Tokenomics: Introducing HMX’s Platform-issued Tokens & Their Utilities
This article is the third part of the series that will provide a comprehensive look at HMX Exchange and its key features.
As Perp88 rebrands to HMX and launches on Arbitrum, we also plan to launch our governance token to help incentivize users to use HMX as well as allowing them to participate in shaping the protocol’s direction. In this article, we will be covering the following topics regarding our tokenomics design:
- HMX’s Token Supply & Allocation
- Tokenomics Design Principle
- HMX’s Platform-issued Tokens & Utilities
$HMX Token Supply & Allocation 🪙
$HMX token is the Governance token of HMX Protocol. It has a total fixed supply of 10,000,000 tokens (ten million tokens). Below is how the token supply is allocated:
Note that the airdrop to the beta users will come from the ecosystem fund allocation. In one of the upcoming articles, we will share with you the exact criteria on how to qualify for the airdrop.
Allocation 1: Community Incentives — 40%
- Total number of tokens: 4,000,000
- Vesting: Over four years. A maximum of 30% of this allocation (12% of total supply) will be released in the 1st year and decreasing each year.
The majority of community incentives will be distributed in the form of esHMX (escrowed HMX) with a small portion in HMX tokens.
Note that $esHMX is the escrowed version of $HMX. It posseses the same utility as $HMX, but must be vested before it can be sold in an open market. You can learn more about the vesting mechanics here.
Allocation 2: Ecosystem Fund — 25.6%
- Total number of tokens: 2,560,000
- Vesting: 5.6% of the 25.6% is unlocked immediately, then linearly release over a period of 4 years.
Ecosystem fund is reserved for various growth initiatives for the HMX ecosystem such as marketing, partnership, exchange listings, etc.
Allocation 3: HLP SURGE — 5%
- Total number of tokens: 500,000
- Vesting: Released monthly for 12 months
This portion is reserved for participants of the HLP SURGE event that bootstraps our trading liquidity. More details in the Launch Plan section here.
Allocation 4: Token Generation Event — 8%
- Total number of tokens: 800,000
- Vesting: Vested immediately
Token Generation Event where we conduct a fair, open and transparent price discovery mechanism. Our process will give everyone the same chance to participate in the event with no advantage to snipe bots, highest gas (e.g., whales), or insiders. More details in the Launch Plan section here.
Allocation 5: Private Sale — 6.4%
- Total number of tokens: 640,000
- Vesting: 6 months cliff; then released monthly for 18 months.
Strategic supporters of HMX can be found here.
Allocation 6: Team — 15%
- Total number of tokens: 1,500,000
- Vesting: 6 months cliff; then released monthly for 42 months.
Tokenomics Design Principles
Before we go into the specific details of all the platform-issued tokens, let us first share with you the design principle that we used to develop HMX’s tokenomics model. When designing the tokenomics for HMX, we wanted to develop a model that creates a flywheel effect that would allow us to achieve two objectives, as follow:
1. Consistent Yield Generation 💵
Real yield has been one of the most important narratives in the DeFi space recently. As the prolonged bear market suppress yields from inflationary tokens, users begin to realize that yields organically generated from protocol fees is the only sustainable source of yield.
On this objective, we have put in place two key mechanics to help incentivize activities on our platform that will directly promote the generation of organic yields:
1.1 Implementation of Trader’s Loyalty Credit ($TLC)
For every $1 of trading volume, HMX’s users will be awarded 1 TLC. Each week, $HMX rewards will be distributed pro-rata to traders based on their TLC amount. This means that the more you trade on HMX, the higher share of the $HMX emission rewards you will receive. More details here.
1.2 Emission Rewards to Leveraged Traders
To help subsidize the cost of borrowing fees and funding fees from trading on HMX and incentivize traders to keep their leveraged positions open to continually generate revenue for the protocol, HMX will distribute $HMX token to leveraged traders with open positions based on the balance of their borrowing amount.
$HMX tokens can be staked to earn a share of the protocol revenue, paid out in USDC.
2. Sustaining $HMX Price 📈
When thinking about sustaining the price of any token, there are typically two things you can do: increase the buy pressure and/or reduce the sell pressure of $HMX. Below are the three measures that we’ve implemented to help increase the buy pressure and reduce the sell pressure of $HMX:
2.1 Distribution of Protocol Revenue to $HMX stakers
HMX will allocate 25% of protocol revenue to the stakers of $HMX & $esHMX tokens. The rewards distributed will be in the form of $USDC. This creates real utility for the $HMX, as the token will accrue monetary upside when staked, and will help increase the buy pressure of $HMX tokens.
2.2 Distribution of Escrowed Reward Token ($esHMX)
Since the beginning of DeFi, one of the biggest problems in sustaining token price is protection from mercenary liquidity providers, who farm and dump tokens, which continuously depletes the value of the governance tokens.
To protect $HMX holders, the rewards distributed to users will be in the form of $esHMX, which is the escrowed version of $HMX. $esHMX can be staked to earn a share of protocol revenue and possess the same exact utility as $HMX tokens. However, the only difference is that $esHMX must be vested first before it can be sold in an open market.
2.3 Implementation of Dragon Points
Dragon Points are awarded to the stakers of $HMX & $esHMX at 100% APR, and can be staked to earn a share of protocol revenue (shared with $HMX & $esHMX stakers). The longer $esHMX/$HMX holders keep their tokens staked, the more Dragon Points they will earn, which allows them to continuously snowball the share ownership of the yield pool.
On the other hand, Dragon Points that are previously awarded will be burned when a user decides to unstake his HMX/esHMX tokens. The amount of Dragon Points burned will be proportional to the amount of HMX/esHMX the user chooses to unstake. This should incentivize HMX & esHMX holders to stake their tokens instead of selling or vesting them, reducing the sell pressure on the token.
🪙HMX’s Platform-issued Tokens & Utilities
Now that we have gone through all the design principles for our tokenomics, let’s look at all the platform-issued tokens at HMX and their specific utilities. HMX’s tokenomics model involves the use of five platform-issued tokens, as shown below.
1. HLP
HLP is a token users receive from depositing their assets into the HLP vault, whose assets act as the liquidity for leveraged traders at HMX. Each HLP token represents a share of the ownership of assets within the HLP vault.
How to obtain:
Utilities:
- Earns 65% of protocol revenue in the form of USDC when staked
- Earns a share of esHMX token emission when staked
- Accrues profits from acting as the counterparty for traders on HMX Exchange
- Accrues full ETH yields and profits from countertrading from GMX (HMX Exchange does not take any cut)
2. HMX
$HMX is the Governance tokens of HMX. In addition to granting participation in the Governance process of the protocol, it also accrues value from the platform revenue
How to obtain:
- Participate in Launch Event
- Purchase it from the HMX-USDC liquidity pool
- Vest esHMX
Utilities:
- Earns 25% share of protocol revenue in the form of USDC when staked (shared with staked esHMX & Dragon Points)
- Earns a share of esHMX token emission when staked
- Earns Dragon Points at 100% APR when staked
- Receive governance voting rights to help shape key decisions on the development of HMX exchange
- Receive tiered trading fee discount when staked
3. esHMX
To protect HMX holders, esHMX (escrowed HMX) is distributed as incentive rewards to the stakers of HMX & esHMX tokens and the depositors of the GLP tokens on HMX. esHMX token is the escrowed version of the HMX token and cannot be traded. It must first be vested before it can be traded. However, the esHMX tokens possess the exact same utilities as HMX tokens.
More details on the vesting mechanics & schedule of esHMX can be found here.
How to obtain:
- Stake esHMX, HMX, or HLP
Utilities:
- Earns 25% share of protocol revenue in the form of USDC when staked (shared with staked HMX & Dragon Points)
- Earns a share of esHMX token emission when staked
- Earns Dragon Points at 100% APR when staked
4. Dragon Points (DP)
DP aims to reward long term supporter of HMX without creating an inflation on the HMX tokens. The owner of the DP can stake them to earn a share of protocol revenue, which is split among staked esHMX & HMX.
How to obtain:
- Stake esHMX or HMX
Utilities:
- Earns 25% share of protocol revenue in the form of USDC when staked (shared with staked HMX & esHMX) 1 DP = 1 HMX and esHMX in the calculation for revenue sharing.
If you unstake your esHMX or HMX, your accrued Dragon Points, equal to the ratio of your unstaking balance, will automatically be unstaked and burned
Trader’s Loyalty Credits (TLC)
For every $1 of trading volume, HMX’s users will be awarded 1 TLC. Each week, HMX rewards will be distributed pro-rata to traders based on their TLC amount.
How to obtain:
- Open a leveraged trading position at HMX (users will receive 1 TLC for every $1 worth of trading volume).
Utilities:
- Receive a share of HMX rewards
Only trades that increase positions’ size will be awarded TLC
Yield Flow & Relationships Between Platform-issued Tokens ⛓
To help users of the protocol better understand the tokenomics of HMX, we have included below two infographics depicting the relationship between each token & the distribution of revenue to the different reward pools.
Closing Remarks 🙇🏻♂️:
In the upcoming article, we are excited to provide comprehensive information about our highly anticipated Public Open Beta. We will delve into the timeline of this event and outline the steps you can take to maximize your participation and seize the opportunity to earn enticing airdrop rewards. We sincerely appreciate your attention thus far and look forward to your continued engagement in our forthcoming article. Stay tuned!
