Firstly, thank you for your interest and proposal aimed at enhancing the Arbitrum ecosystem.
Introduction and Rationale
HMX’s grant proposal aims to attract new users to their platform by using 100% of the grant for trader incentives. They are requesting 1,950,000 ARB, which is 3.9% of the total program availability. Despite being relatively new since its launch in June 2023, HMX has shown impressive performance, albeit possibly inflated by native token incentives. HMX offers low-fee trading across various markets and is built on GMX’s Liquidity Pool. We appreciate the milestone-based distribution of ARB rewards and the plan to use escrowed ARB to minimize selling pressure. However, we’re a bit skeptical about the proposal’s effectiveness in broader terms.
Major Concerns
Concern Regarding User Incentives
- Higher rewards for native token holders could discourage new users
- Grant used exclusively for trader incentives, offering little benefit to other Arbitrum projects
- Current HMX native incentives exceed the platform’s generated fees
- Our recommendation for change: Reduce the grant request to a maximum of 750K ARB, offer equitable rewards to all users regardless of staking, and limit total incentives to be less than the total fees generated on HMX.
Minor Concerns
- Short operational history since only being live for 4 months
- Limited benefit to the wider Arbitrum ecosystem
- Our recommendation for change: The proposal would be more compelling if there were components that benefitted other Arbitrum projects, not just HMX.
Summary
Castle Capital values the innovative approach HMX brings to the trading arena within the Arbitrum ecosystem. However, in its current form, we do not support the proposal moving forward. Specifically, we have concerns regarding the inequality of reward distribution and the isolation of benefits solely to HMX users.
Our recommendations are as follows:
- Lower the requested grant amount to 750K ARB
- Revise the reward distribution to be more equitable among users
- Ensure that total incentives do not exceed total fees generated by the platform
We trust that our comments are constructive and contribute positively to the discussion for the benefit of the broader ecosystem. Thank you for your initiative and commitment to the Arbitrum community.