HGP-64: Exchange CTO Poll

Background: HBOT Tokenomics

• As an open source algo trading framework, Hummingbot is an economic system that connects exchanges, developers, and traders:
  • Exchanges support Hummingbot Foundation via volume-based fee share agreements and sponsorships
  • Hummingbot Foundation pays community developers who build exchange connectors, fix bugs, and contribute other technical improvements to the framework
  • Algo traders and market makers use the Hummingbot for its advanced strategy framework, professional-grade exchange connectors, and new features like backtesting.
• The Hummingbot governance token (HBOT) has simple set of core tokenomics:
  • If the Hummingbot user base expands over time, they should generate higher trading volume and fee share, leading to a growing Foundation treasury
  • Through governance, HBOT holders have unilateral control how the Foundation treasury should be used (grants, buybacks, contests, etc)
  • HBOT holders are rational economic agents who can be expected to make governance decisions that maximize HBOT value

Too Many Exchanges, Not Enough Focus

• While this model has not been a complete failure, it also has not resulted in a sustainable increase in the Foundation treasury
• Through the first 8 months of 2024, Hummingbot Foundation generated $290,838 in revenues from exchange fee share agreements and sponsorships, versus $291,605 of expenses (primarily payroll, legal, and compliance costs).
• I believe that one factor is that the maintenance efforts and usage from Hummingbot users are spread too thin across all the exchanges in the codebase
  • Only a few exchanges have active fee share agreements the Foundation, but Hummingbot contains 50+ standardized connectors used by thousands of traders around the world
  • The need to maintain and update all exchange connectors means that not enough attention and focus is given to the exchanges that truly financially support the Foundation.

An Experimental Community Takeover

• In crypto, a “community takeover” (CTO) is parlance for a semi-coordinated group action by a decentralized community.
• I propose a governance initiative that incentivizes the Hummingbot community to focus on a single exchange, in order to generate community attention, increase trading volume, and boost fee share revenues over the next quarter
• Eligible exchanges would be those with active fee share agreement with Hummingbot Foundation ($500 or more received in last 3 months)
• For the winning exchange, Hummingbot Foundation would:
  • Use 50% of the fee share revenue received during Q4 2024 to programmatically buy back HBOT tokens over the subsequent quarter
  • Allocate a special 1M HBOT pot to fund community bounties that help the community run bots on the exchange (custom strategies, guides, Dashboard pages, etc)
• By incentivizing the Hummingbot community to focus on trading on a single exchange, this proposal may actually increase fee share from that exchange, mitigating the costs of this experiment and resulting in higher revenues for the Foundation than if this proposal were not enacted
• This would be a new Poll that takes place alongide the regular Polls that let HBOT holder allocate maintenance budget to exchange connectors.
• If this experiment results in a 50% or greater increase in the fee share revenues from the designated exchange during Q4 2024, I propose that the Foundation continue these quarterly Exchange CTO Polls in 2025.

Eligible Exchanges

Exchange	Fee Share Terms	Fee Share Revenues (past 3 months)
Gate.io	50% of fees	$16,234
Binance	30% of fees, lower VIP tiers and referred Binance accounts only	$11,942
Kucoin	45% of fees, lower VIP tiers only	$11,760
HTX	65% of fees	$1,165
OKX	50% of fees	$521

Bounty

1,000,000

For the winning exchange, the Foundation would allocate a special 1M HBOT pot to fund community bounties that help the community run bots on the exchange (custom strategies, guides, Dashboard pages, etc) during the subsequent quarter.