GMX Lottery: A Proposal to Reward Stakers & Active Traders
Abstract
This proposal outlines the implementation of a recurring lottery system designed to reward both GMX stakers and active traders on the platform. The core idea is to provide an additional layer of incentives for staking GMX and generating trading volume, thereby encouraging long-term holding, increasing protocol revenue, and enhancing community engagement. Each lottery period, eligible participants will receive tickets based on the amount of GMX they have staked and/or their trading volume, with prizes distributed from a dedicated prize pool.
Motivation
The long-term success of GMX is intrinsically linked to the commitment of its token holders and the activity of its users. While existing rewards provide a strong baseline incentive, introducing a lottery mechanism can achieve several key objectives:
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Increase Staking Ratio: A lottery adds a novel incentive, potentially attracting more users to stake their GMX.
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Boost Trading Volume: By rewarding active traders, the lottery can directly contribute to higher trading volumes on the platform, generating more fees for the protocol and liquidity providers.
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Reward Loyal Participants: The system is designed to directly benefit those who stake their tokens and actively use the platform, fostering a stronger, more dedicated community.
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Enhance Community Engagement: The lottery can serve as a recurring community event, generating excitement and discussion around the protocol.
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Capital Retention: By making staking more attractive, the protocol can improve its capital efficiency and stability.
Proposed Mechanism
1. Eligibility
Eligibility for the lottery can be achieved through two distinct pathways: staking GMX or actively trading on the platform. A user can be eligible through one or both pathways.
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Stakers: Users who have GMX staked in the official GMX staking contract.
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Traders: Users who generate a cumulative trading volume exceeding a specific threshold within the lottery period.
2. Ticket Allocation
Tickets are allocated based on either staking amount or trading volume. A user can earn tickets from both activities simultaneously.
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For Stakers:
- Proposed Ratio: 1 ticket for every 100 GMX staked. This ratio can be adjusted through governance. For example, if a wallet holds 550 staked GMX, it would receive 5 tickets from their staking activity.
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For Traders:
- Proposed Ratio: 1 ticket for every $10,000 in trading volume generated during the monthly period. This includes both opening and closing positions. For example, a user generating $25,000 in volume would receive 2 tickets from their trading activity.
3. Lottery Period & Snapshot
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Frequency: The lottery will be held on a monthly basis.
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Snapshot: To determine eligibility and ticket allocation for stakers, a random, unannounced snapshot will be taken during the monthly period. Trading volume will be calculated for the entire period. This prevents gaming the system.
4. Winner Selection
The winner(s) will be selected through a transparent and verifiable on-chain process. This would leverage a secure source of randomness, such as Chainlink VRF (Verifiable Random Function), to ensure the draw is provably fair and tamper-proof.
Prize Pool
1. Funding Source (Two Options)
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Option A: Protocol Revenue Allocation: A small percentage of the protocol’s monthly fee revenue could be automatically diverted to the lottery prize pool. This creates a self-sustaining system where the prize pool’s size is directly correlated with the protocol’s success.
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Option B: Treasury Allocation: A fixed amount of GMX or stablecoins could be allocated from the GMX Treasury for the first few lottery rounds (e.g., for the first 6 months). This allows for predictable prize amounts initially.
2. Prize Structure
To maximize engagement, a tiered prize structure is recommended instead of a single winner-take-all prize. For example:
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1st Place: 50% of the prize pool
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2nd - 5th Place: 10% of the prize pool each (40% total)
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6th - 15th Place: 1% of the prize pool each (10% total)
Prizes would be distributed in a stablecoin (like USDC) or ETH to provide immediate, tangible value to the winners.
Benefits
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For Participants: Provides an additional, exciting way to be rewarded for their long-term commitment and active use of the protocol.
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For the Protocol: Increases the desirability of staking GMX and trading on the platform, which can lead to a higher staked supply, increased trading fees, and greater protocol stability.
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For the Community: Creates a recurring, positive event that fosters a sense of shared excitement and engagement.
Potential Risks & Considerations
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Whale Dominance: Wallets with very large stakes or trading volumes will naturally have a higher chance of winning. The tiered prize structure helps mitigate this by distributing rewards to more participants.
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Wash Trading: The trading incentive could encourage wash trading if the expected value of a lottery ticket is high enough. The volume threshold should be set at a level that primarily rewards genuine trading activity.
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Smart Contract Risk: The lottery will require a new, audited smart contract, which carries inherent security risks.
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Regulatory Scrutiny: Lotteries can attract regulatory attention. The structure should be carefully framed as an incentive program rather than a gambling product.
Conclusion
The GMX Lottery is a low-cost, high-impact initiative that aligns perfectly with the goal of rewarding long-term supporters and active users of the protocol. By introducing an element of chance and excitement, we can significantly boost staking rates, trading volume, and community morale. This proposal serves as a starting point for discussion, and I welcome feedback from the GMX community.