Strong endorsement, low-risk and win-win in expectation
Thanks for the timely response!
>> Re valuation
At this nascent stage for STFX, itâs useful to look at the valuations and metrics of comparative protocols that are already established and have a track record. Itâs plausible STFX will outperform those given the differences you outline but thatâs theoretical at this point.
- Maybe I missed it, but what is the public launch valuation ($40m FDV?).
A way to avoid this guessing at valuation and be more confident in a fair valuation, would be to wait to do this until after public launch (which is this month anyway?) + 30 or 60 days for price to settle down and to take a VWAP + discount.
Risk of paying more for reducing uncertainty is not a bad trade off from a GMX DAO perspective imo.
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What do other DAO folk think of this? Other downsides Iâm missing apart from price risk?
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Is there any pressing reason this is being proposed before the public launch given itâs imminent?
>> Re perp protocol
Thank you for providing the clarity on perp protocol, that addresses my questions. Makes sense. So itâs more accurate to say STFX will initially source the majority of its liquidity from GMX, but that may change over time with future integrations, and is dependent on users
>> Re $100k
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
I need something a bit more concrete than that! Thatâs not good rationale.
Given you have identified some ways how youâll use the income (and that esGMX income is relatively stable), I would have expected you to have a plan that would justify the income from $100k esGMX, with anticipated pass throughs to GMX etc. Iâm really looking to see that youâve thought it through in some detail vs just plucked a round figure out of the air.
- What could you not do with the income from $50k esGMX and what more could you do with it from $200k? and how would that affect GMX?
4 Likes
i am new to this - where is the vote button?
This is a Proposal, - Voting, takes place after the proposal
Thank you all for the additional replies, we are really humbled by the engagement here and glad to be discussing with the community.
Regarding some of the additional questions that have come up:
At this nascent stage for STFX, itâs useful to look at the valuations and metrics of comparative protocols that are already established and have a track record. Itâs plausible STFX will outperform those given the differences you outline but thatâs theoretical at this point.
We agree that comparable projects are useful in analysis, but they shouldnât be the be all and end all, especially when there is quite a differentiation in terms of product:
We have a lot of conviction that the Social-Fi trading vertical is a multi-billion dollar market. Derivatives are cryptoâs strongest product-market fit to date, and itâs not even close. Currently, the market is mostly driven off the back of retail traders, 99% of whom are socially trading in this format already! The primary difference is that itâs all being conducted through âsoftâ media channels (Discord, Telegram, Twitter) in a fragmented, non-accountable manner. We talk about this extensively in our Medium posts and Twitter spaces, so I wonât rehash it too much here, but the value potential for a platform that can aggregate these fragmented trading communities in a scalable, visible manner cannot be understated. Maybe itâs not STFX that ultimately wins this vertical, but inevitably someone will figure it out, and the value accrual will be extraordinary.
Is there any pressing reason this is being proposed before the public launch given itâs imminent?
Our public launch date isnât hardcoded; we are currently aiming for Q1 2023 but this will likely depend on market conditions to some extent.
We have been going back and forth with members of the GMX community, iterating through the proposal structure since September. As our month-long Alpha mainnet is winding down Thursday, we thought it was an ideal time to make the proposal, supported by stats from the platform so far. Many of the core GMX team weâve been working with agreed.
What could you not do with the income from $50k esGMX and what more could you do with it from $200k? and how would that affect GMX?
At ~20% APR, the current suggestion of $100k gives approximately $20k in annual revenue. As touched on earlier, these funds would be primarily geared towards funding trading competitions on STFX. $20k of income from this proposal will allow us to host regular competitions for managers who host vaults on GMX, accruing value to both platforms in the process.
In addition, these rewards from the esGMX will be paired alongside STFX token emissions to boost rewards further. As a result, value would pass through to GMX as it benefits from the increased trading volumes that stem from these competitions.
As for why we suggest the $100k value, there were a few reasons in particular:
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The GMX core team recommended this as a reasonable value; but also,
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It helps align the two communities without putting material economic risk on the GMX treasury. The larger the treasury swap, the higher risk it presents in the communityâs eyes;
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As mentioned above, while $100k esGMX isnât a war chest of yield, we think itâs enough to move the needle for competitions, especially when paired alongside STFX rewards in a way in which a smaller amount would not be; and finally,
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$100k seemed within the standard bounds of previous treasury swap proposals.
Interesting proposal, I do like that STFX, unlike many of the other token swap proposals that have come across, addresses the taker side (demand) rather than the maker (liquidity or supply) side.
My main questions here which I have not yet seen compelling answers to are:
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Would be very relevant for the community to know if the vocal / loud supporters of this proposal have potential conflicts of interest including investments in STFX in a personal or professional capacity. And likewise with anyone on the GMX core contributor team.
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Iâm not sure why a token swap is needed here for STFX to compose with GMX. The âeconomic alignmentâ argument doesnât really make sense to me as a convincing reason in its own right. Itâs not like a bilateral token swap is needed for an integration here to operationally work.
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Similar to #2, why not just wait till $STFX is floated on public token markets (uni v3, etc) and then the respective SFTX and GMX treasuries can purchase each otherâs tokens on open market if it makes sense.
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GMXâs treasury should absolutely not be treated as an internal VC fund. No responsible treasury should do this unless taking on that level of risk is the expressed goal of the protocol / DAO treasury in question. The fact that this practice is rampant throughout DeFi, does not mean this is a good idea.
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From a reputational and risk to existing business POV, GMX has far more to lose here than STFX. And I am not sure that mismatch in risk being exchanged here (financial and reputational) is accurately reflected in the FDV.
Could you please share the valuation details on the seed and public launch token raise? Also what % of circulating supply and max supply does this proposed $ amt and valuation represent?
4 Likes
Thank you for the reply @randomishwalk and the concerns raised!
Would be very relevant for the community to know if the vocal / loud supporters of this proposal have potential conflicts of interest including investments in STFX in a personal or professional capacity. And likewise with anyone on the GMX core contributor team.
The list of our private round investors can be found below: Investors & Partners - STFX Docs
None of the GMX core contributor team have an existing investment in STFX.
GMXâs treasury should absolutely not be treated as an internal VC fund. No responsible treasury should do this unless taking on that level of risk is the expressed goal of the protocol / DAO treasury in question.
The nature of this proposal is to align both protocols economically and visibly going forward:
STFX despite being in an alpha launch stage (with $200 cap on STVs) has already provided taker volume of over $1mm on the GMX platform. We expect this figure to increase significantly over the coming months as we loosen restrictions on raise capacity.
As a result, we also expect the fees provided to GMX stakers from STFX activity to increase, and believe that a token swap agreement will represent a reflexive arrangement between both protocols; we donât envision this as a one-sided VC investment.
Itâs not like a bilateral token swap is needed for an integration here to operationally work.
Since we already have a GMX integration and have provided significant taker volume on the GMX platform, this proposal is less about operational alignment as it is community alignment. We intend to become a significant venue for volume to flow through the GMX platform over the coming months, and we feel that a token swap between treasuries is an consolidation of that objective.
Could you please share the valuation details on the seed and public launch token raise?
STFX raised a seed round at a $20m pre-product valuation for 10% of the total supply, this raise concluded in August 2022.
Currently, we are planning to raise a public round at a $40m valuation for 15% of the total supply. Though as we stated above, the exact timing and nature of this raise may be subject to change; our current plan is to raise these funds in Q1 2023.
Also what % of circulating supply and max supply does this proposed $ amt and valuation represent?
The suggestion of a token swap of $100k of STFX token at $30m valuation represents 0.33% of the STFX total supply, likewise, 0.018% of the GMX total supply (relative to a current FDV of $553m).
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I really appreciate the transparency. (Also sidenote, but great set of docs imo!)
I was hoping more for others who have commented on this thread to self-identify so that people who donât have time to dig through docs can easily identify the key issues and considerations 
That is good to hear, just from a conflicts standpoint.
Right I totally get that. I take issue with the âreflexiveâ element of it as you point out. I think DeFi and crypto is naturally reflexive enough without having this potential treasury entanglement issue. But I acknowledge I am definitely on the more cautious side when it comes to risk, so I have a clear bias towards highly conservative approaches to treasury management (which thus far in the bear market has been the correct choice for DAO treasuries to make).
Given the high overlap in your angel investor base with community leaders & users of GMX, I would argue that âcommunity alignmentâ is already accomplished. I think there are far more effective ways to signal and implement community alignment that do not involve incremental treasury risk.
Some ideas off the top of my head include:
- Podcast appearances with builders from both ecosystems (Iâd love to listen to that!)
- Participating in jointly hosted Arbitrum AMA spaces which Hunter from Offchain Labs can organize & facilitate/moderate
- Direct collaboration between devs and greater mutual assistance from both sides on the technical & liquidity integration front
- A forked version of the canonical IPFS-hosted GMX frontend that includes more explicit STFX-enabled features
- Joint development of an iOS and Android-friendly mobile app (taking inspiration from more mature âsocial investing and tradingâ apps like eToro) that on backend is powered by STFX & GMX
- Joint grants to fund external risk monitoring (aka Gauntlet) and Dune dashboard contests + trading contests
Thank you again for this disclosure and my apologies if youâve disclosed that elsewhere (twitter, medium, etc)!
Yes I fully acknowledge in terms of both $ amt and % of supply, this is not a massive financial decisionâam just emphasizing that capital is incredibly valuable, especially in a bear market, and there are many (in my opinion) more compelling ways for GMX to use its treasury.
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Update made to reserved post above
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Thanks. What is your opinion on the economic alignment point?
I still think an outright token swap is unnecessary for product alignment (which is really what matters here) and I think this is not what our treasury ought to be used for. This isnât really âoperationalâ or âcapital-raisingâ in nature, which in my mind are the two roles of treasury tokens.
That said, I am somewhat sympathetic to some of the points @STFX has made here and appreciate some of the additional detail / transparency provided.
After looking at the platform I do see its potential but I do think the valuation of 30m needs to be adjusted before its given the green flag
Love the analysis here.
These token swap funds would come out of GMXâs marketing fund, technically. The
â1 million GMX tokens reserved for marketing, partnerships and community developersâ, as the Gitbook describes them. So I feel this expenditure would be in line with what the funds are earmarked for.
Iâm sympathetic to the idea that the protocolâs capital should be allocated conservatively, that said. And some of your mentioned alternative ideas for achieving further GMX-STFX community alignment are excellent, and should be taken to heartâŚ
A joint mobile app, an STFX-features integrated front-end; I would love to see those realized. Because they would exemplify the synergistic value-add relationship between the two protocols.
But that type of deep, longterm collaboration is expensive and time consuming - unlikely to materialise without first cultivating mutual faith, close contact, an aligned vision. Personally, this proposal feels to me like it helps lay the foundations for just that.
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Please note: The STFX proposal has been posted on snapshot, for voting.
Noted, thank you for sharing your thoughts here
This is a very good proposal, which will significantly improve the trading volume of GMX and be beneficial to the development of GMX
Jonezee this could be a silly question but where is Snapshot to vote?
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No silly question at all, here:
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This is a Proposal, - Voting, takes place after the proposal
I support this proposal, a different interface for volume adding is a huge catalyst