$ONE Makers FAQ — Block Rewards Table & AMA with HummingBot Transcript
Harmony is committed to apply the values of decentralization in every possible layer of blockchain activity- hence we couldn’t afford to challenge the status quo of a highly centralized activity -aka market making- by providing the tools & support to our community to support our ecosystem’s token liquidity by themselves.
Together, with HummingBot we are incredibly excited to announce ONE Makers, a liquidity bounty program that rewards our joint communities for providing liquidity to the Harmony token, ONE. Anyone who uses Hummingbot to build and run a market making bot for ONE can earn additional ONE tokens.
The basis reward for every participant is 0.2% on filled limit order volume, while there are different rewards distributed as a monthly bonus in three personas depending on their activity:
$ONE Maker, $ONE Pro, and $ONE Ultimate.
The rewards are outlined in the following table:
You can Sign up today to become a community market maker here:
https://www.hummingbot.io/liquidity-bounties/harmony/
“As a market maker, you should love volatility. More volatile markets typically mean higher volume and higher spreads, which are the two factors that help you make more profits… Michael Feng, CEO Hummingbot”
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“Our collective vision is to create a new opportunity for the Hummingbot and Harmony communities. Market making was earlier limited to only a few people, [but] our team has been a true believer of decentralization. This collaboration with Hummingbot for decentralizing market making [is part of the steps] we’re taking for our community to deeply participate with us… Sahil Dewan Co-Founder Harmony”
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On 20 June 2019, we had an ask me anything (AMA) session with the Hummingbot project team on our telegram channel, where we talked about the Hummingbot project, market making, liquidity, and the partnership expectations. Here’s an edited summary of the session. (Please note, we edited for clarity sake).
Participants:
Hummingbot: CEO Michael Feng
Harmony core team: Sahil Dewan
Harmony community moderators: Manny and Joel M.
The Harmony community: Over 1,000 online members.
Manny (Harmony)
Hi, Michael Feng, could you introduce yourself and tell us a little about your journey so far in the crypto space, and what led to the founding of Hummingbot?
Michael Feng, (CEO Hummingbot)
Sure — this is Mike, CEO of Hummingbot. I started my career on Wall Street before moving to Silicon Valley about 9 years ago. I started paying attention to crypto in 2014 when the Ethereum whitepaper came out. In 2017, we started Hummingbot — originally we were a quant crypto hedge fund.
We found that everyone who did algo trading in crypto had to build the same low-level technical integrations to exchanges, so we decided to open source our tech stack and build a public set of infrastructure that anyone could use. And since liquidity is a huge problem in crypto, this also allows anyone to run a market-making bot and provide liquidity to quality projects like Harmony.
So what is Hummingbot? It’s an open source tool that helps you configure and run algorithmic trading bots. It’s a bit like Bitcoin mining software: it’s a software client that you run locally or in the cloud. It uses your exchange API keys to automate trading for you.
Manny (Harmony)
That’s been quite a journey so far, not too far from when Bitcoin along with other cryptos began their entry into the limelight. So what would you say has been the liquidity state of cryptos since then?
Michael Feng (CEO Hummingbot)
Liquidity is one of the most important qualities for a token project. First, let me define what liquidity is. Liquidity is the ability to buy and sell something in large size without moving the market. Liquidity can be measured by hard, quantifiable metrics like bid-ask spread, depth, and volume.
Academic research shows that liquidity is positively correlated with price. The top 20 coins are all very liquid, but the smaller the market cap of a coin, the less liquid it typically is. In addition, a deep, liquid market mitigates the risk of pump and dump attacks like what we saw with CLAM a few weeks ago.
Manny (Harmony)
Is that actually possible? To make large volume trades without ‘moving the market’? Thought volumes were huge factors in how market trends?
Michael Feng (CEO Hummingbot)
I’m specifically referring to “slippage”, which measures how much you can buy/sell without impacting the market price.
Manny (Harmony)
Can you talk more about the slippage, so that our community members willing to use the Hummingbot can understand what it’s about?
Michael Feng (CEO Hummingbot)
First, to start with what Market making (MM) is? It’s an algorithmic trading strategy where you post buy and sell orders directly on the order book. Market makers make money from the “bid-ask spread”, since their buy orders are lower than their sell orders. Because order books change at millisecond-speed, this has historically only been available to hedge funds. We have open sourced a tool that now allows anyone to do it.
I think the important thing to understand is that research shows that liquidity is correlated with price, i.e. more liquid assets tend to be more valuable. That’s why token issuers hire professional market makers, but these are hedge funds which charge a lot of money. Both we and Harmony believe that a more decentralized model is possible for market making.
Manny (Harmony)
Interesting. So really, how difficult is it to obtain liquidity in the crypto market, and what’s the most significant hurdle?
Michael Feng (CEO Hummingbot)
It’s difficult because there are few professional market makers, and they tend to focus on BTC or top-20 coins. To provide liquidity in the fast-moving crypto markets and not lose money, you need a high-frequency trading bot that can automatically adjust your orders as the market price changes. This is a big technical barrier that prevented ordinary people from participating in market making. With Hummingbot and the $ONE Makers program, now anyone can provide liquidity for $ONE
Manny (Harmony)
Okay, given that every market needs liquidity and this is vital to both exchanges and crypto traders, what do you think is the best way to provide steady liquidity to a market given the intrinsic volatility of crypto, would you say centralized or decentralized?
Michael Feng (CEO Hummingbot)
Actually, as a market maker, you should love volatility. More volatile markets typically mean higher volume and higher spreads, which are the 2 factors that help you make more profits.
You’re right — every market needs liquidity. That’s why we think a decentralized solution, where anyone in the world can run a market-making bot and help provide liquidity, is better in the long term.
Manny (Harmony)
A member of the community has asked for clarification on ‘liquidity is correlated with price’, According to him (@juminoz): “I think he meant Demand when he mentions price, but I could be wrong.”
Michael Feng (CEO Hummingbot)
Sure, there have been a number of academic studies that show that more liquid stocks tend to have a higher price than less liquid stocks, all other things being equal. I’ll try to find one and post it here later.
You can also see this effect if you try to buy/sell a token in a very illiquid market. If the bid/ask spread is very high, it means that you lose money with every trade.
Manny (Harmony)
Speaking of price, we’ve heard before that 95% of Bitcoin trading volumes at some points of price surges could be wash trading, and there have been claims that most exchanges are inevitably vulnerable to wash trading and pump and dump schemes, how should traders treat this ravaging effects of pseudo-liquidity?
Michael Feng (CEO Hummingbot)
Fake volume is definitely a huge problem in crypto. From a market maker’s standpoint, you want to provide liquidity to markets with real trading volume. That’s because you depend on “takers” in the market to fill your buy and sell orders so that you can make money. We currently support Binance, Coinbase, and a few decentralized exchanges that we believe are all legitimate exchanges with real volume.
Manny (Harmony)
How does Hummingbot tackle the issue of wash trading?
Michael Feng (CEO Hummingbot)
Hummingbot is just an open source tool, so it natively doesn’t place any restrictions on users. However, we are very strict about preventing wash trading for participants in the $ONE Makers program. This ensures that people only earn rewards based on their REAL trading volume. To verify that, we collect trading activity from users who sign up for $ONE Makers and run Hummingbot. Then, we check their submitted trades against our internal exchange data feed, so that only legitimate users are rewarded.
Manny (Harmony)
For those of us who are not so conversant with the term liquidity bounty, can you explain what it is and what role it plays in cryptocurrency markets today?
Michael Feng (CEO Hummingbot)
Sure, the idea behind liquidity bounties is that liquidity is a scarce resource in crypto. Currently, token projects who need liquidity are forced to pay professional market makers a lot of money.
We think that a better solution is to put up a bounty and allow anyone in their community to earn bounties based on how much liquidity they provide. This allows community members to make more productive use of their token holdings and earn rewards, while the project benefits from more liquidity.
Joel M (Harmony)
A member of the community (@ValiXXL) has asked for clarification on your marketing strategies, he wants to know if you have good sponsors backing your project, considering you have such a clear future prospect about your technology.
Michael Feng (CEO Hummingbot)
We are primarily a team of technologists and engineers. While we do some marketing, our main focus is building a great product and helping our users get the most out of it.
Manny (Harmony)
So Mike, who can use Hummingbot, I mean how easy is it to set up?
Michael Feng (CEO Hummingbot)
Since it’s open source, Hummingbot is free and available to anyone. We have prepared a guide for Liquidity Bounty participants that should make the setup process less than 10 minutes: https://docs.Hummingbot.io/bounties/intro/
Manny (Harmony)
The ad on your website says that anyone who uses Hummingbot to build and run a market-making bot for ONE can earn additional ONE tokens. Could you explain exactly how this works to those present here?
More so, a community member (@Pauly81) wants to know how long the bounty program will last, and if there’s any form of commitment in the form of ONE tokens to the Hummingbot application, and how the rewards will be distributed?
Michael Feng (CEO Hummingbot)
The bounty program will last for 3 months. No, you don’t need to give us anything. The way it works is that you download/install Hummingbot, put in the Binance API keys, and use your own tokens to run the bot. We track how much trading volume you do and help Harmony verify/automate the payouts each month.
To be clear, Hummingbot is a software you run locally. We never get your tokens, API keys, or private keys.
Manny (Harmony)
At the risk of sounding speculative, what are the expectations from the Hummingbot x Harmony partnership; in metrics, say from a scale of 1–10, can we gauge how much impact it will have on the $ONE token as well as in the development of its price discovery.
Michael Feng (CEO Hummingbot)
To be frank, both we and Harmony are approaching this as an experiment. We believe that the more people participate, the greater of an impact it will have. However, because no one has ever done this (because the technology wasn’t available before), it’s difficult to quantify how much the impact will be. At the end of every month, we’ll sit down with Harmony to review the data and make any necessary adjustments.
Joel M (Harmony)
A community member (@ValiXXL) wants to know more about your advertising timeline.
Michael Feng (CEO Hummingbot)
We don’t focus on advertising our product. It’s an open source tool, so we believe people who use it and are successful in earning profits will keep using it.
Joel M (Harmony)
Michael, can you tell us more about how the liquidity will be improved? Does this mean if I have 10 BTC and I want to buy ONE from the market the price will not go up because a new order from this bot will appear, right? can you emphasize some scenario for this?
Michael Feng (CEO Hummingbot)
Yes, that’s one aspect of liquidity. Another aspect is in maintaining orders and helping to stabilize the price when it trends sharply. This mitigates the impact of pump and dump schemes which can adversely affect ordinary traders.
Manny (Harmony)
Are there any other projects that are currently using the Hummingbot algo. And what would you say is the adoption potential so far — given the experimental stages as mentioned?
Michael Feng (CEO Hummingbot)
Yes, we have a number of projects in our community using Hummingbot to run market making bots. We have seen order volume increase dramatically since we launched 2 months ago. Harmony is our first partner for Liquidity Bounties.
As for the question about a readily available bot with basic configurations, or if configurations are left to the community. Well, that is a great question, as we do provide templates for the strategies, but users need to input the configuration parameters, such as spread, trade size, and how often to refresh orders. Also, all of our strategies are open source, so users can customize or create their own strategies.
Manny (Harmony)
We’ve got one of the co-founders of Harmony with us too, Sahil Dewan (@sahildewan). Can you please shed more light on the Harmony side of this partnership, what are your expectations?
Sahil Dewan (Co-founder Harmony)
Thanks! Mike really put it very well — our collective vision is to create a new opportunity for the Hummingbot and Harmony communities. Market making was earlier limited to only a few people, but with the decentralized market making software, you can support a project that you care about, make the market more liquid and also earn rewards by doing so! We’re excited to have more than 500 people have already signed up for the $ONE Makers initiative 🙂
Our team has been a true believer of decentralization — our launch on the Binance DEX followed by this collaboration with Hummingbot for decentralizing market making are the baby steps we’re taking for our community to deeply participate with us.
Manny (Harmony)
Wow! Thank you, Sahil for showing the community how they are a part of the building process in Harmony’s vision of scaling consensus for 10 billion and giving them an opportunity to participate through the ONE Maker initiative.
As a final question Mike, do you have any follow-up links for study or last-minute points to share with the community we must have missed?
Michael Feng (CEO Hummingbot)
Yes, we have created a guide exclusively for Liquidity Bounty participants: https://docs.Hummingbot.io/bounties/intro/
The program will commence in early July, so please sign up here to get notified as soon it launched: https://www.Hummingbot.io/liquidity-bounties/harmony
Finally, here are the reward tiers for $ONE Makers: https://docs.Hummingbot.io/bounties/active/harmony/
Manny (Harmony)
Okay, thank you, Mike, it’s really been a pleasure having you with us today, helping to shed more light on market making and crypto trading liquidity. I personally I’m hopeful for the fruits of this partnership.
Michael Feng (CEO Hummingbot)
Thanks a lot. I really enjoyed being able to answer the Harmony community’s questions!
[ This is a living Update and will periodically updated with FAQ related to $ONE Makers Initiative]
