[Company Watch] MDEX on Huobi Eco Chain
The popularity of Defi in the last few months and inspired a lot of projects, and in this case, it inspired an entire system. Huobi, a leading Chinese crypto exchange, has recently launched its Blockchain Huobi Eco — or it has been there for a while and only got popular recently. From the design and the very appearance of it like scan.hecochain.com, it all looks like Ethereum. And it worked, just like Tron. HT, Huobi Token are used as gas, it’s costs now are negligible. You can read more about this blockchain here. The use of it is actually simple — setup a customised chain in Metamask, and the rest is just like Ethereum.
And in a very short time span, the entire ecosystem is developed, from lending to DEX, and many more (the info is from DefiBox, a nice info portal, that looks like Debank).
As we are stablecoin-focus, we can leave you to explore the entire system by yourself; and have fun trying all transactions at a fraction of a cent of gas fee. Halelujah!
We will be taking a closer look at the core of the ecosystem of Heco Chain, its version of Uniswap, MDEX.
MDEX works just like Uniswap, you can swap any pair of assets via the pools, via its automatic market making system, at a 0.3% fee. And it’s also somewhat similar to Sushiswap, giving rewards in its platform token MDX to appeal to investors and traders.
Do not apply any common sense here and assume that this nice APY goes to liquidity providers. According to the whitepaper summary, and also after we had experimented, the trading commissions from the AMM go all the project team — yes, to the project team, NOT the liquidity providers.
The project team, then will take out 66% to reimburse the traders who spent money in MDEX. We have tried and it turned out that, based on the as-is price, you got instantaneously your trading fees paid, the 0.3%, of whatever currency it is, in the equivalent amount of $MDX. For instance, if you trade $1000 USDT for $HT, and the fee is 3 USDT, you will get 1 $MDX back in rewards, if it’s price then is $3.
What’s the equivalent of it?
For every trade, you are buying MDX with your 0.3% fee. But as it’s only 66% of the total fee collected to be used for trading compensation, the team has to issue another 34% more MDX, in order to fully cover the 0.3%. The maths here might be off a bit — as it’s based on observations and not a dig into the contract — but you got the idea.
Or you can think of it this way: the project team pocketed 34% of the trading income and gave out MDX — they are selling MDX. It’s a few million $ worth of fees now. We did not see this happen in Uniswap or Sushiswap.
Then what’s there for the liquidity providers? Similarly, the MDX rewards, as there’s not trading fee income.
In conclusion, MDEX is similar to Uniswap in function but different in economics. We are not sure if this will work out, the same level of concern for Sushi and maybe even more serious than that. The general logic here, if we stay way from the intertwined arguments of tokenomics here, is that if the project team is taking away some value from the ecosystem as volume increases as if it’s a 34% tax — it’s a value destruction system for MDX.
However, as MDX is listed on Huobi and Gate.io, the leading Chinese exchanges, the price might be volatile — in any direction, as people speculate.
Apart from MDX, given Huobi’s reputation and track record, we tend to think the chain will be safe and functional.
So, behold and let’s see.
(Serenity Team, 27 Jan 2021, twitter: https://twitter.com/SerenityFund)
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