GMX <> STFX Proposal

Proposals
1

Background Summary:
STFX is a DeFi and SocialFi protocol for short-term asset management. We are pioneering the concept of STVs- single trade vaults- short duration, non-custodial, actively managed vaults that are dedicated to one trade.

STFX’s core product will be geared towards leveraged derivatives, given that these instruments have found the deepest product market fit in crypto. Our vision is to afford retail traders improved success in the markets by outsourcing trade execution to higher competency managers. This approach is uniquely enabled by blockchain infrastructure, and if proven successful, has the potential to radically transform the dynamics in which the marginal retail trader navigates crypto derivatives. Inherent to this adoption would be a non-trivial porting of derivative volume away from CEX architecture, where trading volume has remained surprisingly sticky compared to its spot counterparts. Derivative DEX activity as a percentage of notional volume currently exhibits less than 1% market penetration, whereas DEX spot markets are closer to 10%.

We believe that this proposal is fundamentally different from alternative treasury swap proposals (e.g. Rage and Plutus), primarily because the STFX protocol addresses the demand side, whereas these alternatives address the GLP supply side. Liquidity for these STVs will be sourced primarily from GMX, providing new volume inflows that boost GLP yield and help smooth some of the esGMX emission wind downs over coming months.

Proposal:
STFX will source a majority of its liquidity from GMX; we hope that many existing GMX traders will opt into the STFX platform as their primary means of engaging the derivatives landscape. The GMX community has been highly receptive to STFX since inception, and we’ve noticed tremendous overlap of GMX users across our mutual communities.

Given the interconnectivity between the protocols, we propose a token swap of $100,000 based on a Good Will Valuation further described below in Point (3).

Swap Terms:

  1. STFX will commit the esGMX proceeds from the swap into the GMX protocol as staked esGMX, with a minimum 2-year lockup, in order to achieve tasks outlined in point (2).
  2. All accrued ETH yield from the staked esGMX will be compartmentalized into an STFX Community Reserve which will have the flexibility to be used to sponsor the following:
  • Prize Pots for trading competitions on the STFX platform, which will help drive trading volume on GMX and social trading activity on STFX
  • Community bounty programs to encourage strategy building and research
  • Additional community developments, and STFX lab/project developments
  • Additionally: Harvested esGMX will be compounded on some regular basis into stesGMX to help increase ETH accrual rate, and thereby the reserve’s overall funding capacity
  1. If the proposal passes, swap terms will be executed at a 30m FDV Good Will Valuation for $STFX - at 30m FDV, the swap terms are a blended valuation between seed and public launch, as a show of good-will between STFX and GMX communities, and to demonstrate intentions to cultivate productive and long term collaboration.
  2. At the end of the lockup duration outlined above (1), STFX will have the option to continue using the esGMX as before, or otherwise use the esGMX in other manners as STFX sees fit, including the vesting of the swapped esGMX and any esGMX earned during that time.

Proposed Token Swap in Dollar Amount:
We propose a token swap of $esGMX for $STFX tokens amounting to $100,000 at a proposed 30m FDV Good Will Valuation for $STFX as outlined in Point (3) of the aforementioned Swap Terms.

Action:
An OTC swap of between the GMX and STFX treasuries in the dollar amount of $100,000:

  1. Community votes to approve/disapprove the proposal
  2. If approved, the swap will be conducted on the Good Will Valuation for $STFX as outlined in Point (3) of the aforementioned Swap Terms
26 Likes
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Reserved for further comment

Edit:

I think this partnership is a natural fit - as much of the previous collabs have indeed been on the supply side. Directly driving volume and fee-generating activity is a huge boon, and there’s the added bonus of consolidating GMX as a DeFi primitive on a highly familiar level, and now at a more informal and social level. Socializing the finance experience as a way to include others is a great step forward for all of DeFi and this proposal seems a prudent one in positioning GMX, and by extension STFX, as part of that base

Also very kind of the STFX team to offer a sort of discounted Good Will swap terms

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I strongly endorse this proposal. STFX is working symbiotically with GMX to bring in liquidity via STFX trading and to reinvest in the GMX community by sponsoring additional trading competitions and community development.

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In follow-on discussion between core contributors and STFX, we have proposed that a small change be made to better reflect the long term alignment between the protocols. The final language that goes for voting will include the below updated language.

STFX and GMX intend to hold the tokens received from the swap indefinitely and keep them in their treasury. However after 2 years the protocols can mutually review and come to their governance to seek equitable adjustments in the event there has been is a material change in the tokenomics or intended utility of the tokens, that results in the protocols being unable to use them as had been intended.

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As a follow up to the OP:

Highlighting the potential trading volume STFX can bring to the GMX protocol, in a little over 3 weeks our Alpha Mainnet trading competition has done nearly $1M in total volume on $200 max capacity vaults, with 2,400 total users connected and ~1,500 total vaults executed!

Stats can be viewed here

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I am super excited for this proposal. This is one of those rare synergies on multiple fronts and directly going to add value to our customers and potentially bring more demand to GMX. It is a win/win.

I also like how it allows to build a community, social fi and fun among our customers. This is one area I am very excited about. GMX already has a very strong investor based community who are loyal and connected, to give our customers also multiple platforms to have a fun trading experience is a huge plus. All this is possible because of how defi apps work and how wonderful it is integrate these blocks together on-chain and creating lots of safe possibilities for users to onboard on to defi.

Also in favor of the financial terms of the deal.

1 Like
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I am in support of this proposal. As @CredegarFhristensen mentioned, most of the previous proposals were focused on the supply side rather than increasing demand. Using the yield of GMX rather than the actual GMX itself provides a confidence boost that the yield generated from GMX is more beneficial long-term than actually realising the equity value of GMX. This aligns to the values of GMX.

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I’ve seen so many SocialFi protocols, Copy-Trade on CEX’s & DEX’s and none of them has ever succeeded. I hope STFX will do good on this front and get success, but given the history of such dApps, I’m against this proposal.

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The partnership makes sense but the valuation used for SFTX is too high (at present time). For sure a lot of seed investors have an interest to see this propsal pass.

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It can’t be worth 30mil.

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I’m a little unclear about the situation with perp protocol & optimism?

Several of the docs only mention perp & optimism (e.g. roadmap & system flow), whilst others only mention GMX/arbitrum (e.g. Sept medium article “Why STFX Chose to Build on GMX”). It looks a bit like STFX has pivoted? If so, why?

I see a $12k grant was received from perp protocol, were there any conditions or requirements from that grant?

The proposal states: “STFX will source a majority of its liquidity from GMX”. If STFX is using both perp v2 and GMX, how can that be guaranteed? Or has perp protocol been abandoned? What is the state of that relationship?

Are there plans to integrate with any other protocols in the short to medium term?

None of this is a showstopper for me, but I’m uncomfortable with the lack of clarity and apparent inconsistencies.

As others have commented, I too believe the valuation is too high. Enzyme (MLN) has years of track record, a TVL of $37m and a FDV of $39m; dHedge has $11m TVL and a FDV of $10m. Whilst the ambitions of STFX may extend well beyond these, and I understand the differences in approach, that’s yet to be demonstrated. Ballpark, in current climate, I’d assess this more in the $10m to $20m FDV range.

From a GMX DAO perspective: we should really do some independent due diligence and risk assessment before agreeing to these deals. The financial risk is pretty low, but I’m more concerned with the reputational risk.

We’re an established and significant protocol and all eyes are on DEXes right now, it’s our obligation to ensure we’re only associated with good actors and good protocols. And that means doing some work. And no, assuming other credible investors have done their due diligence so we don’t need to, is not sufficient. If we haven’t learned that from 2022, then we’re not paying attention. Reputation is hard earned but easily lost.

This is not particular to STFX, and my impressions of them are mostly positive and I’m generally bullish for this proposal dependent on DD and right valuation, it’s a general point about us managing our risk better.

7 Likes
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Some further questions:

  1. How is the 2yr lock up enforced? Is that done by GMX?
  2. Why $100k? Why not $50k or $200k?
  3. How will the GMX price for the swap be determined?
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Thank you to everyone for their replies so far, we’re taken the time to read all of the replies individually. We wanted to take the time to answer some of the concerns.

Surrounding the project valuation and deal terms:

We don’t think it’s fair to blindly extrapolate dHedge/Enzyme FDVs to make the conclusion STFX is overvalued, any more than it is to extrapolate the FDVs of Perp, Tracer, Injective or Gains and make the conclusion that GMX is overvalued.

There are more nuances based on the designs of the architecture, community and vision:

  • STFX offers leverage which induces infinite times more excitement/opportunity than spot

  • STFX offers the ability to short assets

  • We strongly believe that single-trade focused vaults in the duration of days to weeks are much more likely to find product market fit in the crypto space than multi-month or multi-year managed portfolios

  • STFX is the only social trading platform actually introducing social features natively into their product

Some clarity surrounding Perp and Optimism:

  • STFX received a non-binding, $12k grant from Perp Protocol very early on in product development. The grant was a part of a program given to projects that build within the Perp ecosystem, but does not mandate any exclusive action

  • We are still planning to deploy STFX on Perp, but realistically, due to lack of liquidity on the protocol, we expect it to only be utilized by a) Perp focused traders, and, b) traders looking for instrument exposure that GMX does not currently offer

  • We are omnichain, and our #1 priority is to give our users the deepest liquidity, cheapest fees, most instrument pairs, and best UX. We will never force anyone to use any particular DEX, nor monopolize order routing through any particular protocol. Traders will always choose where they want to derive their liquidity from

  • Given the above, we quickly sought out GMX integration after Perp, due to deeper liquidity and community. As we have been working with GMX devs during the integration process, we were very impressed by their response times and helpfulness

Our medium-term expansion goals are getting GMX integration on Avalanche up and running, and increasing STV capacity and volume on our existing Arbitrum deployment on GMX. We are also looking forward to the potential opportunity to integrate GMX synthetics in the future.

Regarding the additional questions from @degenian:

  • The 2yr lock on esGMX token would be enforced at the contract level by GMX, if the STFX DAO decided to vest into vanilla GMX token, the vest process on GMX would be an additional 1yr on-top of the 2yr for a 3y combined vest

  • We felt that a $100k swap between both projects was a good degree of alignment given our projected valuation, and would align both of our projects going forward

  • The GMX price for the token swap will be determined by taking a volume-weighted average price of GMX over the 7 days prior to agreement

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I agree and will vote in favor, STFX is a fantastic dapp that will have product market fit the second mainnet start and we can expect it to bring lots of volume. Tho i’m expecting STFX to keep GMX as its DEX perp BASE in the coming years. After expansion to perp protocol or other, GMX should keep some form of priority from STFX team. GMX protocol is basically the first risk taker and should be rewarded to do so. esGMX are more valuable than STFX token considering where the protocol is right now.

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I like the idea of a token swap between GMX and STFX. However I don’t think 30m valuation is appropriate when considering current market conditions. Seed valuation would be more convincing.

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Went through docs, interacted in the community, used the stfx dapp in Alpha mainnet, and observed the activities going on there. It is innovative to see stfx bringing to us the experience of Decentralization, Socialization, Gaming & Finance in one dapp. Based product! I strongly approve of this proposal

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$30m is way too high of an evaluation imo. Why are we as the biggest dapp on Arbitrum consistently paying a premium/giving a discount on these “treasury swaps”? When you are the big fish, it’s the little fish that are the ones who should be giving a discount/paying a premium to be a part of your ecosystem, not the other way around.

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Great proposal. Love STFX, my vaults got rekt hard. Can´t wait for more!

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Good synergy between the two projects, so makes sense to align them formally through the token swap. DEXes need more users and deeper liquidity and this offers that.
Subject to the deeper DD called on by other posters, seems like a sensible deal. I don’t know enough to take a view on the valuation.

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Endorse the proposal. Align with DEFI ethos