When reviewing the previous proposal, I came across comments from Time Research (likely one of GMX’s largest LPs), which raised several points that need to be addressed:
- “We are in favor of this proposal. Buying back GMX with the fees from the protocol will help increase the price in the long run. Many users in this ecosystem are happy to see the GMX price go up, as it will help unify the community.”
Time Research clearly highlights the significant benefits of GMX’s strong performance for its development. Increased attention on GMX will inevitably bring more opportunities to GM LPs.
- “We also need to consider the relationship between the price of GMX and the long-term success of the GMX protocol. Right now, I do not see a strong connection. GMX LPs and GMX traders do not come to GMX for the GMX tokens.”
Time Research points out the current lack of a strong connection between GMX LPs, GMX traders, and the GMX token—a fragmented relationship. BB&D is undoubtedly the best tool to build this connection. Furthermore, we could consider introducing tiered fees based on GMX holdings to strengthen the relationship with traders.
- “If this were ten months ago, we would definitely vote no because we held a lot of GLP at that time. Forcing GLP holders to accept GMX would not be a good idea, as it is difficult to sell $5M worth of GMX tokens in the market, while ETH does not have this issue. Now, with V1 fading out, it is acceptable for us to support this proposal.”
This point warrants further scrutiny. It is undeniable that if your earnings accumulate to $5M, selling it all at once could have a significant price impact under current circumstances.
However, the issue you described would occur if GMX tokens were minted out of thin air, without increased liquidity, resulting in $5M worth of GMX that couldn’t be converted to $5M USD. Under the BB&D scenario, $5M worth of ETH would first be used to purchase GMX, injecting liquidity into GMX, and then you would withdraw $5M worth of liquidity, minimizing the impact.
Additionally, this discussion is based on a single LP. GMX has many LPs, which introduces a time lag, effectively creating a substantial liquidity pool (as reflected by the significant increase in GMX liquidity). Thus, exits should be simpler for all LPs, with each individual exit becoming easier as a result.
Furthermore, if you are concerned about this marginal risk, you can mitigate it relatively easily through hedging or by avoiding a $5M single-sale scenario. For example, selling in $500K increments? These are all solvable issues.
- “Lastly, when GMX holders make decisions for LP holders, they need to consider the long-term profit of the LP holders and not focus solely on the GMX price itself.”
I agree with this point—GMX holders should make decisions carefully. However, there is a balance to consider here. GMX holders own the protocol but receive only 27% of the fee distribution. GMX LPs, while potentially affected by these decisions, have high flexibility and receive 63% of the fee distribution. GMX holders bear the risk of protocol failure, while GMX LPs bear the risk of trader profits and losses. Overall, the distribution is balanced.
In my view, if GMX holders focus solely on maximizing their own interests at the expense of GMX LPs, that would be shortsighted. Similarly, if GMX LPs focus only on maximizing their marginal returns without considering GMX’s overall development, that would also be shortsighted. A lose-lose or a win-win situation—this choice shouldn’t be difficult to make.