[HIP-4] HMX Hoard Program Improvement For Deeper On-Chain Liquidity

Background:

In February, we launched the Protocol Owned Liquidity (POL) initiative, which dedicates 5% of the HMX protocol’s revenue to build up POL for future strategic uses. In April, we introduced the HMX Hoard program, a systematic program to use POL to buyback HMX.

Observation:

As we continue to build upon the success of our Protocol Owned Liquidity (POL) initiative and the HMX Hoard program, we have identified an opportunity to further enhance the stability and long-term success of the HMX token. After careful analysis and discussions among the team members and the councilors, we believe that an increase in the on-chain liquidity for HMX token would be beneficial for our ecosystem as it will give users and potential buyers the confidence that they will be able to enter and exit large positions without suffering large price impact.

Proposal:

To tackle this challenge and ensure the continued growth and success of the HMX token, we propose to modify our current buyback strategy for HMX tokens to improve the liquidity profile of HMX, with changes applied retroactively.

Instead of allocating the entire POL funds towards buying back HMX tokens, we propose using 50% of the funds for buybacks while retaining the remaining 50% in ETH , allowing us to inject both HMX tokens and ETH into the HMX-ETH liquidity pool.

Transition Phase:

Initially, we will allocate 100% of the newly earned POL funds to purchase ETH. These ETH will then be paired with the 30,439.3486 HMX tokens that constitute the POL and have been acquired through previous buybacks. Both will be added to the HMX-ETH liquidity pool. Once all the previously acquired HMX tokens have been utilized, we will seamlessly transition to the proposed 50/50 allocation.

This change will contribute to the overall stability and long-term success of our ecosystem, further strengthen the HMX protocol and provide enhanced value to our stakeholders. Here is a summary of the proposal:

Current HMX Hoard Program:

• Buyback of HMX tokens with 100% of POL funds (5% of the protocol’s revenue)

Proposed Modification to the HMX Hoard Program:

• Buyback of HMX tokens with 50% of POL funds (2.5% of the protocol’s revenue)
• Retention of the remaining 50% of POL funds in ETH (2.5% of the protocol’s revenue)
• Injection of both the bought-back HMX tokens and the retained ETH into the HMX-ETH LP

Benefits:

• Increase on-chain liquidity
• POL will grow from trading fees earned
• Diversify POL holdings into ETH