GMX Multiplier Points

Proposals
1

GMX Multiplier Points

MPs have been an integral part of the GMX bootstrap process, rewarding loyal long-term staking in the protocol with increased power in governance and fee earning. Over the last 18+ months, as a protocol, we have continued to evolve the economic aspects and tokenomics of the protocol with emissions for esGMX, fee splits between GMX-GLP staking, and the introduction of referral/trader incentives.

During this time, MPs have continued to emit at a rate of 100% APR for GMX (and esGMX) staking and have been burned pro-rata to the amount of GMX unstaked from the platform. As of this date, across Arbitrum and Avalanche, we have these approximate staking balances:

Token Balance Percentage
GMX 6.73m (42.2%)
esGMX 1.77m (11.1%)
MPs 7.44m (46.7%)

The above shows the split of weekly fees, with MPs approaching nearly 50% of all fee distributions

MPs act as an incentive for long-term staking but also have the effect of diminishing the governance power and fee reward share of new stakers that have yet to accumulate MPs. It is essential to balance these incentives in a way that reflects the contribution of long-term stakers in guiding the protocol to this stage while ensuring that the protocol welcomes new voices and token holders into the flywheel of the GMX ecosystem.

Below are a series of proposals and discussions to evolve the MP system. Feedback has been taken from development contributors to ensure the proposed changes, while possibly requiring new contracts, will be possible with a manageable migration.

Proposal One – MPs @ 50% APR

Adjust APR for accrual of MPs from 100% to 50%, lowering the dilution of governance power and protocol fee participation that would result from future MP distribution. The proposed alternate rate is 50%, but any specific percentage can be considered - dependent on governance support.

This proposal would not result in any change to the MPs already accrued before the proposal’s passing. This proposal can be permanent, or until governance can make longer-term modifications to the MP program.

Proposal Two – MP Caps

Implementing caps on MPs must be reviewed carefully to ensure they don’t materially change the incentive structure that aligns the protocol toward long-term holders.

This provides a clean and simple-to-understand approach. The additional benefit is that MPs continue to accrue, so a wallet that has already maximized its usable MPs can acquire additional GMX/esGMX and quickly achieve a max boost on those new tokens. This creates a new opportunity for long-term stakers to benefit from investing in growing their current GMX and/or esGMX positions in the protocol.

This means that stakers can still enjoy a significant boost in their governance and protocol fee participation but with CAPS, and long-term stakers are rewarded with significant benefits that long term stakers can maximize by adding to their staked GMX.

Combined with proposal #1 a 150% maximum boost would result in a three year period until new stakers reach maximum benefits.

Next Steps

The above are simply ideas so that as a community we can evaluate if updating the MP system makes sense, and then identify proposals that can be voted on, the specific proposals above are provided as examples.

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Reserved for Updates and links

The following discussion now has a proposal on snapshot.

https://snapshot.org/#/gmx.eth/proposal/0x89ddca6114ec5732b0e5c6b83e4278d82b1d7eba5839ec2a58bad903945edd11

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First thought: first one then the second, or both. Whatever is most efficient. Cap it now.

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Yes, it’s time to address this issue. Thanks for adding the current staking balances, that illustrates how significant MPs have become to the overall fee distribution.

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Would like to sum up some thoughts:

The success of GMX was in my opinion always coming from a great combination of a good product with strong tokenomics. Strong tokenomics attract people and builds a community that gets sticked to the product helping to promote the product, but also expanding it with community projects and of course using it. It is crucial in my opinion to ensure both a appreciation of early supporters (that currently achieved already high MP levels), but also give new people and capital the chance to “earn their way” into the ecosystem.

Uncapped MP boosts are very discouraging for new people, cause they have to buy the token itself for a higher price and at the same time will never achieve MP boosts OG accounts have. Reducing the rate of MP distribution is not helping new people in the ecosystem to catch up, it is rather discouraging as they earn slower than early people already did. I am therefore not in favour of Proposal One.
Proposal 2 would be a solid solution, but at the same time it need to be made sure that people that already achieved higher MP boosts than the CAP are not getting punished. One solution would be that those accounts can just keep their high MP boosts, but as soon as they burn their stake they will be capped at 150% like all other accounts.

I also very much like the idea from the second proposal to be able to earn an additional stack of GMX up to the max boost of for example 150% as a reward for long term holders

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I am strongly in favor of MP caps (proposal 2). I realize this negatively impacts the longest term holders the most, especially the team/core contributors (and including myself), but I think this is the right long-term greedy thing to do.

Yes we want to incentivize LT holders and disincentivize unstaking, but it only goes so far. MPs cannot inflate forever and disincentivize new stakers/holders - this would be negative for GMX price (and to some extent already has had some negative impact). Proposal 1 is thus inadequate in my view.

I think the MP cap should only be 100%, which already would effectively doubles GMX’s P/E ratio for a new staker - a very high hurdle.

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Given the current mechanism, as a newcomer, I am indeed more inclined to purchase esGMX and MP, rather than buying new GMX.

At present, the total volume of MP is 7M. When the total volume of MP reaches 70M, the base APR of GMX will be roughly 1/10th of its current rate, virtually indistinguishable from zero.

So, for a newcomer, why would they want to purchase a token with an APR of zero? Are they hoping that others will burn their MP, gradually increasing their own actual APR? The infinite inflation of MP could potentially deter all new investors’ interest in MP. This raises a problem that needs to be addressed – curbing the infinite inflation of MP.

However, resolving this issue comes with many prerequisites. Primarily, the solution should not be established at the expense of loyal users, such as those accounts already boasting a 160% - 170% boost percentage. We can’t set a cap, for instance at 150%, which would strip these accounts of their existing rights and stifle their future growth.

Currently, the total MP staked stands at 7439809, with all the burned MP totaling 8151589. The ratio of MP staked to the total (MP staked + MP burned) is 53%. We could approach this issue by adjusting the Mutiplier Points APR: instead of having a uniform 100% for all accounts, when an account’s Boost APR is higher, their Mutiplier Points APR should be lower. This approach gives new users a chance to catch up, while preserving the advantages of the older users, continuing their growth.

To design an algorithm that curbs the inflation of MP, we could consider a reciprocal decay function to decrease the production speed of MP as the boost percentage increases. The function could be chosen according to actual needs, such as exponential decay, logarithmic decay, or other forms of decay functions.

Let’s denote boost percentage (abbreviated as BP) as BP = 100 * (Staked Multiplier Points) / (Staked GMX + Staked esGMX). Assuming the current value of BP is B, the decay functions could be:

  1. Exponential Decay: MP Generation Rate = Initial Rate * e^(-aB)
  2. Logarithmic Decay: MP Generation Rate = Initial Rate / (1 + a*log(1 + B))
  3. 1/B type Decay: MP Generation Rate = Initial Rate / (1 + aB)

Here, ‘a’ is a tuning parameter that can be adjusted based on actual conditions. Similar to the difficulty adjustment in Bitcoin’s network, ‘a’ could be a dynamically adjusting parameter, balanced according to the previous week’s data to equalize the overall MP production speed with the current MP burn rate. This parameter could be obtained through iterations or other optimization methods. In practice, some restrictions may need to be introduced into the decay function, such as setting a minimum MP production rate to prevent MP production from completely stopping.

This approach, while preserving the existing benefits of older users, provides greater advantages to new users, and addresses the issue of infinite inflation of Mutiplier Points, keeping its quantity roughly the same as today. This should also keep GMX’s Base APR at a reasonable level rather than infinitely decreasing.

As for whether to reduce the overall weight of Mutiplier Points, making MP only 50% of GMX and esGMX, I believe the specific proportion could be decided by vote but should ultimately benefit GMX itself. Lowering the weight of MP implies raising the weight of GMX, which would incentivize newcomers like me to choose GMX instead of trying to buy accounts with esGMX and MP at a lower price via the OTC market. As for future MP gains, they represent unrealized profits and can be dynamically adjusted. However, the staked MP represents the user’s existing property. If there’s a need to reduce the proportion of MP, it should apply equally to all, regardless of whether they are new or old users, ensuring absolute fairness.

In conclusion, the proposed solution provides a mechanism for new and old users to coexist harmoniously. It mitigates the inflation issue of Mutiplier Points, without causing harm to any current users’ benefits. This proposal maintains the APR of GMX at a reasonable level while enabling newcomers to actively choose GMX, improving the overall health and sustainability of the system. It provides a model that balances the needs of old and new users while ensuring fair treatment.

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The most important thing is that everyone should be treated equally going forward. I am ok with “Proposal One” because it “punishes” everyone. We can even reduce MP issuance to 0 if inflation is such big problem. But I will never vote for proposal what benefits others at my expense. Accounts approaching or passed 150% MP boost have almost 50% of all voting power (~7M votes) and I doubt we can pass any voting that penalizes only them (as Proposal Two).

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I dont think “Proposal One” really solves the underlying problem. It slows down the inflation rate of MPs, but for everyone, so it doesnt make any real difference. I believe its in everyone best interest to move to a suistainable long term solution for the “MP problem” (infintie dilution of yield for new stakers).

A cap on MP, or a lowered MP rate after certain treshholds, are viable solutions in my opinion. I’m not a fan of making things overly complex, so capping it (at 150% for example) makes sense to me. Obviously every OG with a boost of > 150% can keep it.

I love the idea to accumulate extra MP (when your boost is 150%) for new GMX buys. It’s a great idea!

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I want to propose a bold idea: we already have a large amount of MP, and the new allocation of MP is only determined by the amount of MP that is destroyed. For instance, if a total of 10,001 MP was destroyed the previous day, then these 10,001 MP will be distributed to all users today based on the weight of their GMX+esGMX holdings.

A more accurate description would be that for each transaction where MP is supposed to be burned, it will be distributed proportionally to all stakers as a reward. MP will no longer be generated additionally and will remain fixed at the current quantity. This way, we address the issue of MP inflation while preserving GMX’s Base APR. The change in the mechanism is minimal, ensuring that no one’s interests are harmed or penalized.

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What do you think about the following:

  • Cap MP boost at 100%, but allow everyone at higher boost to keep their boost until they burn them. Reduce emissions for everyone to 50%. That way OGs still have a significant advantage with their high MP boosts, but we cut new emissions significantly.

I think it´s important to find an easy and understandable solution that does not generate new attack vektors

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This would still put new stakers at a significant disadvantage, no?

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but why newcomers should instantly be rewarded as loyal stakers ? overtime they will earn that advantage too i think this suggestion is quite good and should be discus

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Very valid point you earn loyalty, its not something you get free with every GMX bought

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Definitely the first option

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The solution that fits both newer and longer term holders is a variation of 2.

Capping MP’s at 200% and those that are over receive 15% APR in esGMX from the treasury, on top of whatever the base APR is.

Virgin esGMX motivates longer term stakers to remain staked.

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Good to see you are debating this problem.

I think we definetly add a cap on MPs. It’s going to dillute yield, lower aprs, disincentivise new commers. Yield is already decreased a lot.

I also like the idea of distrubuting the same amount of MP which burned at the day.

We can also incentivise trading activity on GMX or staking GLP via using MP. Rn only gmx- esgmx stakers earns MP.

What do u think distrubuting MP to the traders? Ofc we should be carefullabout washtrading (smhw) but more trading activity would bring more yield.

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GMX cannot just keep printing esGMX. For one, there is a limited supply (though it could be voted to mint more); and two, it is effectively inflation of GMX to perpetually mint esGMX, which also dilutes APRs

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This proposal contains false claims that are not supported by calculations. Will try to debunk some of them and express my arguments against strict caps.

  1. “MPs act as an incentive for long-term staking but also have the effect of diminishing the governance power and fee reward share of new stakers that have yet to accumulate MPs.” - It is false statement, because new stakers are not losing but gaining power in comparison with OG stakers. My calculations: we have OG wallet with 1000 GMX and 1500 MP (150% boost) and new staker with 500 GMX and 0 MP. ATM OG has ~83% of voting and fees power but new staker only ~17%. After one-year OG wallet will have 1000 GMX + 2500 MP and new wallet will have 500 GMX + 500 MP. Power of OG will decrease to ~78% and for “new” staker increase to 22%. With 150% boost capping “penalty” to OG will be even worse and his power will decrease to 71%.
  2. To stake “new” GMX it should come from somewhere. However, with very limited GMX issuance mainly it can come only from other stakers hands, who burn MP by unstaking. So “new” stakers are no suffering from MP supply growth but are benefiting from MP burnings.
  3. Where are false assumptions that unlimited MP issuance is making GMX unattractive and lowering it’s price and base APR. GMX APR is directly dependent on platform fees and to increase APR we need to increase fees or lower GMX price even more. I think for many GMX is attractive investment not only for “real revenue” share but also for attached 100% MP APR and this is supporting GMX price not lowering it.
  4. I am quite big esGMX staker and had not vested single token yet, because even after esGMX rewards sunsetting it has very attractive 100% APR MP rewards. After MP caps implementation I will get 0 MP on my esGMX and better option for me will be vest them to GMX and sell some, increasing pressure on GMX price.
  5. If MP inflation is so bad, why we are not discussing completely abolishing MP rewards and cutting issuance to 0? If complete MP removal is bad option how lowering issuance can be better than leaving it at current level?
  6. There are many third party protocols build on top of GMX ecosystem and many of them will be directly impacted or even destroyed after MP capping implementation. Pirex, Key Finance to name a few. Lowering MP issuance rate will not affect them, but capping will.

Because of above considerations I am in favor only for “Proposal One”- to lower MP issuance rate to 50% APR. It is simple to implement and will equally treat all current stakers and on top build protocols going forward. Best part- it is very good chance this option will perfectly balance MP issuance/burn rate and we will not have “GMX APR going to 0” problem anymore. From protocol beginning 18+ months ago there was burned ~50% of all issued MP. I doubt lowering issuance rate somehow will affect MP burns, so with new 50% APR rate we will be issuing and burning about same amounts and will limit “effect of diminishing the governance power and fee reward share of new stakers” :slight_smile:

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I am in GMX since day 1 and my GMX are staked from day 1. I have around 185% APR from MP’s compared to GMX staking. I think the initial purpose of MPs were to allow people to continue to stake their GMX for even higher APR, and that did happen, many people kept their GMX staked all this while.

I understand that it’s impossible to let MPs rise exponentially as then it will dilute the rewards given to GMX stakers, to a negligible rate.

Therefore, I am in support of implementing both Proposals starting with the 2nd proposal first and a decaying mechanism built in the smart contract to reduce the APR of MPs from 100% to 50% over 2-3 years time frame and re look into it after that time frame.

I don’t mind even if my excess of 150% APR is cut down as well. I believe that the OG of GMX who has accrued 150% APR or more will mind it as well. The reason is GMX price is already at around 30x since buying for OG and are already in very good profit.

I am adding a poll here to see the general thinking and preferences of the GMX community:

  • Implement Proposal 1
  • Implement Proposal 2
  • Implement both Proposals
  • Do not consider any changes to MP

0 voters

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