Hey Dragons! The community has proposed a new idea that’s gained traction following our tokenomics improvement proposal (HIP-3). After discussions, it’s now officially become HIP-5 and is ready for voting soon. You can find the full discussion thread here.
There’s still time to share your thoughts for minor adjustments before the vote. Your input is valuable in refining this proposal.
Background:
The HMX token has faced challenges due to recent market conditions, leading to a constant price decline. While market factors are largely responsible for the overall decrease in altcoin prices, this presents an opportunity to revisit and adjust HMX tokenomics to benefit all holders.
Objective:
Improve the price action of the HMX token by reducing sell pressure from users who do not demonstrate platform loyalty, while rewarding long-term holders and maintaining fairness for all stakeholders.
Observation:
Before diving into this proposal, we must understand the different type of HMX/esHMX stakeholders on our platform. To improve tokenomics effectively, we’ve categorized esHMX holders into three main types based on their behavior. Understanding these profiles is crucial for making informed decisions about our platform’s future and optimizing our tokenomics.
Stake Only: Most loyal users. They stake their esHMX without vesting. They earn the most Dragon Points (DP) and create the least selling pressure on HMX.
Vest & Stake: Medium loyalty. They vest esHMX to HMX, then stake it. They earn fewer DP than group 1 and can create moderate selling pressure on HMX.
Vest & Dump: Least loyal. They vest esHMX to HMX and sell immediately. They earn no DP and create the highest selling pressure on HMX.
Proposed Changes:
DP staking requirement for esHMX vesting: To vest their esHMX tokens, users will be required to stake DP tokens at a ratio of 1 DP for every 4 esHMX. This 1:4 ratio is fair for all stakeholders, as DP is emitted at 100% APR, meaning users will only need to stake for one quarter to accumulate enough DP to vest their staked amount. This requirement will encourage longer-term commitment and primarily affect those who quickly vest and sell their tokens, while users who only stake will not be affected.
Extended esHMX vesting period: The vesting period for esHMX tokens will be increased from 12 to 36 months. This extension will allow users to realize their gains over a longer period, thus promoting project stability. Users can still exit without additional expenses, but over this extended 36-month timeframe.
Summary of the proposal:
Current Tokenomics:
No DP staking requirement for esHMX vesting
12-month vesting period for esHMX
Proposed Modifications:
DP staking requirement: 1 DP staked for every 4 esHMX to be vested
36 months extended vesting period for esHMX
Benefits:
Protects long-term holders’ interests.
Encourages platform loyalty.
Reduces short-term selling pressure.
Provides a fair exit strategy for all users.
Enhances the utility of Dragon Points.
Implementation Details:
Existing esHMX in vesting remains unaffected if the user has sufficient DP staked.
esHMX in vesting beyond DP coverage will be unvested and subject to the new vesting requirements.
To not penalize users who recently unstaked, we will implement a one-time offer where users can recover their Dragon Points balance back to before they unstaked by restaking their HMX and esHMX tokens. This mechanic only applies to users who unstake between May 1st and the end of this proposal voting period.
Example:
Alice has 20 HMX + 40 esHMX staked, with 20 DPs.
On May 10th, Alice unstakes 10 HMX and vests 20 esHMX. She then lost 50% of her DPs (now 10 DPs) at the time of unstaking.
Recovery options:
If Alice restakes 30 tokens (any mix of HMX/esHMX), she’ll regain all her 20 DPs.
If Alice restakes less than 30 tokens (any mix of HMX/esHMX), her DP recovery will be prorated.
If Alice has sold some vested esHMX, she can stake HMX instead. As long as she restakes a total of 30 tokens (any mix of HMX/esHMX), she’ll recover all 20 DPs. Restaking more than 30 tokens won’t increase her DPs beyond the original 20.
I’m not sure the new proposal has much merit. People who are not loyal to projects and only want to be there for the free hand outs will just go somewhere else. There are enough projects to chose from.
Instead, you will project the image that long-term holders are trapped and inflexible to market conditions. The 21 day lock on HMX is fine but it does hamper any kind of reactivity to market conditions. Sure, long-term idealists (and don’t get me wrong, I have long-term intentions for crypto plays too) are not the majority of people that are in crypto right now. Catering to this minority too early will bring much greater risks to the longevity of a project than success.
I liked the previous ratio proposal of saying you have to stake HMX to also be able to vest esHMX. Seemed like a good idea. Maybe the ratio needs to be fine-tuned.
Doing it with Dragon Points, seems overly complicated and a turn-off for newcomers.
Instead, why not try and give incentive in a different way to those who hold their vested esHMX. For example, if you re-stake vested tokens you get an additional earning boost (valid for the week of re-staking) ~ so for example 0,5% extra APR from the fees pool.
This in turn will also promote, and give incentive to HMX as a project (not the token) to focus more on marketing effort to attract traders. Reinforcing loops are fantastic.
Oh and also, if you sell your vested tokens, instead of getting the boost, you get a -0,5% (or whatever, the percentage is just an example) anti-boost to your weekly APR.
This proposal is complicating things
HMX is facing two main problems:
1, There is no upward buying pressure
2, Continuous selling pressure comes from those vesting ESHMX
My explanation for these 2 problems
1, I really want to buy and stake HMX but the 21-day unstake restriction makes me worried (21-day restriction to prevent people from unstaking and selling their HMX- But why be afraid of them selling HMX, there will be buyers This number of HMX is sold because we have regular weekly revenue, high APR). The limited 21-day launch will only hinder new users from purchasing and staking HMX
2, A lot of people want to get out of ESHMX (HLP suger rewards, trading rewards, staking rewards…) they want to recover their capital or lock in profits… Instead of stopping them and letting them sell every day , let them exit HMX, there will be new buyers and take their place, add option of instant vesting with 70% fee, 3 month vesting with 50% fee, 6 month vesting with 25% fee %… This will reduce the supply of HMX
The most important thing about HMX is that there is no buying pressure, let’s add utility to it instead of putting restrictions on HMX and ESHMX
The Vest and Dump crowd aren’t going to sit there and re-evaluate incentives like boosting APR for holding or whatever long term ideas we can come up with. They don’t care by design, their goal has been to acquire and dump as much esHMX as possible to cushion their trades
Initially, DP was a good attempt to retain users and continues to serve as clear indicator of who is patient and loyal to HMX. The problem is that the initial vesting design of HMX was not perfect and rewarded large volume traders for dumping more than long term supporters for holding. I don’t fault anyone, its a learning process. This proposal we are voting on rewards DP holders without requiring additional investments tax us further. I think we’ve paid enough already.
Don’t let objections and stall tactics prevent this from going to a vote. The writing is on the wall, The longer we wait, the longer the punishment by the “Vest & Dump” will continue. The recent vote to increase our liquidity only works to buy us time to make real changes to the platform. If you agree that Dragon Points holders should be prioritized here, please be sure to “Like” Takamuras proposal or and /or this comment. Dont be lazy and let other people fight your battles. Take 1 minute and sign in to show your support and stand up for your bags.
To be fair, as far as I remember, the 21 days was initially implemented to prevent voter abuse, not with regards to “fear that holders sell”. That said, the solution here is, to take a snapshot before initiating a governance discussion.
I like your second point. That could be interesting for the team and community to consider.
I only do staking, so I agree. However, I can understand the reasons for the opposing views. I think HMX needs to make further efforts to expand HMX to other chains rather than making such minor changes in tokenomics. If we aim for multi-chain dapps, not just Arbitrum and Blast, I think the price of HMX tokens will naturally rise.
I don´t think it´s a good idea to force short term oriented users to stay longer in esHMX. Many of them will migrate to a different platform, which reduces volume and hence reduces the platform´s value.
Imo Point 2 mentioned by @MORE to allow different vesting windows with variable exit fees is a better way to balance long term holder interest and platform value. The exit fee could even be redistributed to esHMX stakers specifically to incentivize 1) not converting to HMX and 2) to stake esHMX.
Too much focus on short term price action of the token over platform utility/value is not a promising management strategy for long term investors, so you risk to lose them too.
That aside, I have major concerns with the implementation details.
Just like last time, the proposal suggests to change the logic for ongoing vesting amounts.
I don´t know if there is any place in the world where it is allowed by law to change a commercial contract in retrospect and single-sidedly without consent by the other party - this would be the real world parallel to the proposal.
Imo, this type of business conduct is fundamentally unfair and erodes trust in the team.
What will you do next time? Expropriate depositors to buy back HMX?Technically, you could do so.
I´m exaggerating here to get the point across: do not ever break trust with your users and / or investors. That means, honor past agreements and only make forward-effective changes.
Since we talk about tokenomics again, I want to suggest another point that was mentioned in HIP 3 by someone else and which I fully agree with:
Implement a DP cap per staked HMX / esHMX.
This avoids a structurally unfair playing field among investors where later investors cannot ever catch up with the earning power of old investors. Naturally, this crushes demand for the token and reduces liquidity over time, as GMX demonstrated.
If the cap is reached after a reasonably long time, like 5 years, (i.e. max 5 DP per 1 es/HMX) it still incentivizes investors to stick around for the long term. However, it doesn´t repell new investors because they can eventually catch up to earn their fair share of fees, proportional to their investment value.
The community has proposed a new idea that’s gained traction following our tokenomics improvement proposal (HIP-3). After discussions, it’s now officially become HIP-5 and is ready for voting soon. You can find the full discussion thread here.