APR management discussion

This is more of a discussion than a proposal, any changes to APR will only be done after careful evaluation and a governance vote. We are posting this as this was brought up in the Telegram group by @kalcrypto1 and we think it makes sense to be discussed.

As we have seen from past performance the amount of fees received by the protocol can fluctuate significantly from week to week. This leads to large changes in the APR of both GMX and GLP at times.

A possible way to smooth out this APR would be:

  • If the APR for GLP is more than 30%, transfer the excess fees to a treasury contract, the excess fees should be from both the GLP and GMX portion, so e.g. if there is $500 million worth of GLP tokens and fees for the week is $5 million, 70% of that would give GLP an APR of ~36%, in this case the total fees distributed for both GMX and GLP should be 30 / 36 * 5 million => $4,166,666, and $833,333 would be transferred to the treasury

  • This treasury can be used in case of emergencies, it can also be used to help smooth out the APRs, so if there is a week where the APR of GLP is below 20%, then instead of increasing APR with esGMX rewards as detailed in Snapshot, an amount of funds equivalent to 1/52 of the total treasury can be used to increase APRs for both GLP and GMX

Benefits

  • More predictable APRs for LPs and GMX stakers
  • Reduced esGMX emissions

Drawbacks

  • APR for GLP will be capped
5 Likes

Personally, I’m a big fan of this proposal! Reliability and predictability are important for investors. The bigger GLP gets, the more efficient our protocol gets, the more market share we can take. This proposal will build a real sustainable stream of revenue, aligning with long term holders of GLP. Makes GMX very robust for the long term!

1 Like

I love this idea! I would also be a fan of increasing GMX APRs (if they’re below a treshold) when the treasury allows it. But then again we need to make sure to first boost GLP rewards and make sure that we have enough treasury in case of emergencies.

1 Like

I think I’d bet a little worried about the treasury growing massively if, for example, it had been around this week. When is this APR being calculated? GMX dropped almost 50% this week and the APR skyrocketed.

As someone mostly in GMX, I can tell you my view is that the holders who stay through periods of high volatility (usually to the downside) to earn those huge APRs, see their return for high risk be dolled out slowly to users to dumped and then came back in times of stability?

The current design already does this being based on the previous weeks fees (e.g. everyone who jumped ship over the last few days but re-enters next week gains the same rewards as those who stayed) and this will make things worse for GLP (GMX has the bonus points which mitigates things a little bit).

I honestly wish rewards were based off the previous 4 or 12 hours, though wildly fluctuating APRs would result.

I’d be against this proposal.

2 Likes

I’m not a fan of the proposal.

I think the benefits of smoothing the APR are miniscule compared to the complications it brings. GLP price will also still be volatile, so a smooth APR will not really help with financial planning.

It also sounds like the average APR will be lower overall.

1 Like

I see the point, but one thing to consider are multiplier points. Let’s say we hit the threshold for max APR, will your MP points become worthless at this point for the upcoming week? On the other hand if you could boost your APR above the limit with MPs this might actually be a nice initiative for long term holding

Edit: alternatively, MPs could be changed to increasing APR for both GMX and GLP if the max limit is reached. This would incentivize people holding both, GMX and GLP

1 Like

Not sure I’m a fan of this idea. I understand the appeal of a stable APR, especially for GLP, but what happens if there are weeks of sustained low volume/fees generated and this treasury becomes empty? What will be used to smooth out the APR then? How would the multiplier points work? I think it adds unnecessary complications for the potential benefits.

1 Like

I strongly oppose and would vote against such proposal. This will bring a lot more confusion and questions than before. Probably a simpler solution to this problem would be to change from a weekly to a monthly fees accumulation schedule without changing anything else. This should significantly reduce APR volatility.

1 Like

I would be against this.

The rest of the roadmap here is far more important than this. This is a vanity feature. It sounds nice but the net gain to the protocol in terms of growth is likely minimal. This isn’t going to be a 2 day feature. Doing this means you’re losing time delivering features that matter, like, say the TradingView integration or closing a position and receiving any token. These are things that might make traders actually use the platform more. If you look at holders of GMX or GLP you’ll notice that “mercenary capital” doesn’t flood in during time of increased fees and abandon immediately thereafter. Most LPs stick around, and so a fluctuating APR matters little.

The majority of people who ask “why APR dip” in TG and Discord are wanderers. They literally are not the ideal customers of GMX anyways so why pander?

If we’re doing this for the sake of building a treasury, I think it makes more sense to have the protocol take 1-2% of weekly fees for emergencies. As an LP I’d take “hey the protocol takes 2% of fees for emergencies and growth” over “hey your APR is capped, but you might get some of that back if volumes are low for a couple weeks”

6 Likes

Im against this proposal as well - at least in its current form. Especially for GMX holders it reduces value accrual, and effectively reduces the incentive to hold through times of significant volatility. Since gmx can fluctuate much more in price, the aprs will always be volatile and can easily exceed a min threshold, especially during drops. I see the rewards as a direct benefit of hanging on to and long-term staking of the GMX token, and I’d rather new buyers come in to catch strong revenue weeks by buying into GMX (thereby reducing any downside risk) than losing out on disproportionate rewards during a week gmx was exposed to volatility. Technically, eventually the market should stabilize both GMX price and aprs anyway, because demand for higher Apr should slowly drive gmx price up.

I would not be opposed to ONLY use part of GLP specific revenue being allocated to smooth out only the GLP APR and grow the treasury that way. Because price of the basket fluctuates less (historically) those APRs could easily be stabilized that way and it would further distinguish the two token options while maintaining the original incentives for both GLPers and GMX holders.

Lastly - high gmx APRs (even if temporary) are also a great marketing tool and will further draw attention to the project.

3 Likes

I’m also against this proposal. I largely agree with the points @sevpants brought up. If building a treasury is necessary, I’d rather have the protocol skim some of the fees from LP’s.

1 Like

Fixed vs Variable / Oh-no, an age old discussion :slightly_smiling_face:

It may likely fail vote in terms of personal viewpoints.
I like it… but it’s pitch-format will fail
I’ll try and repackage it - with a twist…

Re-incentivize proposal as a APR Price-Floor Fund Component similar to current *price floor fund. The description incorporates user-friendly ease of clarity-understanding.

And to win the vote add *optional… "Opt-In/Use-Case Function offering :thinking: ??
both …fixed and variable apr ?

  • Which is akin to ? legacy model ? It’s more math , no ?

  • Could …User Opt-In / Use-Case …be viable ?? :slightly_smiling_face:

  • Our users love options :heart_eyes: …But will we get in trouble :grey_question:

The Opt-In strategy, - will benefit both target-market roi as-well-as maintaining boost to our *current public exposure & meanwhile boost retail and vc institutional appeal(s).

It’s natural modelling.

  • We draw and maintain both crowds/parties that way.
  • Can it be warranted though ?
  • Even if we buy time ?

If we moved to *Fixed are we impairing :grey_question:
And if so, - what proportional extents.

My bias is we prioritize work-load on extremity-length of regulatory.
Even-though the above is a stability component - we above all work with *time
And given upcoming and present X4 Developments vs Staff.

  • Rollout vs Time - The balancer, is it worth precipice :grey_question:

Wrapping up, …
My vote notes let *variable reign ; and my bias pends too regulatory time-frames or the above motion suffice change.

Humans are animals, let them be cyclical

I agree why we doing this for GMX, I thought this was for GLP only

Smoother dividend flows typically (real world) are more highly valued than unpredictable ones, due to the relative assurance they provide.

Thank you everyone for the feedback on this, will look into the issues brought up and re-propose, maybe something more conditional might make more sense, e.g. only cap APR if the price of GLP increased and outperformed the index for the week, another additional condition could be to only boost APR if utilization is high. With these conditions it could help us to increase liquidity when it is needed and to keep liquidity at just the right size for utilization otherwise.

2 Likes

Wouldn´t such a structure incentivize the following scenarios:
In times of overall high trading / fee accumulation but capped APR people might look for alternatives to earn higher APR with different protocols but then in times of overall low trading / fee accumulation coming back to GMX to now harvest the fixed but higher (in comparison to other protocols) APR?
Maybe i am missing something but to me it feels like something like that may result in attracting more wanderers / yield chasers to “loot” the treasury in bad overall market times ?
For long term investors the APR will average itself out anyway, no ?

3 Likes

good point, that could happen as well

Looks interesting and promising!

As mentioned by Zano, why not have a mixed of both Fixed and Variable apr? As a small retail long term holder, it would be best if let say we have:

  • base apr, e.g. 10% (it gives an assurrance that during a bad time at least there will be a 10% apr payout)
  • variable apr, e.g 0%-35% capped which is on top of the base apr (like mentioned high variable apr when there is high utility. and anything exceed the capped will be in treasury (to be able to payout the base apr in bad times) or be given out in:
  • multiplier/bonus/booster apr, rewarding those who hold for long term.
1 Like

interesting idea, I don’t think we can ensure a fixed APR though, cos the funds for it would have to come from fees to build up a reserve and if we give a fixed APR it is possible for that reserve to run out quickly which could reduce the APR below the fixed percentage

1 Like