PROPOSAL SUMMARY
GMX Labs requests authorization for continued funding for 2026-2027 through a comprehensive two-year framework that includes operating funds and contributor tokens. The proposed plan implements floor and ceiling mechanisms to balance operational stability with fiscal responsibility, leveraging the strengthened treasury position achieved during the 2024-2025 mandate.
Building on 2024-2025: During the previous two-year period, GMX Labs demonstrated operational efficiency by maintaining lean direct operations at $9.4M over two years supporting full protocol development and maintenance (with $19.4M total over two years including contributor tokens and other key DAO expenses), while generating $80.6M in protocol proceeds over the period (~$40M annually) and contributing $21.5M net to the DAO treasury. Additionally the bonding program successfully raised $4.2M in accumulated balance during this period, complementing the broader treasury strengthening efforts.
| 2024 - 2025 Reconciliation | ||||
|---|---|---|---|---|
| Operating Activity | ||||
| Protocol Fees (net of LPs) | 65.0 | Operations | 9.4 | |
| Price Impact Pools | 15.6 | Contributor Tokens | 5.6 | |
| V1 Security Payout | 2.0 | |||
| Chainlink | 1.6 | |||
| GMX Solana | 0.8 | |||
| Total Proceeds from Protocol | 80.6 | Operating Use of Funds | 19.4 | |
| Net Contribution from Operations | 61.2 | |||
| Financing Activity | ||||
| Net Contribution from Operations | 61.2 | Distribution to GMX Stakers | 50.3 | |
| Add-back: Contributor Tokens (GMX) | 5.6 | |||
| Proceeds from Bonding (GMX to USDC) | 4.2 | |||
| Add-back: Vendors paid in kind (GMX) | 0.8 | |||
| Total Sources | 71.8 | Total Uses | 50.3 | |
| Net Retained after Staking | 21.5 |
Notes
- The report follows a modified format of a cash flow statement, reflecting full expenses in operations, using the financing section to adjust for non-cash payments. No investment section has been presented here
- vendors were paid $1.0m GMX in-kind, of which $0.8m was issued from the treasury and $0.2 was purchased from the market
- all amounts where possible were valued at the time of receipt / distribution.
- contributor tokens were valued based on the monthly closes of GMX assuming 24 months of full distribution. This marginally overstates the total.
Scaling: Labs now supports an expansion to 30 contributors supporting GMX’s continued maturation. We have fortified the protocol through a combination of top-tier service providers including Guardian, Chaos Labs, and Alchemy alongside a near-tripling of our internal engineering and product headcount, which has grown from 7 at the start of our prior mandate to 19 today. Spanning everything from smart contract development to UI/UX design, this diversified talent pool minimizes operational risk and establishes a robust, sustainable foundation for long-term growth.
Labs/DAO History: The GMX DAO was already established, and in October 2022, a proposal passed to create a Labs entity to support it. This entity was mandated by the DAO to act as its service provider: developing and maintaining code, administering delegated responsibilities, securing and holding IP, and acting as a counterparty for contributors and other service providers. Labs operates in full alignment with the DAO.
This Proposal Requests:
- Two-year authorization to utilize the V2 fee stream to fund protocol operations
- Two-year continuation of the contributor token grant program
FUNDING REQUESTS
1. Contributor Token Allocation
Request: 250,000 GMX tokens over 25 months (December 2025, 2026-2027)
Structure:
- Linear monthly distribution: ~10,000 GMX per month
- Represents 1.9% of total supply over the period
- Maintains historical pattern from Years 1-4
Rationale:
- Alignment: Ensures contributors remain aligned with long-term protocol success
- Retention: Competitive compensation to retain experienced talent with institutional knowledge
- Proven Model: Continues successful approach from previous funding periods
- Cumulative Allocation: 6-year total of 750,000 GMX (~5.7% of total supply)
Historical Context:
- Years 1-4 utilized ~3.8% of supply for team compensation
- No founder allocation or pre-mine
- Community-first approach maintained throughout
- Token grants have proven effective for retention and alignment
2. Revenue-Based Operating Funds
Source: Unallocated 10% share of V2 protocol fees accumulating in DAO treasury
Annual Floor: $7,000,000
Annual Ceiling: $9,000,000
Mechanism:
Labs funded from the 10% V2 treasury allocation (currently 8.8% net after 1.2% Chainlink payment):
- If annual revenue < $7M: Shortfall supplemented from DAO treasury reserves
- If annual revenue $7M-$9M: Labs has full access to the V2 protocol fees for operations
- If annual revenue > $9M: Labs capped at $9M, excess remains in DAO treasury for governance allocation
Key Features:
- Leverages the strengthened treasury built during 2024-2025
- Creates predictable operational funding across market cycles
- Returns excess value to DAO during favorable conditions
- Maintains fiscal discipline through ceiling mechanism
RATIONALE FOR FUNDING FLOOR
Why a Floor is Critical
The $7M funding floor ensures availability of resources across all market conditions for:
Core Development Team Retention:
- Maintaining experienced contributors with institutional knowledge of the protocol
- Preventing sudden resource reductions that compromise development velocity
- Enabling competitive compensation in both bull and bear markets
Critical Security Operations:
- Ongoing audits and security assessments
- Continuous monitoring and threat detection
- Rapid incident response capabilities
- Proactive vs. reactive security posture
Essential Infrastructure Costs:
- Oracles, keepers, RPCs across multiple chains
- Monitoring systems ensuring protocol operational health
- Multi-chain infrastructure maintenance
- System reliability and uptime
Legal and Compliance Baseline:
- Entity maintenance and corporate governance
- Regulatory compliance across jurisdictions
- Governance coordination and administration
- Professional legal counsel for evolving regulatory landscape
The Risk Without a Floor:
Extended bear markets without a funding floor could force:
- Sudden team reductions losing institutional knowledge
- Infrastructure cuts compromising protocol reliability
- Security compromises through reduced audit frequency
- Reactive-only incident response capabilities
The $7M floor represents the conservative funding level needed to maintain professional operations. The bonding program and DAO treasury reserves provide the buffer to supplement protocol revenue when market conditions require it.
RATIONALE FOR $9M CEILING
Fiscal Responsibility
The ceiling mechanism ensures:
Prevents Excessive Accumulation:
- Labs does not over-accumulate funds during bull markets
- Maintains lean operational philosophy
- Aligns with DeFi industry standards (comparable to Uniswap, Compound)
- Returns excess value to DAO for community governance
Enables Strategic Treasury Use:
When protocol revenue exceeds $9M annually, the excess enables:
- Ecosystem Grants: Community-governed grant programs
- Strategic Initiatives: DAO-directed growth and partnerships
- Emergency Reserve: Buffer for extraordinary circumstances
- Sustainable Model: Long-term treasury growth for protocol resilience
Balance with Efficiency:
The $7M-$9M range:
- Covers essential operations comfortably
- Allows for strategic growth and contingency (up to 35-40 contributors)
- Prevents waste through spending caps
- Returns significant value to DAO during favorable conditions
AUTOMATIC REVIEW MECHANISM
Trigger Conditions
If either condition occurs, all three funding components (treasury fee allocation, token grants, bonding program) will be subject to automatic DAO review at the 1-year anniversary:
Condition 1: Token price prior to the one-year anniversary is below the current token price (both taken as 30-day TWAPs)
Condition 2: Protocol fees are insufficient to cover the $7M floor, and DAO treasury/bond program funds are tapped
Review Process
When triggered, the review includes:
- Comprehensive assessment of all three funding components
- Community discussion period on adjustments or continuation
- Governance vote on whether to modify, continue, or terminate any component
- Ensures funding structure remains appropriate for evolving market conditions
Purpose:
This mechanism provides:
- Accountability: Regular assessment of funding effectiveness
- Flexibility: Ability to adjust to changing circumstances
- Transparency: Community oversight and input
- Protection: Automatic check on value delivery to token holders
EXPENSE ALLOCATION FRAMEWORK
Proposed Budget Breakdown
| Category | Allocation | Uses |
|---|---|---|
| Core Development | 45% | Contributors (Development, Product, Ecosystem, Community) |
| Security & Risk | 27.5% | Audits, risk management, threat monitoring |
| Infrastructure | 15% | Keepers, RPCs, monitoring systems |
| Legal & Compliance | 5% | Entity maintenance, regulatory, governance |
| Strategic/Contingency | 7.5% | Growth initiatives, emergency response, contingency |
2026-2027 Baseline Budget Projection
Based on current protocol performance and operational requirements, the following projection represents expected annual operations:
Operation Activity
| Source of Funds | Amount (Annual) | Use of Funds | Amount (Annual) |
|---|---|---|---|
| Protocol Fees (net of LPs) | $22.2M | Operations | $7.0M |
| Contributor Tokens | $1.2M | ||
| Chainlink | $0.7M | ||
| Marketing | TBD | ||
| Risk / SAFU Contingency | TBD | ||
| Total Proceeds from Protocol | $22.2M | Operating Use of Funds | ~$8.9M |
Financing Activity
| Sources | Amount (Annual) | Uses | Amount (Annual) |
|---|---|---|---|
| Net Contribution from Operations | $13.3M | Distribution to GMX Stakers | $16.2M |
| Add-back: Contributor Tokens (GMX) | $1.2M | ||
| Proceeds from Bonding (GMX to USDC) | - | ||
| Total Sources | $14.5M | Total Uses | $16.2M |
| Net Contribution to DAO | ($1.7M) |
Key Assumptions & Notes:
- Protocol fees of $22.2M annually represents net fees to LPs and stakers after operational costs, based on stabilized V2 performance over recent quarters
- Contributor tokens valued at $10 reflecting last quarter average price
- Currently no add-back for vendor paid in kind
- Bonding program may be re-initiated but not taken as a baseline for understanding financial health
- Marketing and Risk/SAFU Contingency funding levels to be determined through separate governance proposals
- This baseline shows operational sustainability with protocol fees comfortably covering operations even in moderate market conditions
Floor/Ceiling Context:
The $7M-$9M floor/ceiling mechanism provides:
- Floor ($7M): Below the baseline operational needs, requiring treasury supplementation only in severe market downturns
- Ceiling ($9M): Cap before separate governance proposals required, ensuring fiscal discipline
TEAM COMPOSITION AND SCALING
Current Team Structure
Present: 30 contributors across all functions
Planned Capacity: 35-40 contributors where operationally feasible
Scaling Approach
Growth will be measured and strategic:
- Market Conditions: Scale during favorable conditions when revenue supports expansion
- Protocol Needs: Add capacity in critical areas (security, development, infrastructure)
- Efficiency First: Maintain lean philosophy, avoid unnecessary overhead
- Talent Quality: Prioritize experienced contributors with DeFi expertise
Retention Focus
The funding structure prioritizes retention of:
- Core development team with institutional protocol knowledge
- Security specialists familiar with GMX architecture
- Infrastructure operators ensuring multi-chain reliability
- Product and ecosystem contributors driving growth
ACCOUNTABILITY & GOVERNANCE OVERSIGHT
Ongoing DAO Control
These distributions to Labs remain subject to governance at all times, with key provisions:
Termination Rights:
- Future distributions terminable if governance determines payments no longer support DAO requirements
- Not limited to automatic review triggers - DAO retains full authority
- Simple governance vote can modify or terminate funding at any time
Continuous Accountability:
- Labs operates under DAO oversight throughout the funding period
- Community can raise concerns and trigger discussions
- Regular transparency in operations and fund usage
- Responsive to DAO feedback and direction
Labs Commitments
Labs commits to:
Smooth Transitions:
- Orderly handover to other contributors if so desired by governance
- Comprehensive documentation of all systems and processes
- Knowledge transfer protocols for critical functions
- Minimal disruption to protocol operations during any transition
Transparency and Communication:
- Regular updates on development progress
- Clear reporting on fund utilization
- Open communication channels with community
- Responsiveness to DAO inquiries and concerns
Professional Standards:
- Maintaining high-quality development and security practices
- Industry-leading operational standards
- Proactive communication on challenges and solutions
- Continuous improvement in efficiency and effectiveness
COMPARISON TO DEFI INDUSTRY
Treasury Allocations
Industry Context:
- Many DeFi protocols allocate 15-25% of fees or reserves to teams/foundations
- Some protocols have uncapped operational budgets
- Foundation control often opaque to token holders
GMX’s Differentiated Model:
- Uses only the established 10% V2 treasury allocation (8.8% net) as a target budget
- Implements spending caps through ceiling mechanism ($9M maximum)
- Returns excess to community governance for allocation
- Maintains one of DeFi’s most transparent and efficient structures
Team Token Allocations
GMX’s Minimal Approach:
- Years 1-4: ~3.8% of supply used for team compensation
- Proposed Years 5-6: Additional 1.9% of supply
- Cumulative 6 years: ~5.7% of total supply
Industry Comparison:
- No founder allocation (many protocols: 10-30% founder allocations)
- No pre-mine or early investor advantage (common in other protocols)
- Community-first approach throughout protocol history
- Token-based compensation aligned with protocol success
Alignment Benefits:
- Team directly benefits from protocol growth
- Long-term retention incentives
- Shared success with community
- No dilutive founder stakes
TREASURY SUSTAINABILITY PROJECTION
Revenue Sustainability - Already Achieved
Current State (2026):
- Already revenue self-sufficient: Annual protocol fees of ~$22.2M significantly exceed operational needs
- DAO treasury has meaningful reserves (built during 2024-2025 from fee retention)
- Maintained lean direct operations at $9.4M during 2024-2025 supporting full protocol development
- Protocol generating consistent fees across varying market conditions
- Multiple revenue streams providing resilience (trading fees, price impact pools, funding rates)
- Infrastructure and operations at professional standards
Near-Term Outlook (2026-2027):
- Floor provides continuity: Safeguard if extreme market conditions reduce protocol fees below operational needs
- Already sustainable: Current annual fee generation of ~$22.2M far exceeds $7-9M operational range
- Ceiling returns excess: Bull market conditions ensure DAO treasury continues growing
- Multiple funding sources: Diversified revenue reduces dependency on any single source
Long-Term Vision (2028+):
- Continued revenue strength: Protocol revenue expected to remain well above operational needs
- DAO treasury growth: Excess funds accumulate in DAO governance for community allocation
- Token distribution evolution: Token grants may be reduced or phased out as protocol matures
- Fully mature operations: Established, efficient operational model with proven sustainability
PROPOSED GOVERNANCE TIMELINE
Phase 1 & 2: Discussion and Refinement (10 days)
Community Input Period:
- Feedback on floor/ceiling amounts ($7M-$9M range)
- Discussion of expense allocation priorities
- Questions and clarifications on proposal mechanics
- Alternative suggestions and concerns
Key Topics for Discussion:
- Is the floor amount appropriate for operational needs?
- Is the ceiling amount reasonable for fiscal discipline?
- Are expense allocations aligned with community priorities?
- Are automatic review triggers appropriately designed?
Proposal Adjustments:
- Incorporate substantive community feedback
- Finalize parameters if adjustments are needed based on discussion
- Prepare final proposal text with any modifications
- Address remaining questions or concerns
- Clear documentation of changes made based on feedback
Phase 3: Snapshot Vote
Formal Voting:
- Official Snapshot vote on final proposal
- Simple majority required to pass
- Clear voting options and implications
- Implementation timeline upon approval
Post-Vote:
- If approved: Implementation begins immediately
- If not approved: Return to discussion phase with community input on modifications
- Transparent communication on next steps
WHAT THIS PROPOSAL ENABLES
Protocol Development
V2.3 and Beyond:
- Enhanced trading features and user experience
- Advanced risk management tools
- Performance optimizations and scaling
- Multi-chain expansion and integration
Technical Infrastructure:
- Robust, multi-chain infrastructure
- High-availability systems and monitoring
- Professional security posture
- Rapid incident response capability
Security and Risk Management
Proactive Security:
- Continuous audits from top security firms
- Ongoing code review and analysis
- Threat monitoring and intelligence
- Bug bounty program support (under existing DAO framework)
Risk Mitigation:
- Enhanced risk management tool development
- Protocol risk assessment and monitoring
- Incident response planning and execution
- Security training and awareness
Team and Operations
Stable, Experienced Team:
- Retention of core contributors with institutional knowledge
- Competitive compensation across market cycles
- Consistent development velocity
- Professional operational standards
Operational Excellence:
- Legal and compliance baseline maintained
- Multi-jurisdictional entity management
- Professional governance coordination
- Industry-leading transparency
Community Value
DAO Treasury Growth:
- Excess fees during bull markets accumulate in DAO treasury
- Community governance over strategic initiatives
- Buffer for extraordinary circumstances
- Long-term protocol sustainability
Staker Distributions:
- Continued fee distributions to GMX stakers (from remaining 90% allocation)
- Protocol growth increases overall fee generation
- Community-first approach maintained
EXCLUSIONS AND SEPARATE INITIATIVES
Items Not Included in This Proposal
This proposal covers contributors and normal maintenance operations. The following items will be addressed through separate proposals to the DAO:
Marketing and Growth Programs:
- Updates to referral programs
- Rebate structure modifications
- Marketing campaigns funded from treasury
- If successful, potential permanent incorporation into tokenomics
Bug Bounty Programs:
- Payouts remain under existing approved framework with DAO and security committee
- No changes proposed to current structure
- Immunefi program now self-funded from price impact funds
Organizational Structure:
- Proposed revamp for Labs, DAO, and reinforced leadership team
- To be brought forward in 2026 for separate consideration
- May include proposed changes to compensation structures
- Potential variable incentives for DAO consideration
Why Separate Proposals?
These items are addressed separately to:
- Maintain focus on core operational funding
- Allow distinct community discussion on each initiative
- Enable independent governance decisions
- Provide clarity on approval scope
CONCLUSION
This proposal establishes a comprehensive, sustainable operating model for protocol operations and funding for GMX Labs that balances operational excellence with fiscal responsibility, leveraging the strengthened treasury position built during 2024-2025.
Proven Track Record: The 2024-2025 period demonstrated Labs’ ability to maintain lean, professional direct operations at $9.4M (supporting full protocol development and maintenance) while overseeing the transition to GMX V2. This proposal builds on that proven efficiency while implementing safeguards to ensure sustainability across all market conditions.
Key Benefits
Two-Pillar Funding: Combines contributor tokens and protocol revenue caps for operational stability
Leverages Treasury Strength: Built during 2024-2025 through successful fee retention, providing reserves for extreme scenarios
Aligns Contributors: Token allocation ensures long-term alignment with protocol success and competitive retention
Maintains Efficiency: Combined model among most efficient and transparent in DeFi (30% efficiency ratio vs sustainable fees)
Preserves DAO Control: Full governance oversight with termination rights and automatic review mechanism
What This Delivers
Operational Excellence:
- Stable, experienced team retained across market cycles
- Consistent development velocity and professional standards
- Proactive security posture with continuous audits and monitoring
- Robust multi-chain infrastructure and reliability
Protocol Growth:
- V2.3 implementation and enhanced features
- Advanced risk management tools
- Multi-chain expansion and integration
- Competitive positioning in DeFi ecosystem
Community Value:
- DAO treasury grows substantially during favorable markets (ceiling returns excess fees)
- Already demonstrated: $50.3M to stakers + $21.5M treasury growth in 2024-2025
- Transparent, accountable operations with proven efficiency
- Community-first approach maintained
Long-Term Sustainability:
- Already revenue self-sufficient with annual fees of ~$32.5M far exceeding operational needs
- Floor/ceiling mechanism provides predictability, not a path to sustainability
- Protocol generates ~3.4x annual revenue vs operational needs
- Token grants may reduce over time as protocol matures
- Strengthened position for future challenges and opportunities
Request for Community Support
GMX Labs requests community support for this funding structure, enabling continued professional stewardship while maintaining the efficient, community-first approach that defines GMX.
This proposal provides:
- Stability: Operational continuity across market conditions
- Accountability: Automatic review triggers and ongoing governance oversight
- Efficiency: Industry-leading lean operational model (30% efficiency ratio vs sustainable fees)
- Alignment: Contributors directly tied to protocol success
- Fiscal Discipline: Already revenue self-sufficient with smart floor/ceiling safeguards
KEY PARAMETERS SUMMARY
| Parameter | Amount | Purpose |
|---|---|---|
| Contributor Tokens | 250,000 GMX | 25-month linear distribution (~10k/month) |
| Annual Floor | $7,000,000 | Minimum operational funding guarantee |
| Annual Ceiling | $9,000,000 | Maximum annual allocation cap |
| Funding Source | 8.8% net V2 revenue | From 10% treasury allocation (minus Chainlink) |
| Bonding Program | Recommend transfer to treasury committee | When committee established |
| DAO Control | Full oversight | Terminate/modify anytime via governance |
| Duration | 2026-2027 | Two-year authorization period |
| Automatic Review | At 1-year mark | If either trigger condition met |
| Team Size | 30 current, 35-40 planned | Where operationally feasible |
Review Triggers (Either Condition)
- Token price below starting price (30-day TWAPs compared)
- Protocol fees < $7M floor requiring treasury/bonding funds
This proposal builds on the successful 2024-2025 framework detailed in the companion Economic Activity Report, positioning GMX for continued growth and excellence while maintaining the transparent, community-first approach that has defined the protocol since inception.