Hermez Network Token

The Hermez Network Token (HEZ) has a significant history, particularly in its merger with Polygon. Here are the key points:

• Founding and Early Development: Hermez Network was founded on October 15, 2020, in Zug, Switzerland. It focused on scaling payments and token transfers on the Ethereum network using zero-knowledge (ZK) cryptography, aiming to reduce transaction costs and support community projects through its Proof-of-Donation mechanism.

• Merger with Polygon: In August 2021, Hermez Network merged with Polygon (formerly Matic Network) in a historic deal worth $250 million. This merger integrated Hermez's technology, solutions, team, and HEZ token into the Polygon ecosystem. HEZ token holders could swap their tokens for Polygon's native token, MATIC, at a ratio of 3.5 MATIC to 1 HEZ.

• Post-Merger Developments: After the merger, the HEZ token ceased to exist, and MATIC became the utility token for the Polygon Hermez zkRollup. The merged entity, Polygon Hermez, continued to focus on scalable payments and token transfers using ZK cryptography, ensuring security and efficiency on the Ethereum network.

• Current Status: Today, Polygon Hermez operates as a layer 2 scalability solution on top of Ethereum, leveraging ZK technology to reduce transfer costs and enhance the efficiency of the network. The project continues to evolve, with ongoing development and improvements to its zkEVM and other components.

The Hermez Network Token (HEZ) is a crucial component of the Hermez Network, a decentralized, open-source zk-Rollup platform designed to scale payments and token transfers on top of the Ethereum blockchain. Here's how it works:

Hermez Network is a Layer 2 (L2) scalability solution that leverages zero-knowledge (ZK) technology to significantly reduce transfer costs and enhance the usability of token transfers. It operates by compressing and aggregating thousands of transactions into batches, which are then verified using zk-SNARKs (zero-knowledge Succinct Non-Interactive Argument of Knowledge) on the Ethereum blockchain. This approach ensures the security and integrity of the transactions while maintaining the decentralized nature of the Ethereum network.

The HEZ token serves as the primary economic driver for the Hermez network. It is used in various ways to facilitate the network's operations:

1. Bidding for Coordinator Slots: Potential coordinators (equivalent to block producers) bid for the right to create the next batch of transactions using HEZ tokens. The highest bidder wins the slot and is responsible for processing the transactions. This bidding process is known as "proof-of-donation," where 40% of the winning bid is donated to support Ethereum public goods through Gitcoin quadratic funding grants.

2. Donations and Incentives: The HEZ token is used to incentivize active network usage and engagement. Donations from the bidding process are allocated to support the development of the network and its ecosystem.

3. Economic Design: The HEZ token is designed to ensure a fair and transparent process for deciding who the next rollup batch creator should be. It also helps to maintain the network's security and decentralization by ensuring that coordinators have a stake in the network's success.

After Hermez Network merged with Polygon, the HEZ token has been indexed to MATIC, Polygon's native token. This means that HEZ tokens can be exchanged for MATIC tokens, which will become the utility token for the Polygon Hermez zk-Rollup.

• Scalability: Hermez Network can handle a large volume of transactions by compressing and aggregating them into batches, making it highly scalable.
• Security: The use of zk-SNARKs ensures the integrity and validity of transactions, maintaining the security of the Ethereum blockchain.
• Decentralization: The network is decentralized, allowing anyone to participate in the bidding process and become a coordinator.
• Low Costs: The use of zero-knowledge technology significantly reduces transfer costs, making it more accessible for mainstream adoption.
• Censorship Resistance: Hermez Network relies on the same security assumptions as Ethereum, making it censorship-resistant.

In summary, the HEZ token plays a vital role in the Hermez Network by facilitating the bidding process for coordinators, incentivizing network usage, and ensuring the network's security and decentralization.

The Hermez Network Token (HEZ) has several strengths that make it an attractive option in the cryptocurrency market:

1. Scalability and Cost-Efficiency: Hermez Network utilizes zk-rollup technology, which significantly reduces transaction fees and increases the throughput of the Ethereum network. This makes it an efficient and cost-effective solution for users.

2. Security and Privacy: The network emphasizes security by leveraging the Ethereum blockchain's robust security measures and utilizing zero-knowledge proofs to ensure the confidentiality of transactions. This provides users with a secure and trustless environment for their financial activities.

3. High-Speed Transactions: Hermez Network's zk-rollup technology allows for efficient transaction processing, ensuring near-instantaneous transaction confirmations. This makes it ideal for applications requiring fast and seamless transactions.

4. Microtransactions: The low-cost and frictionless transfers enabled by Hermez Network facilitate microtransactions, which are crucial in various sectors such as gaming, content creation, and decentralized finance (DeFi).

5. Decentralized Governance: The HEZ token is used for network governance, allowing users to participate in decision-making processes and ensuring the network remains decentralized and community-driven.

These strengths position Hermez Network as a promising solution for users seeking fast, secure, and cost-effective transactions on the Ethereum network.

Hermez Network Token (HEZ) carries several financial risks. The token is considered a moderate to high-risk investment, with a risk gauge rank indicating that it involves significant market risks and price volatility.

One of the primary risks is the potential for funds to be stolen. This can occur if the cryptography used in the zero-knowledge proofs is broken or implemented incorrectly, if the operators trigger a false alarm during withdrawal, or if a contract receives a malicious code upgrade. The system has a 7-day delay on code upgrades, but this does not eliminate the risk entirely.

Additionally, users can be censored if the operator refuses to include their transactions and they lack the resources to propose blocks themselves. This can lead to difficulties in accessing funds.

The token's value is also subject to market fluctuations, and investors should be aware that financial instruments involve risks and may not be suitable for all investors.

• Hermez Network Team: The team behind Hermez Network, which includes 26 members, is led by Antoni Martin, the business development lead. They are known for their work on zero-knowledge (ZK) cryptography and the development of the zkEVM technology.