission of an application. Selected nodes are smaller than standing nodes, and specifically smaller venture capital firms that target cryptocurrency investments only, such as BlockVC, Node Capital and DFund.

According to the paper, Huobi stated, “All projects for the public voting list must be supported by a Standing Node and projects that were not supported by any standing nodes will be removed from the list and votes will be refunded.” As a result, standard nodes have a greater amount of pull on which tokens will be added to the HADAX exchange, and this has caught the ire of some of Huobi’s supernodes.

Several supernode operators have already threatened to quit working with Huobi, taking to social media to voice their concerns in terms that leave no doubt as to how they feel. Supernode operator Du Jun, who founded Node Capital and was also a co-founder of Huobi, posted his views on his WeChat channel, stating succinctly, “Fuck the HADAX operation team.”

Du Jun was joined by a few other companies who had been operating as supernodes, including Bixin Capital and Dfund. They all expressed concerns that the decision was “discriminative and authoritarian,” and that it was a slap in the face that diminished their positions as supernodes.

After the outcry, Huobi co-founder and CEO Li Lin jumped on his WeChat channel to clear the air, saying that the move was taken only to ensure the quality of offerings on the exchange. He said, “I apologize for not having effectively communicated with supernodes before publishing our new decision…. We understand that some selected nodes feel disrespected or their branding is hurt, which led to their respective responses. We build collaborations based on a win-win purpose. Partnership or not is always a free market choice. Huobi always opens its gate for partners. But HADAX must be completely revamped and we will have another major upgrade in July. In regardless of what model it will take, we think being responsible for users is of utmost importance.”

Due in part to the fact that the rules are new, Huobi has decided to postpone the next round of voting for now. In a statement on the company’s website, the company said, “Due to the participation of new nodes, the HADAX operating team is still working hard to provide better autonomy plan for the community, and the rules are still being discussed intensively, taking into account the forward compatibility issue. Therefore, HADAX will delay the opening of the 1st round of the 4th phase of voting.”

While it certainly takes time to adjust to any new policy, the fact that the supernodes unequivocally voiced their concerns probably has something to do with the postponement. It should be interesting to see how Huobi now responds.