Background and motivation: I propose my thoughts on improving the tokenomics and utility of HMX. In my opinion, it’s impossible to enhance the project’s appeal through restrictions and bans. The project’s attractiveness should be improved through flexibility, variety, and rewards for loyalty.
The innovations I propose, in my opinion, will increase the project’s attractiveness for all parties - HMX holders, liquidity providers in HLP, and the project itself.
Objective: Yes, I don’t fully understand some technical aspects of my proposed innovations and don’t provide specific detailed figures and calculations; I am merely outlining general ideas. How attractive they are and what exact proportions and numbers to apply should be decided by the newly launched DAO.
Proposal Details:
Allocate HMX to HLP
I propose that the protocol allocate a portion of the commission revenues to buy HMX from the market and place them(permanently locked) staked within the HLP. It doesn’t matter what we call it - buyback, treasury, POL, or anything else. The principle here is as follows:
Gradually buy HMX to increase its weight in HLP to 3-5%. Then, if demand for HLP grows, regularly buy HMX from the market to maintain the token’s weight in HLP at 3-5%. If demand for HLP falls, causing HMX’s weight in HLP to exceed 5%, the project stops buying HMX from the market and starts buying GM-BTC & GM-ETH in HLP.
Thus, if the HMX token price rises, its weight in HLP increases, and the protocol starts buying GM-BTC & GM-ETH in HLP, balancing their weight relative to HMX. The income received from HLP can either be used to launch some incentives, for a constant HMX buyback from the market, or to pay an intern’s salary; how to use this income should be decided by DAO voting.
If the token price falls, its weight in HLP decreases, and more tokens need to be bought from the market to support its price.
Staked in HLP, esHMX tokens give HLP holders additional income. For example, if the current APR of esHMX is higher than HLP, HLP holders benefit. If esHMX yields less than HLP, the total income of HLP decreases slightly, but this likely means the token price has fallen, and hence the HMX buyback will be higher, benefiting HMX holders.
In both cases, the project itself benefits as the token price is supported, and the project earns income from staked esHMX and owning HLP.
We must not forget about the third party - traders; we want them to benefit as well, right?
Reducing Vesting, Penalties, Force Unstaking
Firstly, I propose reducing the vesting period to 3 months. Additionally, introduce the possibility of early force unstaking. However, to benefit HMX holders and the project from force unstaking, I suggest introducing a penalty for force unstaking, which decreases linearly from 50% to 1% depending on the vesting period. Simply put, if a trader earns rewards in esHMX and decides to convert them to HMX immediately without vesting, they pay a 50% penalty in their rewards. Part of these penalized esHMX goes staked within HLP, and another part is distributed among HMX stakers; the proportions should also be decided by DAO. If a trader holds esHMX in vesting for 1.5 months, they pay a 25% penalty; if they hold it for 3 months, they pay a 1% penalty for unstaking.
Ability to Lock esHMX for 1, 2 Years or forever with Additional Income
Loyalty should be rewarded, so I propose enabling the lock of esHMX for one and two years or forever. These tokens cannot be force unstaked during this time and should be given increased income. This could be a part of the project’s revenue from the sources described above or directed incentives like those from Pyth. Alternatively, the project could buy ETH with part of the profits and distribute them to locked esHMX.