[HMX] LTIPP Application - FINAL

Hello Drake,

Thank you for taking the time to go through our proposal. While we appreciate you looking out for the interest for the Arbitrum community, the comments you made are based on misinformation and inaccuracies.
We understand that you may not have been following our announcements or updates closely, so we hope we can use this opportunity to share with you some concrete data and statistics, to help you get up to speed on our progress and contribution to the DAO, and hopefully this would change your views towards what we’re building at HMX and our ask for the LTIPP program :slightly_smiling_face:.

As a top-5 perpetual DEX on Arbitrum by both volume and TVL, we have made many contributions to the Arbitrum ecosystem through partnership with other protocols and participation in the governance. Our contributions can be categorized into multiple types:

  1. Partnership with other protocols: Since our launch on Arbitrum in June 2023, we have partnered and integrated with many other protocols on Arbitrum. HMX’s ecosystem of protocol now boasts a stacked roster of:
  • Stella:
    • Integration of $HMX/ETH pool for leveraged strategies
    • Addition of $HMX lending vault on Stella
    • Private loan of 3,000 HMX ($30,000) to lending vault to support vault liquidity
    • Example tweet
  • Vaultka:
    • Integration of HLP pool on Vaultka
    • Incentives of 400 $HMX ($4,000) per month
    • Example Tweet
  • Pendle:
  • Penpie
    • Integration of HLP pool to for yield strategies
    • Bribery for HLP pool on Penpie
    • Example Tweet
  • Equillibria
    • Integration of HLP pool for yield strategies
    • Bribery to HLP pool on Equillibria
    • Example Tweet
  • Possum Labs
    • Integration of HLP pool on upfront yield strategies
    • Marketing support
    • Example tweet

In addition to the examples above, we’ve also hosted a special marketing campaign to promote all the protocols within our ecosystem and show support to decentralization, aimed at onboarding the next wave of users to Arbitrum. The campaign focuses around providing a free mint 3D NFT to users who use the product of our partner protocols within the specified period.

You can find the link to the campaign details here and the link to the final NFT distributed to the users here.

  1. Distribution of value to users on Arbitrum: At HMX, not only do we contribute value to the Arbitrum ecosystem through our product, collaboration, and innovation, we have also contributed back to the users in terms of monetary value. Some of details are as follow:
  • Revenue Distribution to users: To date we have distributed almost $7 million of protocol revenue back to our users (HMX stakers & HLP depositors). This is the clearest form of contributing to the Arbitrum ecosystem, creating earning opportunities for stakers and holders alike.

  • esHMX Airdrop campaign: When HMX launched its token, we did a one-time airdrop of our governance tokens, totaling 2.5% of the total supply. At the current market value, that is USD $2.5 million worth of tokens. This is another example of our contribution back to Arbitrum.

  • Distribution of PYTH rewards from retroactive airdrop of Pyth Network: As a recipient of $PYTH Network retroactive airdrop program, we have decided to re-distributed the airdrop rewards back to our traders and stakers. By the end of this month (March 2024), we would have already distributed 1,000,0000 $PYTH or ~$900,000 at the current market price to users, and will continue to distribute more rewards.

If you sum up all of the value from these initiatives, HMX has already given back over $10.4 million worth of value back to our users on Arbitrum.

  1. Revenue generation for Arbitrum chain:

In addition to contributing key statistics to the Perp DEX sector, we’re also enhancing Arbitrum Network’s revenue and metrics. In the last 30 days, our main entry point contract, the Limit Trade Handler, paid over $133.27k in gas fee, placing itself in the top 20 by gas used on the Arbitrum Network. This level of activity translates to an annualized $1.6Mn in gas fee.

  1. Participation in the Arbitrum DAO: We are active builders, with a track record of contributing to the DAO in the past (Serious People: Proposed KPIs for Arbitrum Grant Programs (LTIPP) - #5 by SeriousKeith). Our primary focus, however, has been on enhancing our product and developing HMX. While our involvement in the DAO process may not be prominently displayed, we are confident that our contributions are evident in various other areas, as highlighted above.

Perp88 was our first iteration of the PerpDEX where our goal was to learn and try to find product market fit and get users feedback. We launched Perp88 without the Governance token, so all the usage and traffic were organic. Many leading protocols on Arbitrum also had their origins / earlier iterations on other chains. We decided to launch on Arbitrum with our 2nd iteration (HMX) because of the vibrant ecosystem and community.

There are many ways to innovate and one way can be refining and building upon proven concepts. In the dynamic DeFi space, earlier protocols serve as sources of inspiration and building blocks, guiding newer innovations. GMX and Gains have significantly influenced our journey, contributing to our current success.

While we embrace drawing inspiration from other protocols, labeling us as a fork is inaccurate. Our codebase was developed from scratch, without forking GMX or Gains. Please feel free to review our codebase.

PS: Account abstraction is a concept that has been around for some time, and no protocol has a monopoly on the concept.:slightly_smiling_face:

Wash Trading:
We have received baseless accusations of wash trading on HMX numerous times, even during our application for STIP last year. These accusations are factually incorrect as, mathematically and economically, there is no incentive for users to wash trade. Furthermore, we maintain direct contact with the top traders on HMX, all of whom are real individuals :joy:.

Let’s delve into the actual data. For instance, last week:

Total trading fees paid amounted to ~$455k USD
Total incentives provided equaled: $214k USD

This means that incentives are running at ~47% of the total fees paid - i.e., approximately 47% rebate on trading fees. These figures are easily verifiable on Dune Dashboard.

Fees / TVL
We offer one of the lowest trading fees among PerpDEXs (e.g. 0.02% for BTC and ETH). This is a response to be competitive while some other PerpDEXs received STIP and were able to subsidize their trading fees. Also, our trading model is different from GMX where we don’t need a full reserve for profit and hence was charging a lower borrowing fee to traders.

Build on Arbitrum

As far as our commitment to the Arbitrum chain, let’s give a concrete example. HMX was a recipient of the PYTH retrospective airdrop alongside many other protocols. To date, we are on track to distribute 1,000,000 PYTH by the end of March exclusively to users on Arbitrum. Even though the Pyth team did not have a mandate on how to spend it, we chose to allocate a majority to users. As far as we know, no other protocols have done this yet.

We think it’s short-sighted to be limited to just one chain for many reasons. For one, as our current design goes, some incentive rewards (such as esHMX) can only be claimed on Arbitrum. What this means is that users of other chains will necessarily have to come to Arbitrum if they want to claim these rewards - a great way to convert them into Arbitrum users if they are not already one.

Additionally, regarding the project launching on Metis, if you actually have been following us, then you would know that it is a licensed fork of HMX launching on Metis, similar to how Camelot DEX has their licensed fork on Metis, called Hercules. The project on Metis is operated by a different team, with HMX serving as advisors. There are economic flowbacks from the project back to HMX stakers, benefiting Arbitrum users who stake HMX and participate in this collaboration.