With so much discussion on GLP compensation in TG group. I would like to open this thread for discussion here. Just re post my writing in TG.
Guys,
I have been thinking about GLP compensation lately. Here is my line of thinking.
3 elements for GLP compensation: capital gain/loss + yield + esGMX.
esGMX is fixed on 100K/month now. Don’t want to touch it here. Will come back later.
The question is how we can mix without fee GLP price change and yield to divide the fee fairly to GMX and GLP ?
I propose a dynamic compensation schedule as follow:
Red Zone: IF GLP w/ fee price loses X% THEN GLP:GMX is 70:30.
Green Zone: IF GLP w/ fee price gains X% THEN GLP:GMX is 30:70.
Yellow Zone: IF GLP w/ fee price falls between -X% and X% THEN GLP:GMX is 50:50.
How much X% is open to discussion.
For example, X% is 5%. This week’s total fee is $1.2M. GLP Price belongs to Yellow Zone.
So the fee distributed to GLP:GMX is 50:50.
GLP holders got $600K or 29% ETH APR.
GMX holders also got $600K or 13.5% ETH APR.
The question is sometime we want to increase APR to grow GLP ?
esGMX entered here. We can change esGMX based on growth campaigns.
So probably we should simplify dynamic fee schedule to two zone
Red Zone: IF GLP w/ fee price <= -2% THEN GLP:GMX is 70:30.
Green Zone: IF GLP w/ fee price > -2% THEN GLP:GMX is 50:50.
Thank you very much for this suggestion, replied in Telegram but re-posting here.
I think it is a good idea, my main concern would be that if GLP is not doing well, then likely the market is not doing well, so reducing distributions to GMX at that time would be a double negative, and the impact could be more than having a fixed percentage.
This GLP compensation looks like a small change but It’s really quite fundamental. It creates the path to push forward GLP from high yield Debt to a Fund. When GLP is more like an index fund and GMX is more like a Fund Management Company, we can bring down the cost for renting liquidity, even turn it into negative someday.
If GLP is a Fund and it did NOT perform well, then GLP holders should be compensated more. GMX as a Fund Manager should share the burden with GLP holders. At the worst, market goes down and GMX got a 30% fee. This is our current model anyhow.
If GLP is a Fund and it DID perform well, then GLP holders can be compensated less. GMX as a Fund Manager should get more upside.
Yeah. Having enough Protocol Control Liquidity is essential. Like Equity in Tradi.
GLP is kind of Debt in Tradi. It is essential as well. We should leverage Debt with minimum interest.
GLP should be as big as possible.
e.g: 1B Protocol Control Liquidity and 20B GLP.
Green Zone: GLP w/ fee price > 6%. GLP:GMX:FPF is 30:30:40.
My thinking is to keep the percentage to staked GMX fixed for the near term, and to accelerate protocol owned liquidity when prices are doing well.
Also having a fixed percentage to staked GMX would make the GMX APR more consistent and it won’t feel like a double negative if e.g. the market is going down and then GMX APR also decreases.
Not against increasing protocol owned liquidity but during the last couple of downturns this has not been an issue and we have not seen much in terms of glp dumps. Therefore increasing rewards during those times seems gratuitous to me. If anything selling pressure was much more pronounced among GMX holders. Of course that APR goes up as a result, but the net incentive to hold gmx is more diminished than that of GLP holders (naturally). I therefore question whether the change should be to boost glp rewards beyond currently working levels. Why not lower apr overall and reduce more / less in the referenced zones to feed fpf so in current conditions rewards would go up to current levels, drop when GLP appreciates.
Good points, if GLP’s price is doing well, chances are that the crypto market is also doing well in general, so if the fee percentage taken is too high, one consideration would be liquidity providers might choose to hold WBTC or ETH directly instead of GLP. Which could lead to a shortage of liquidity when demand for long positions is high.
Taking 50% of fees for token holders is also quite a large percentage I believe, of protocols that have a liquidity provider model, this would be one of the highest percentages that I know of.
Hi X and Team. Congrat on the success of Avax Launch.
Dynamic fee schedules make things more complicated. Moreover, in the Green Zone: taking 70% of the trade fee does look very aggressive.
I researched the CRV Model and Geyser KPI model. Would like to share it here.
So in the CRV model Protocol takes 50% Trade Fee. (It is called Admin Fee). The APR for LPs are adjusted by CRV Token Rewards. LPs can sell this CRV Token Reward immediately. This likely attracts short term LPs only.
GMX Model with esGMX vesting over 1 year likely attracts long term LPs only.
We should have a system that attracts both short term and long term capital. After all, banks turn a lot of short term capital into long term capital. (Liquidity Maturing). Enter Geyser KPI or DXDAO Carrot KPI. It works like this:
If LPs hold capital in GLP for 1 week: APR is 60%.
If LPs hold capital in GLP for 1 month: APR is 90%.
If LPs hold capital in GLP for 3 months: APR is 120%.
So this works just like the interest for a bank saving account. And it is a system that can attract both short term and long term capital for GLP to grow to Billions.
GMX stats graph that shows Traders Vs GLP net PnL but does not account fees and esGMX price appreciation but i think GLP seems like a def a winner here so far
i think our AUM utilisation is too polarized, perhaps we should look to incentivize a certain direction(bull/bear) when the utilisation is low? so, if a direction util is low, lowering the borrowing rate or trading fees would increase utilisation and lower GLP risk, which is issue here
Although the initial proposal makes a lot of sense from the conceptual point of view I believe it introduces a lot of complexity in order to explain it to future prospects of GLP as its more difficult to calculate what is their Expected Value, so IMO it could be a good option if further funding to the PFP is needed to pay the team, marketing etc in the short term, but if that is not the case, maybe it is easier to continue with the 70:30 model, and in given time when the protocol has grown more, come back to the 50:30:20 model
With regard with the second proposal (bigger APR to GLP the more time are staked) I am not a big fan of it as I believe they are already getting compensated very well in general and in particular for being long term holders (their earned esGMX can be staked to obtain MPs and if they stay into GLP they can vest esGMX so their EV in 1 year would be bigger). Giving too much MPs to GLPs could harm the protocol in the long term as the “cake” has to be split in more parts
I echo the the words of DeFiMan; while a very interesting proposal I think this would distract us from further developing that could push the project forwards. The simple 70/30 is working and we can fund the GLP POL from Bonds with small impacts on price.
We are trying to fix what is not broken with this proposal. Just my 2 cents.
