Trade Limitless With HMXSponsored
Optimized DeFi and Leverage Trading on Arbitrum
By: Squiffs • Loading...DeFi Explainers
What is HMX?
HMX is a decentralized perpetual platform built on Arbitrum offering cross-margin and multi-asset collateral. With plenty of decentralized exchange (DEX) competitors on the market, HMX separates itself from the herd with unique economics and features designed to make their platform both user friendly and efficient.
The pivot from centralized exchanges (CEX) to decentralized exchanges (DEX) has been a theme throughout 2023 and the market’s desire for expansive DEX trading is as clear as ever. As activity across the board is beginning to pick up again, HMX’s futures focused platform provides a one-stop-shop for all CEX native perp traders looking for a new home.
Decentralized perpetual protocols allow for futures trading via a decentralized exchange platform. Despite most existing products having limited features, DEXs are preferred for many traders as the user's assets are self-custodied and verifiable on-chain.
This transparency layer prevents misappropriation of funds and allows for extra security from a single point of failure. That being said, lack of overall UI/UX innovation and liquidity has left many perpetual native traders hesitant to move off of their native CEX’s, leaving decentralized perp platforms with a massive market share to claim.
Locked and loaded with an array of features, HMX has come to Arbitrum to revolutionize how traders interact with decentralized platforms. Offering a similar user experience to centralized exchanges while retaining the benefits of decentralization, the launch of HMX has added a new horse in the race for the top decentralized perp platform.
Futures and Their Purpose
To put it shortly, Futures are a speculative derivative of the base asset. Take Ethereum for example, futures allow traders to speculate on exactly what it sounds like, the future price of the asset. It’s not Ethereum itself, but a projected outcome of it, and in doing so the hard asset itself is not obtained by the user.
This comes with a few advantages that platforms like HMX can capitalize on. In particular, leverage positions become much more expansive which can help maximize user reward (and risk) when taking a position with a smaller bankroll.
This ability to spread capital out efficiently across the platform allows users to experiment with everything HMX has to offer. By leaning into specifically futures trading the platform can offer a seamless and versatile trading hub for crypto, forex and commodities with up to 1000x leverage and flexible collateral.
The market has shown a desire to continue moving towards decentralized exchanges as their primary trading hubs, only to be inhibited by the lack of available features on the average DEX. Since October 2022 the DEX to CEX Spot volume has increased significantly from roughly 8% to 13%, peaking at a high of over 20% in May 2023. Meanwhile the DEX to CEX Futures volume has stayed relatively stagnant over the same period of time.
Some of the main issues holding back a much larger percentage of futures traders may come down to lack of liquidity and features. To counter this, HMX has designed their product with a CEX-like UI/UX and rehypothecated liquidity from GMX’s LP to bootstrap its initial liquidity.
Diversify Your Strategy
HMX offers an array of features including Perpetual Futures and Leveraged Market Making. More notably HMX features cross-margin collateral management and multi-asset collateral support, which allow for the sharing of margin balances across multiple positions whether you’re backing it with BTC, ETH, USDC, USDT, DAI, or any other supported collateral currency.
While many perp platforms have taken steps to allow more flexibility for diversified traders, HMX is the only pool-based decentralized perpetual protocol that offers cross-margin collateral management with multiple assets offered as collateral, all while offering some of the lowest trading fees possible.
With cross-margin collateral, users are able to manage their portfolio efficiently and conveniently. This improvement in capital efficiency will allow for a much wider use of funds for traders so users can maximize the potential of their bankroll, and also remain flexible for the many opportunities that present themselves throughout Web3.
DeFi yield seekers can benefit as well through HMX’s novel Leveraged Market Making feature. Leveraged Market Making is done by rehypothecating liquidity from GMX’s GLP pools to market make for traders at HMX. GMX recently upgraded to GMX v2 in which they’ve introduced GM pools. GM Pools are the v2’s new liquidity pool that will be incentivized with 6m $ARB tokens from the recent Arbitrum’s Short Term Incentive Program (STIP), thus leading to a higher anticipated APR.
As a result HMX plans on following suit and upgrading its HLP composition to focus on the new GM pools. This allows for those who deposit HMX’s liquidity pool token, $HLP, to yield fees simultaneously from both GMX, and HMX at the highest valuation possible.
Unique Tokenomics and Incentives
As fantastic as the platform sounds on paper, decentralized protocols need a strong foundation in their tokenomics that sustains the long term health of the platform, and is also beneficial to its top users. HMX’s tokenomics is built out with a focus on two primary goals: token price sustenance and generation of real yield.
Farming and dumping has always been a huge issue in DeFi tokens. In order to reduce sell pressure on $HMX, HMX’s incentive rewards are distributed in escrowed tokens, referred to as $esHMX. This $esHMX then must go through a period of one year of linear vesting prior to becoming liquid.
In order to incentivize $esHMX and $HMX holders to stake their tokens instead of vesting them, Dragon Points ($DP) are awarded to them at 100% APR. When staked, $DP is seen as equivalent in value as $HMX & $esHMX, and earns 25% of the protocol fees, shared with the other two tokens. On the other hand, $DP awarded will be burned at the same proportion as $esHMX or $HMX tokens are unstaked which incentivizes holders to keep the tokens staked.
Through HMX’s multi-token economy users are incentivized to trade, and then rewarded via real yield distributed through protocol fees in the form of $USDC. HMX’s incentive system awards $TLC to users based on total leveraged volume traded, with varying distributions depending on the asset type. For example users generate 1 $TLC per dollar traded of Forex, but 4 $TLC per dollar traded of BTC.
$TLC functions as an effective rewards system that spares unnecessary sell pressure on $HMX while incentivizing traders to trade more on HMX. Many protocols in the past have emitted rewards in the form of their governance token, which has often resulted in LP’s dumping their token to immediately recoup cost or profit. Instead, HMX chooses to reward its traders in the form of $TLC
Holders of $TLC tokens receive weekly rewards in the form of $esHMX, which are distributed based on their usage of the platform. This strategy effectively incentivizes traders, who are the primary contributors to the protocol's revenue. $esHMX rewards earned from $TLC can be viewed as a subsidy for trading fees, reducing the barrier and switching cost for the traders. $esHMX can be further staked to yield $USDC, $esHMX, and $DP.
Through this model increased trading volume leads to increased protocol revenue, which results in larger revenue distribution for those that stake, thus incentivizing overall trade volume. This flywheel effect not only subsidizes the cost for traders to keep their position open, but offers additional incentives and profit potential for long term supporters.
HMX power users are one of the core components to the platform's success, which is recognized and rewarded by the team. The HMX referral program offers both fee rebates and a scaled discount on trading fees for heavy traders. So those who share their links can receive up to a 15% rebate on referred user trading fees. Furthermore, on top of HMX’s already low fee structure, users will receive a further discount on fees based on their trading volume. This cyclical incentive structure allows the platform's top users to be continuously rewarded while driving more volume through HMX as a whole.
Expansive, Secure, Efficient
By combining the best of both DEXs and CEXs, HMX offers traders and DeFi users of all levels a streamlined and secure experience. Following the collapse of FTX, crypto participants across the world are more wary than ever of the importance of self custody. With HMX, users are provided a growing list of features and real yield with everything verifiably distributed on-chain.
Following a red hot start to their open beta in August, HMX's first few months of operations have been strong. The protocol has yielded over $2m in fees since launch, with a TVL of roughly $30m, all while supporting over 60,000 trades and $4.5b in trading volume. The strong growth off the bat proves promising as HMX looks to convert more CEX traders and DeFi enthusiasts into regular users of their platform. The development and growth of the HMX ecosystem has resulted in over 4000 unique users since its full-scale launch.
Exploits can occur far too often in DeFi, which has been recognized by the HMX team. Throughout the development of HMX, security audits have been conducted by reputable firms and individuals to ensure user safety. With successful audits from Cantina, WATCHPUG, and 0xFoobar, the HMX team has explored and resolved any potential vulnerabilities drawn to their attention.
Low fee structures, incentivized use, and well balanced rewards lay the base for a sustainable future in the early innings of HMX. The decentralized spot market has paved the way for top DEX platforms to claim a portion of liquidity from centralized competitors, which presents the potential for significant growth .
Get Started Today With HMX
HMX is developing the next generation of interoperable DeFi and DEX trading. With so many different options within the platform, its versatility is appealing to savvy CEX users, advanced leverage traders, and DeFi yield farmers alike.
HMX launched as of August 10th 2023 and is open to those that wish to begin trading, yield farming, and contributing. The novel take on Leveraged Market Making, cross margin collateral and multi-asset collateral support makes for a deep ecosystem ripe with opportunity on the leading layer 2 blockchain, Arbitrum.
With over 9000 active community members amongst Discord and Telegram, and over 4000 unique platform users, HMX’s launch has built a strong foundation for future success. While having only been live for 4 months, HMX has already supported over $4.5bn in total trading volume and over 60000 trades. Through competitive UI/UX built on top of Arbitrum, HMX is here to take the decentralized exchange revolution to the next level.
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