The proposal below is intended to create stability and help smooth out volatility in GLP fee distribution especially after the phasing out of esGMX incentives. This should create help ensure that liquidity remains strong in all market conditions, not focused on specific weeks with high distributions.
The fees available in any given week can be affected by a combination of factors most notably through open/close fees and distribution of accumulated borrow fees when open positions close (including those open over multiple distribution periods), which add to volatility.
In the event that the fees collected for payout to GLP holders exceed [20% APR], half of the incremental fee over the threshold will be directed to a Yield Stabilization Reserve (YSR).
Additionally, a minimum of [0%] of the YSR balance will be distributed and up to [20%] of the YSR will be added to the weekly distribution up to a maximum [20% APR] cap.
Below is a google sheet of the proposal with the assumptions shared, look forward to the community undertaking its own assessment, utilizing the attached information and their own research and perspectives. The numbers utilize are from stats.gmx.io and do vary from the actual weekly distributions on account of volatility on realization of tokens for distributions, precise timing of weekly switchover, plus accounting for referrals which are averaged out.
Notes
YSR is for GLP distribution and not for distribution to GMX staking, although similar models can be evaluated if the DAO finds them appropriate.
YSRs for each chain’s GLP will be distinct.
YSRs will be an asset of the DAO, and modification of its usage or distribution structure will be subject to DAO governance.
YSRs may or may not exist in GMX v2 or take a different form given their isolated market structures and yield distribution mechanisms.
The accounting for this proposal will be automated together with the weekly fee distribution.
I’ve been in favour of this for a while. And think that - in light of the increasing number of projects building on GLP, and how whale traders affect the fee distribution - it’s an even better idea now. The Stability will benefit many.
If it doesnt require sizable dev time, let’s get it done asap.
What about instead of just using a random set percentage, an average or mean percentage is used. The average of the past 10 or so weeks is what is used as the mean and YSR can balance based on how far away it is from the mean for that that week?
I would suggest putting that developer’s free time to fix GMX boost percentage. Boosts above 100% greatly dilute earning possibilities for new participants of GMX ecosystem.
I am in favor of your proposal, it’s just the timing doesn’t feel right. It would be a great feature for V2 though.
Speaking from the perspective of a protocol building on top of GLP (Revest) - any way to stabilize the yield would be amazing. The depth and long term performance of GLP can’t be touched by many assets - any way to stabilize the shorter term is a positive step to fixing one of the possible draw backs!
Love the proposal. Great for sustainability and predictability of GLP’s rewards. My first thoughts are that eventually this proposal will need to be adapted to conform to a changing market, unless, instead of the 20%, a moving average of x weeks is taken as proposed by kingblueberry. While that would lead to more volatility, depending on the MA timeframe, it would be worth it. This, especially with the upcoming Synthetic Markets system, impacting yields.
From a DeltaPrime perspective (platform on Avalanche, integrating GLP) I expect that, with and without the MA timeframe, having a YSR will lead to greater adoption of GLP on DeltaPrime, and will improve the investing experience on DeltaPrime as a whole. This because borrowing / deposit interest rates will be less volatile as a consequence of a more stable GLP (assuming GLP will have a significant influence on borrowing rates).
Interesting proposal! It should help to drive long term adoption of GLP.
Questions/first thoughts:
In the high volatility weeks the investors who stood up and kept their GLP on risk while seeing some fees that they earned transferring for another week may not be compensated enough to stay. We wonder if there is some sort of multiplier point system that could assist in this area
I like this idea for the reasons already stated in reducing week to week volatility.
Only feedback would be that the 20% threshold would ideally be evaluated over time on a chain-by-chain basis in instances where the YSR has accumulated a significant amount of fees (or not enough). I could see some occasions where that figure should be higher or lower depending on the historical chain performance of GLP.
Don’t overcomplicate things. GMX tokenomics is not simplest one and various terms as smoothing/averages/mean/ma timeframes/multiplier point system and others only adds insult to injury. I am against any changes in current tokenomic and fee distribution. Everything worked perfectly until now, so no need to change anything.
I am a big fan of this proposal and have suggested this and been trying to lobby for it for more than 8 months now. I think the model is simple enough as a first go at it and see how it works.
GLP smoothing will be an awesome addition to already an excellent asset to hold which mutes crypto volatility and a great passive income earner. To have a steady predictable passive yield is excellent for long term holders and very attractive for new folks/protocol treasuries/funds etc.
Folks saying it adds a lot of work to dev team, I think otherwise. To implement this model you don’t even need to automate it to start with. A simple running sheet can be maintained and the current process can be slightly modified to include this new data. It probably adds less than 10 minutes each week and can have huge impact to both GLP yield smoothing, investor experience and potentially can improve overall GLP because of the stability it can provide.
Over long period we can automate the process and can even improve on it.
Some of the ideas which can be looked further to improve are
→ Instead of 20% as base hardcoded target yield this is something which can be dynamic and move up or down with Moving Averages over time
→ Another factor to add is OI utilization as a parameter for how much of YSR needs to go for that week, instead of hardcoding 20%. If we hit the caps pretty close and the OI utilization was really high then a higher percentage of YSR can go to the APR so we attract some GLP to meet the demand, if the OI and utilization is not that great then it is not great to just give away 20% of YSR in just one week to attract more GLP which will only further dilute the yield for the coming weeks and deplete YSR more quickly.
This way the system can balance both short term and long term needs. But again we can improve this with time and in iterations. I fully support this plan over the current system we have.
This is already an issue with the current implementation, during the massive draw downs last year many users withdrew their liquidity, only to put it back in once the project didn’t fail and the APR skyrocketed.
I would be worried about the YSR being co-opted like the floor price fund was, there needs to be guarantees the YSR can never be used for anything other than providing returns to GLP stakers.
Maybe wait for v2 to see how it plays out? Seems like a better use of developer effort at he moment.
Would need a wind-down plan, I can see the return being quite high for long periods, if 20M builds up I would be nervous as a staker.
Hearing feedback about using a dynamic rate instead of 20% sharing some modelling on this.
In the attached sheets the variable is set at the lower of 20% or the average natural yield from GLP over the prior 4 weeks. The final version of a variable model could have to adjust slightly to make the automation process simple to execute (for example it might instead involve a single reset every 3 months) but following a similar principle but the effect should be similar to what was shared.
I’ve also heard questions about excessive buildup of reserves, the nature of the proposal is somewhat self correcting that is unless we are continuously running at yields high above 20%. While history is not a perfect indicator looking at a year of results reflecting a variety of market conditions have not resulted in an excessive buildup in the YSR.
Look forward to feedback on the dynamic model as well and then hopefully put these to a snapshot vote in the coming days.