With perps being the most popular product in crypto, hundreds of projects are trying to grab a slice of this growing pie. The competition is so fierce that we’ve often wondered why these projects keep popping up.

But then it hit me. Blockchains resemble distinct countries, each with its own array of businesses.

Naturally, these countries will include familiar establishments like grocery stores, pharmacies, and cinemas. The same goes for food delivery and car-sharing apps.

For example, in the US, there’s Uber and Uber Eats, whereas in Europe, an identical service is offered by Bolt and Bolt Food. Although they’re identical products, both can thrive impressively within their respective regions.

Keeping that analogy in mind, it follows that each blockchain will feature its own variations of similar products. To succeed as a perp DEX, there's no need to reinvent the wheel; instead, you simply need to offer the best service in a specific on-chain domain.

The project we're going to discuss today resides on Arbitrum and has been overlooked by most. It quietly brings in volumes on par with the likes of GMX and, at times, even exceeding them.

So far, the protocol has been a quiet triumph.

However, as we enter 2025, the combination of a complete rebranding, revamped tokenomics, and the introduction of a central limit order book (CLOB) is set to create the perfect conditions for an explosive year ahead.

Pay attention, even sentient computer programs are talking about it.

Introducing HMX

Originally called Perp88 and first launched on Polygon, the project quickly pivoted to Arbitrum and was subsequently rebranded to HMX. The name derives from the fact that the protocol utilizes GMX's GM token underneath.

Despite that, HMX has achieved immense success on its own. It consistently demonstrates substantial trading volume on V1 and ranks among the top five perpetual DEXes on Arbitrum.

HMX has been battle-tested for over a year and has executed more than $50 billion in trading volume. During this period, HMX has consistently ranked as one of the top-10 derivatives exchanges in crypto across metrics such as volume and revenue.

Are you begging to see the immense opportunity at hand?

Existing product suite

While the perp DEX product has been around for a while, teams have been pushing the edge of what can be built on decentralized rails ever since. HMX is no different.

But first, let’s get the obvious out of the way. The DEX features two distinct sections: Trade and Earn. Like many other perp DEXes, HMX has a liquidity pool called the HLP, used for market-making purposes.

Let’s start with the main attraction — leverage trading imaginary Internet coins.

Trade

HMX features a sleek and modern trading interface that, together with the protocol’s functionality, closely mirrors that of a CEX. As HMX uses re-hypothecated liquidity from GMX, the protocol can afford to offer lower fees to traders than the market rate.

Traders also have the option to enable gasless trading, where the protocol pays the transaction fee on their behalf through intent-based architecture.

The cross-margin functionality and multi-collateral support distinguish it from other offerings, enabling traders to adopt different trading strategies based on risk tolerance.

For example, if you think Vitalik and the foundation will finally stop selling coins, you can implement a max-long strategy using ETH as collateral to go 100x long on ETH for maximum exposure, thanks to multi-collateral support.

Conversely, if global liquidity (M2) is declining and inflation is starting to rise again, you can use USDC as collateral to protect your principal while flipping short.

The cross-margin functionality, however, enables a CEX-like trading experience and enhances capital efficiency by ensuring that when one position is underwater, the collateral supporting other positions that are ‘’in the green’’ can help balance things out.

For traders who prefer a more cautious approach, there is also an option to segregate positions using sub-accounts.

To facilitate the unique cross-margin and multi-collateral features on HMX, the developers had to develop a proprietary oracle aggregator.

This is essential because when managing positions — whether opening, closing, or adjusting position sizes — the protocol needs to accurately fetch oracle prices and assess the overall health of the account across all positions. This process can be costly.

HMX has devised an innovative technique to optimize and compress price data from Pyth and Stork to tackle this issue.

This enhancement improves gas efficiency and allows multiple price feeds to be processed in a single transaction, all while safeguarding against oracle manipulation and reducing gas costs by a factor of ten.

Now, onto the other side of the equation.

Earn

As mentioned, HMX features the LP model based on GMX’s GM token, which serves as a decentralized market maker. In this setup, depositors act as counterparties to all the traders, and since most traders eventually lose against the house, this is a very favorable position.

What makes HLP particularly interesting is that depositors accrue fees from both HMX and GMX, enabling what the team has coined — leveraged market making. The liquidity contributed to the vault supports market-making activities for traders on both platforms, increasing the earning potential.

To participate, users have two options. The first option is to deposit assets into GMX's GM pools, where the acquired GM tokens can then be staked on HMX to receive HLP tokens. The quicker route is to simply deposit USDC.e directly into the HLP.

Regardless of the option chosen, HMX takes the necessary actions behind the scenes to ensure that users continue to earn 100% of the yields from GMX’s GM pools.

HMX utilizes the liquidity from staked GM tokens to support trading for its users through HLP, leading to profits or losses from various trading activities and fees. These earnings are converted to USDC.e, with half distributed to liquidity providers.

Additionally, HMX collects trading fees and yields from GMX, which it then shares with users along with esHMX emission rewards. The yields from GMX are automatically reinvested as GM tokens in HLP.

I realize that the abbreviations HMX, GMX, esHMX, GLP, and HLP can be quite overwhelming. The key takeaway is that if you provided liquidity in HLP over the past month, you would have earned some of the highest yields in the entire market.

So far, we have established that HMX provides a trading experience that meets industry standards and offers lucrative incentives for liquidity providers.

And yet, the job’s not finished, and the upcoming year for HMX promises to be electric.

A new era

Several key initiatives are going live in Q1 2025, starting with the rebranding. This will introduce a much-needed fresh image and a new mascot, along with updating platform interfaces, social media presence, and marketing materials to reflect the new brand.

The team is actively working on many fronts. Around that time, the platform will introduce new trading infrastructure based on the central limit order book (CLOB), enabling traders to choose their preferred counterparty setup.

The CLOB model has significant advantages over pool-based systems, particularly in enabling the listing of coins with smaller market caps.

CLOBs also provide a more efficient cost structure for traders, eliminate open interest caps for greater scalability, and support advanced trading features like real-time order matching and flexible trade settlements.

Most importantly, the new token, which will go live next spring, will reflect the new vision of the protocol and bring an improved economic flywheel to ensure a more effective value-accrual to the token.

Outline of the roadmap going into 2025:

• Q4 2024: Community review of the new tokenomics and governance feedback
• January to mid-February 2025: Rebranding and launch of CLOB model
• February 2025 onwards: Marketing campaigns fully launched to add visibility to their rebranding and new tokenomics
• April/May 2025: Migration of HMX to the new tokenomics system

Congratulations, you’ve made it this far, so here is the well-deserved alpha.

Tokenomics revamp

As you read this piece, a proposal is already live on HMX’s governance portal. It outlines the new tokenomics and what that means for existing stakeholders and new entrants.

Currently, the protocol’s revenue far outweighs the token’s market cap with a price-to-fee (P/F) ratio of just 0.36x.

To put that into perspective, the closest competitors, like GMX, Vertex, and Synthetix, have a P/F ratio of 4x, 13x, and 47x, respectively.

The lackluster performance of HMX hinges on two issues.

Firstly, the original token, HMX, was introduced in August 2023 and is based on the popular vote-escrowed model.

Holders can lock their HMX tokens or HLP shares and receive a non-transferable esHMX that grants them access to voting and protocol rev-share.

This mechanism is relatively straightforward. But in the case of HMX, there are also dragon points and traders' loyalty credits, which creates more confusion and fragmentation.

Secondly, a low circulating supply is a massive deterrent for most people in the current climate.

With a circulating supply of around 3.2 million tokens out of 10 million, nearly 70% of HMX tokens remain uncirculated.

With such a vast supply overhang looming over the horizon, investors are not keen to get dumped on.

The new token aims to simplify the protocol's economy and attract investors with better tokenomics.

If approved by the community, the tokenomics of the [REDACTED] token will look like this:

• Total Supply: 1,000,000,000 (increased by a factor of 100)
• 38% reserved for liquidity and incentive programs (more on that in the next section)
• 54% reserved for HMX conversion into [REDACTED] at a 1:100 ratio, ensuring no value is lost for existing holders
• Only 7.5% is reserved for investors and the team (reduced by 50%)
• A community-governed inflationary model, where the inflation rate is determined through an annual governance vote. For the first year, inflation is set at 0%

Regarding value accrual, the introduction of the CLOB is set to provide stakers with additional revenue.

Fees flowing from the pool-based model and CLOB will be collected within a Central Revenue Pool (CRP), from which half goes toward operating expenses and the other half toward token stakers.

Overall, the new vision for the protocol hinges on a well-executed token migration, and the airdrop is a big part of that.

Airdrops are dead, long live airdrops

Pretty much everyone who’s been in crypto knows that spending months testing various half-baked applications only to receive minimal rewards will make you feel frustrated, almost betrayed.

Whether VCs and teams like it or not, giving the community a significant stake in the protocol’s success is the best means of marketing you will get. Period.

Hyperliquid’s token launch stood in stark contrast to the lengthy trend of underwhelming airdrops, where teams typically allocated only single-digit percentages of tokens to the community.

It also set a precedent that forces the hand of any protocol doing an airdrop. Anything below that 30% mark will be deemed greedy, and people will simply move on to greener pastures.

Recognizing this shift, HMX is following in Hyperliquid’s footsteps and even raising the bar by allocating nearly 40% of its tokens to its users.

However, the balance of rewarding new entrants and long-standing community members is also crucial. For this reason, the team will allocate at least one-quarter of that airdrop to loyal token stakers as a token of appreciation. Pun intended.

Conclusion

In our book, the chads over at HMX are doing all the right things in preparation for a massive display of dominance in 2025.

With HMX already rubbing shoulders with the leading perp DEXes, all it takes is a little noise about the upcoming upgrades and an airdrop to propel this protocol to the forefront of people’s minds.

When attention inevitably returns to Arbitrum, people will re-discover HMX in its new and evolved form. You can expect a considerable increase in noise on the timeline, as people begin to call HMX "the next Hyperliquid."

Bet accordingly, anon.