We are pleased to announce the release of the Hxro Liquidity Producer Pool Report.
The Liquidity Producer Pool program is the heart of the HXRO token economy and offers our community the opportunity to participate in and earn from the growth of the Hxro network.
This report provides prospective LPP's, on-platform users and other HXRO wallet holders a transparent and comprehensive review of the LPP program and its related token economics. If you have any questions, please do not hesitate to get in touch with us at LPP@hxro.io.
Liquidity Producer Pool Report
US persons are strictly prohibited from participating in the Liquidity Producer program.
HXRO is a new type of crypto derivatives exchange platform. The platform offers a simple way to express a view on price, hedge risk and trade digital asset markets. HXRO’s MoonRekt contracts are peer-to-peer, adding an unmatched level of transparency and fairness to users. The project was founded by seasoned derivatives traders with 40+ years collective experience.
Key Takeaways HXRO Project
- HXRO has differentiated itself from traditional crypto derivative exchanges with unique, simplified products and more attention to the retail user experience.
- HXRO’s peer-to-peer parimutuel markets provide the fairness, transparency and 24/7 liquidity of DeFi with the benefits of a high throughput web app (centralized UX reduces fees and offers fast speeds unlike other crypto apps).
- The release of V2 of the platform has driven strong user growth (active users are at record highs) and total notional liquidity has held steady.
- HXRO is led by two financial market veterans, who collectively have 40+ years of experience in both legacy and crypto markets
Key Takeaways LPP Program
- HXRO’s LPP Program (lock 250k tokens for fee rebates/benefits and for a pro-rata share of ⅓ of net platform fees) offers a virtuous growth cycle where LP’s acquire HXRO, discounts drive usage and liquidity, increased liquidity attracts more users and increased fees incentivize more LP’s to acquire LPP units.
- To offset token unlocks and open the platform to more LPs, HXRO will offer a maximum of 2k units (currently ~100) over the next seven years. In any given year, 100-500 units will open at discretion of management. A max of 50% of HXRO supply is for LPP units.
- LP yields vary based upon HXRO’s token price, fees generated on the platform and the number of units for fee distribution.
- When analyzing these three variables across different HXRO prices and total fees for 100, 1,000 and 2,000 LP units, yields varied from low single digits to very strong yield levels (pages 11-13).
HXRO Is A Gamified Derivatives Platform
HXRO is a gamified platform that allows users to express an opinion on price in a fair and transparent way. The system takes inspiration from legacy financial markets and gaming to appeal to a wide array of users - from retail (looking to speculate and play the market) to institutions who can use the products to hedge risk and capture edge.
HXRO’s core products use parimutuel technology and standardized time frames, which aggregates all positions into a liquidity pool with the in-the-money positions sharing the total pool at expiration. Since this is inherently peer-to-peer, users are afforded with an unmatched level of fairness and transparency. MoonRekt users don’t compete with high frequency market makers or risk having an exchange trade against them. All index price feeds are independent to the HXRO platform.
HXRO takes very complicated financial derivatives and distills them down to easy-to-use and gamified instances: one-click decisions for users to take a position on higher or lower prices. These products appeal to retail users (quants, speculators, hobbyists, new participants) looking to speculate and play the market; and institutional users (proprietary trading desks, hedgers, speculators) looking to hedge risk and capture edge.
Parimutuel Contracts Are Extremely Fair and Transparent
HXRO’s platform offers one of the fairest and most transparent derivatives experiences.
Since every contract is peer-to-peer, HXRO’s parimutuels offer an unprecedented level of fairness that is differentiated vs other venues which are dominated by high frequency market makers. Every contract settlement corresponds with time stamped pricing data from external sources and transparent payouts that are visible at all times.
HXRO’s parimutuel contracts bring together the exciting aspects of gaming and betting in the form of a derivative. Each MoonRekt contract is P2P, and the size of the contract pool is based on participation on each side. The winning side shares the total pool at expiration. For example, let’s say a MoonRekt contract has Moon positions (price higher) of 700 HXRO and Rekt positions (price lower) of 300 HXRO. If the Rekt side prevails, the 700 HXRO from the Moon side is paid to the Rekt users. If the Moon side wins, the 300 HXRO from the Rekt side is paid to the Moon users.
HXRO’s MoonRekt contracts run perpetually; the settlement price for one game (i.e. bitcoin at some price) is the strike price for the next contract. Given this dynamic, MoonRekt parimutuels run 24/7/365 and are always available to participants.
The platform offers short (1-minute, 5-minute) and long (daily or longer) contracts for retail and institutional traders to hedge or express a view on price based on multiple different time periods.
HXRO offers the best of DeFi (transparency and fairness) with the user experience of a high performance web application to drive useability and to avoid high on-chain gas fees.
While MoonRekt is the platform’s flagship product, the team plans to ship additional and differentiated products over the course of the next 12 months.
MoonRekt Key Features
- Perpetual: Each time frame runs perpetually, with the expiration of one contract marking the start of the next contract.
- Simple: Take bullish (moon) or bearish (rekt) positions in the most familiar and studied technical analysis time frames: 1-minute, 5-minute, 15-minute, 1-hour, and 1-day.
- Parimutuel: Traditional derivatives require matching buyers and sellers. Hxro’s MoonRekt products are parimutuel, meaning all positions are aggregated into the contract payout pool and paid to in-the-money positions.
Active User Growth
HXRO has recently attracted strong user growth following the release V2 release of the platform along with trading competitions, new products and prizes. Monthly, weekly and daily average active users are at record highs at approximately 30k/5k/1k, respectively.
Liquidity on HXRO’s platform has remained steady following a notable increase from ~$500k to $2M+ earlier this year before settling around $1.25M. The team expects liquidity to increase following organic growth, onboarding more trading desks and retail users and attracting LPP’s to the program who double as users.
LPP Program: A Virtuous Liquidity Cycle
Well Capitalized and Engaged LPs are Bootstrapping The HXRO Ecosystem
The Liquidity Producer Pool program is the heart of the HXRO token economy. Interested parties can become liquidity producers by locking up 250,000 HXRO tokens in exchange for an LP (liquidity producer) unit. This unlocks fee discounts and rebates and also earns a pro-rata share of ⅓ of total network fees (BTC and HXRO) spent on the platform. Network fees are driven by a gross 3% platform fee on all MoonRekt contract pools. The LPP model helps bootstrap the entire HXRO ecosystem across three main areas:
- LP’s have to go to the market, or the HXRO team, to purchase 250,000 HXRO per unit which locks up a growing percent of tokens. Each LP is required to lock tokens for one year.
- Since LP’s are offered large fee discounts and rebates, they incentivized to be more active in HXRO’s products which drives more usage and liquidity to the platform.
- This increase liquidity attracts even more, and new, users and LPs to the platform.
- The increased liquidity and usage drives fees to the platform which incentivizes existing and new users to lock up HXRO and become LPs which creates a virtuous cycle.
Given the commitment size to be an LP, HXRO has attracted large and well-capitalized and engaged players to its platform who are bootstrapping liquidity and helping to drive the project forward.
- 80 units currently claimed in June/July 2020
- 2,000 units max
- LPs earn a pro-rata share of ⅓ of platform fees
- Each LP unit is 250,000 HXRO tokens. This will not change so LP’s can simply add units to increase exposure to the ecosystem.
- LPs unlock additional benefits including fee discounts and fee rebates for HXRO’s products
- LPP program launched June, 2020.
LPP Unit Supply Dynamics
To be an LP in the LPP program, a prospective LP has to lockup 250,000 HXRO once an exchange unit is open. Units are unlocked at the discretion of HXRO’s management, but will likely follow the below projection (image 2) to offset token unlocks by early investors to help mitigate the potential negative effect of large token unlocks hitting the market and to help further bootstrap the ecosystem through additional LPs. Given token unlocks (next slide) HXRO will look to open between 80-400 units in any given year (Chart below accounts for token unlocks not treasury sales).
Currently, 80 LP units (20M HXRO) have been taken and there is a maximum supply of 2,000 units which translates to 500M HXRO, or 50% of the total supply. The remaining HXRO will be used within the platform, held by speculators and held by users of the platform to unlock rewards and features (discussed later on).
A supply of units (20 to start - 5M HXRO) will be used for a community staking pool, where token holders can stake their HXRO to earn a percentage of fees, with the goal of graduating to full LPs. This will be a seamless onboarding process for users to drive even more HXRO to be staked and locked up.
Currently there are 143.46M HXRO tokens in circulation of the 1B token maximum supply. There are two tranches of tokens representing 12% and 40% of the max supply which unlock in the coming years. Given this is a large influx of supply, granted over several years, the best case scenario would be for prospective LPs to acquire these tokens when they are unlocked to become LPs, mitigating the effect of new supply entering the market. Realistically, there will also be net new demand for the tokens from non-LPs which should also help mitigate the inflow of new tokens in the market while also helping with distribution by allowing new tokens to flow into the wallets of new users.
Key unlock metrics
- 400M token tranche unlock starts in June 2023 and occurs over 4 years or 8.3M tokens per month.
- 120M token tranche unlock starts June 2021 and occurs over 2 years or 5M tokens per month.
- A variable amount of tokens will be released from the HXRO treasury for operations, prospective LPs who approach HXRO for tokens and other uses. This supply schedule assumes 12M tokens are released from the treasury per year, or 1M per month.
LP Yields - Assuming 100 Units
Given yields vary based on fees and HXRO’s price, the market will determine an equilibrium acceptable yield over time. To explore prospective yields for LP’s the below table demonstrates the gross yields for LP’s based on various HXRO prices and fees to LPs.
For context, through the end of June, cumulative platform trading fees topped $3M. If we look at volume and platform fees for 1H20, the annualized LPP fee share would be ~$1M. In the below scenarios we used $1M as the baseline fee share to LPs, with $0.10 HXRO as the baseline token price, given this is the prevailing market price.
With 100 units, yields to LP’s are quite favorable even at low total platform fee levels. Between a HXRO price of $0.10 to $1.90, yields range from 40% to 2% assuming $1M in annual fees to LPs which is conservative given it assumes no growth.
These yields assume the HXRO LP unit was acquired at the prevailing token price in that row, so those LPs who acquired units at lower token prices, will have higher yields since fees are distributed pro-rata per LP unit.
LP Yields - Assuming 1,000 Units
Below we share a table on LP yields assuming 1,000 units, or the midpoint of total available units in the LPP program. Yields at lower total fee levels have fallen considerably, at $1M in total fees yields range from 0% to 4% at various HXRO prices. Although given it will take several years to hit 1,000 units, a more logical conclusion is to assume total fees experience growth, and thus yields will rise. If HXRO increases fees to LP’s by 16x or to $16M, yields vary from 3% to 64% depending on varying HXRO token prices.
LP Yields - Assuming 2,000 Units
Lastly, the below table demonstrates yields assuming all LPP units (2,000) have been acquired. This would be several years out, and at a mature point in HXRO’s growth, as such yields are only attractive assuming large platform growth from today’s levels. If HXRO is able to drive usage and fees to the platform and LPs, yields are attractive despite the increase in units from current levels (80 units today).
HXRO Lockup For Rewards
Beyond locking up HXRO in the LPP program, the team expects a portion of HXRO to be held by users of the platform to access fee rebates which is an indirect way to lockup a portion of supply, albeit with no on-chain time lock. While larger players can access bigger rebates through the LPP program, retail and smaller users can still access rebates by holding HXRO which aligns them with the platform’s native token.
Noteworthy LPP Unit Holders