GMX: Transition from “Buyback ETH and Distribute ETH” to “Buyback GMX and Distribute GMX”

Proposals
21

Hello, good proposal but i have 1 question :
What will happen to the Beefy vault which autocompounds ETH into GMX? it will be necessary to update the vault, does it depend on Beefy or GMX?

22

Beefy will have to update the vaults.

23

ok have you contacted beefy to inform them of the reward change?

24

As a GMX delegate I am in favour of this proposal and will vote yes for it.

  • Constant buy pressure in GMX attracts more solid investors who will see a lineair relation with fees generated and GMX price going up. GMX price going up is free marketing and more eyes on GMX as the most liquid platform to trade assets on.
  • More volatility on the GMX token, more volatility means fees going to LPs through swaps and leverage trading a more volatile asset
  • Dormant esGMX issue without benefitting to GMX also gets solved immediately as dormant esGMX wallets now create constant buy pressure of GMX so they get tied to the ecosystem
  • Compounding is in most countries a non-taxable event allowing for more optimised handling of these rewards.
  • Having a solidified rewards system with one token GMX, allows us to think about cross-chain expansions a lot more
6 Likes
25

I trust this is well intentioned post (make token price go up). But on the actual merits - this is a very bad proposal for long term price-go-up of GMX token. Switching to GMX as teh default option versus keeping ETH the default versus enabling GMX as an option is the main issue here

This mechanism switch posits changing GMX into a commodity asset from an asset that can be staked to collect real earnings. The vast majority of capital seeking returns in tech and venture and crypto markets are looking for equity-like returns. These are assets that give holders a pro-rata share of real earnings in ETH or BTC or USDC.

Getting more GMX with staked GMX is not real value accrual. The price go-up is still dependent on having the ETH to buy the GMX in market - its just means more inefficient way to distribute this to investors and that investors have to price liquidity instead of value the dividends / earnings. It adds extra risk here as investors now need to also ask "am I going to get my full share of the value distributed if its all in GMX by default - is liquidity or claims timing going to create negative externality for my holdings?

It is much more beneficial for long term capitalization of GMX project to be an asset that passes ETH dividends. So far the average yield on GMX has been relatively consistent around 5-8%. This means market has been pricing pretty efficiently. To grow GMX mcap, it is far more efficient then to simply focus on growing earnings > ETH dividend payments through product improvements, than trying to manipulate amm liquidity for short term gains. Larger funds who see this are very bearish circular reference tokenonmics for governance tokens like gmx. ETH dividends are far more attractive.

So overall I would argue the default should remain distribute ETH, and then the check-box option to receive more GMX would be the option (not default selection)

26

strong agree - this is much better approach

27

the goal here tho is to collect eth dividends - and although there is a ‘check box’ there is no guarantee that the gmx will be able to sold for eth or usdc at the same rate that staker would be able to just claim eth right away

28

Great proposal, great discussions. Not much to add from my side, very much in favour. Thank you Q for putting out high quality proposals like this.

4 Likes
29

I think its a great idea just as long as we do get the decision what token we want our pay out in, would it be possible to include pay outs in usdt as well or an option to put any payouts straight into a single token pool to earn extra interest on our pay out. I dint know if any of this would be viable or not

30

I think its net +ve for price of $GMX (buying pressure from buyback always > selling pressure from dumpoors to eth or usdc), but the real yield guys who selects convert to ETH will have extra fees ( - 0.6% I suppose). I will vote yes I guess. What will happen to the users holding v1 GLP? they dont accrue value from now?

31

Thank you very much for your detailed response and analysis.

You have clearly articulated your preference and stance, which is to prefer ETH as the actual yield. I not only support this but also recognize that there are many users within GMX stakers who share the same preference.

For your preference, the implementation of this proposal only requires you to check the option to convert GMX to ETH during your first claim, ensuring no difference in your current staking experience. Of course, there is no guarantee that you will receive the same proportion of ETH as you do now; it could be higher or lower, depending on the timing and frequency of your claims.

So why choose GMX as the fee storage form instead of ETH? Using ETH as the fee storage form fully explores users’ preferences and needs for ETH, while using GMX as the fee storage form fully explores users’ preferences and needs for GMX.

Here are two examples to help you understand this difference:

  1. For zombie accounts (e.g., stolen, lost, or accounts that have left GMX for a long time but still have staked esGMX and never claim rewards), the current plan will continuously allocate ETH and AVAX to these accounts, helping ETH and AVAX circulate in the market (although without significant impact). If it were GMX instead, you could easily see that this plan would be a net gain for GMX, even in the worst-case scenario where all active users swap GMX for ETH (refer to the data analysis above). We can even further logically deduce an extreme hypothesis: if 99% of accounts are lost, for Bitcoin, as Satoshi said, it contributes to Bitcoin; but for real-yield-based projects and models, it means 99% wastage (for GMX, not ETH).
  2. Value retention needs to be understood dynamically. Each GMX account has a lifecycle, and the contribution of each GMX account to GMX’s value retention can be calculated with a specific formula: the integral of GMX amount from the start time to the end time. The total value retention of GMX is the integral of the integrals of all GMX accounts. If a user’s fee, say the value of 1 GMX, is stored in GMX for 10 days and then claimed as ETH, the contribution of this account is 10 GMX-Day.

This fully explores users’ preferences and needs for GMX, aggregating the contributions of numerous accounts to impact GMX itself rather than ETH. More importantly, there is a leverage effect here; the higher the buyback amount/circulation ratio and the lower the circulation/total amount ratio, the greater the leverage effect.

Once the principle is clear, we should understand that GMX’s contribution to ETH is a drop in the ocean, but this drop can create huge waves within GMX’s scope. Users who prefer GMX and those who prefer ETH both objectively exist, and the proposal still ensures a seamless experience with user-friendly options.

The actual market performance after the proposal’s introduction has also shown widespread recognition of this proposal, unless the market is wrong. However, I would like to emphasize one principle again:

within GMX, GMX first.

4 Likes
32

For GLP holders, they might not experience any changes. The hidden storage of fees will simply change from ETH to GMX. When they claim, they can choose their preference between GMX and ETH (most will likely choose ETH), and then ETH will become their default option.

1 Like
33

Hi gmsolq,

Thanks for the proposition into GMX’s governance. Some understanding:

How are buyback done? Are buys performed through the GM Balanced GMX Pool? An aggregator like CoW Swap that allows functionalities like TWAPing (to prevent front-running)? Or aggregators like OpenOcean, who recently were approved for a grant to support GM Pools on Arbitrum as apart of their aggregator. Unfortunately there is no solution on Avalanche at the moment.

34

Hi Legend Shogun.

This is the implementation plan proposed by Xdev. Indeed, it is executed in GM Balanced Pools, thus avoiding the risk of external dependencies. I don’t see any issues, but I’m not a dev and my perspective might be limited in this area. What do you think?

2 Likes
35

I dont think this response really appreciates the core argument I make.

For your preference, the implementation of this proposal only requires you to check the option to convert GMX to ETH during your first claim, ensuring no difference in your current staking experience. Of course, there is no guarantee that you will receive the same proportion of ETH as you do now; it could be higher or lower, depending on the timing and frequency of your claims.

So this is the risk and theres no clear reason why the net amount of fees will go up just because they’re being used to ape GMX. If stakers receive ETH by default, that means protocol revs are going straight to stakers w/o any intermediation and its happening in ETH. There is a very large and mature market for ETH yeild already. Because of this, the project simply needs to grow the net total of eth being distributed and fdv growth will naturally follow (see how base staking yield has remained pretty constant this entire year at 5-8%). The goal should be to grow net amount of dividends being sent to stakers, not short term price pump-inoomics.

The actual market performance after the proposal’s introduction has also shown widespread recognition of this proposal, unless the market is wrong. However, I would like to emphasize one principle again:

In this time the net amount of OI on the exchange has also gone up, which when combined wiht volatility is a fwd looking indicator on staker dividends. In addition, there are several new features being built that have the potential to drive this growth - better composability for GM pools, more markets, more permissionless listing, etc. I dont think you can definitively say the market is responding to this proposal and these other things aren’t a factor.

within GMX, GMX first.

We’re all aligned on growing GMX FDV. but lets not cut off our nose to spite our face. there is a much larger market right now of buyers for ETH yield than GMX yield. Catering to the first and growing net dividends is the is best way to grow FDV. The current proposal creates unnecessary risk for this larger market cohort with no clear indication of net-new value creation.

36

Currently, fees are stored in the form of long token/short token in the GM pool, collected from the trader’s collateral asset, swapped into ETH once a week, and then distributed to stakers the following week. Is there a way to hedge the absolute amount of ETH yield risk during the week when it hasn’t been converted to ETH? The only method is to initiate any transaction, regardless of the amount, and directly swap into ETH to fully achieve the ideal effect, which is unrealistic. You can carefully review the implementation method proposed by Xdev.

Regarding this proposal, GMX began to rise 8 minutes after it was released. This indicates two points: first, the market recognizes and anticipates it, reflecting real demand. If it were a pessimistic and poor proposal, users would vote with their funds. Second, there was no frontrunning.

You don’t need to view this proposal in opposition to the ETH narrative. This is also not about turning real yield into buyback. The fees generated by real yield are diverse, and the form of fee output depends on the user’s choice. If you prefer ETH, you choose ETH. If you prefer GMX, you choose GMX. Providing this flexibility in one transaction, I’m more than glad to know what more needs to be done to add in this proposal.

Thanks.

37

As a GMX delegate i will be voting in favour of this proposal, reasoning and discussion as follows.

As stated in the proposal, the intention of this change to the rewards system is to encourage a strong buy pressure on GMX token. A more straight forward way to implement this is to include the option to swap accrued ETH/AVAX rewards into GMX when claiming/compounding. Metavault, a once friendly GMX fork but has now transitioned into much more, implemented this within their forked version. I believe the request from the community for such an implementation was more for convenience rather than creating this strong buy pressure, and after some thought while it would bring buy pressure it would be likely largely negligible and wouldn’t achieve the entirety of the proposal.

Having read the comments above, across telegram and twitter i see a couple of common concerns, which i will comment underneath each with my own thoughts:

1) Is buy back and distribute still considered real yield?

So long as the distributed tokens are fully liquid and not locked in any way, then yes i would consider this real yield still. I think it must be made abundantly clear that the distributed GMX are not newly minted tokens and that these are 100% purchased with real revenue collected from GMX platform.

2) Yield is now in a more volatile asset, potentially more risk associated?

I would argue that as a GMX holder/staker you already accepting of the risks of a more volatile/lower market cap asset and that this should not matter in that context, but the option to convert GMX → ETH/AVAX in claim/compound is a must.

3) Users will lose $ value if having to convert GMX → ETH/AVAX on claiming

Of course this part is hard to mitigate. Ideally swapping would happen through gmGMX market, but this may take time to become liquid enough that price impact does not significantly reduce the net earnings. Having the option to route through aggregators could help to mitigate the fees paid on swap, but will require development time and potentially introduces further smart contract risk. I believe longer term that the value brought to GMX token through BB&D would negate the fees lost in swap vs being paid in ETH/AVAX.

4) What happens when people just chose to swap GMX → ETH/AVAX on claiming? Surely that will offset the buy pressure?

Yes, to extent, but if faced with two options 1) ETH/AVAX → GMX in the claim/compound process and require the user to be more conscious in converting rewards to GMX or 2) Distribute as GMX and give users the option to swap into ETH/AVAX, i believe the latter will result in far more net buy pressure than the former. If there is no significant buy pressure after implementing BB&D, which indications from other protocols that implemented such designs recently (eg gains) suggest this would not be the case, then the only thing that would be lost is time.

To conclude, so long as implementation does not require significant development time and does not add unnecessary smart contract risk i see very little downside with this proposal.

4 Likes
38

The implementation plan from X’s solution is good and feasible, reduced and extended interval buys reduce risks of front-running.

I think this well-thought out model, enhances GMX, instead of ETH or AVAX as a fee storage. Which fulfills a greater demand and benefit for the GMX token.

Thanks for making this proposal, and responding to feedback from the community, I will be a proponent for it.

5 Likes
39

As a GMX delegate with the GMX Blueberry Club project, we are in favor of this proposal and will vote positively for the following reasons:

  • The main objective, as mentioned in the proposal, is to generate continuous buying pressure on the GMX token. This ongoing buyback strategy supports long-term value retention for GMX, which is good for the token’s stability and sustainable growth.

  • The positive perception of a protocol buying back and distributing its own tokens is a powerful marketing argument. This could attract new investors and increase interest in the protocol, which is essential for GMX’s continued growth.

  • While GMX may be more volatile than ETH, these fluctuations will not significantly impact the annual yield, whether positive or negative. Additionally, the proposal retains the option to convert GMX to ETH, thus offering valuable flexibility to users.

  • Currently, GMX buys and distributes ETH, storing weekly fees in ETH before redistributing them. The proposal suggests storing and distributing in GMX instead, without fundamentally changing the nature of the process.

  • Many inactive accounts continue to receive rewards in ETH/AVAX without claiming them. Distributing these rewards in GMX to these accounts is more efficient than distributing unclaimed ETH/AVAX.

With many other benefits, we believe that the potential advantages of this buyback system justify its implementation. This proposal is solid and promising, and we optimistically anticipate the benefits it can bring to the entire GMX ecosystem.

6 Likes
40

In response to the proposal for Buyback GMX and Distribute GMX, Vaultka team supports this idea with the following reasons:

  1. Positive impact on $GMX price growth in long run
  • To support healthy price growth, it is vital to have a buyback feature that creates consistent buying pressure for GMX tokens instead of minting new ones. Utilizing the ETH reward for GMX buybacks could have a positive long-term impact on GMX’s price. Considering that GMX consistently generates over $10 million in fees annually, the buyback could significantly and positively affect GMX’s price.
  1. Users get exposure on $GMX tokens
  • Users can get exposure on $GMX tokens directly under the option for buyback GMX and increase their potential return when the GMX token steps into its bull run. On the other hand, users have another choice to receive ETH rewards based on their risk preferences.
  1. increases the exposure of $GMX in the open market
  • In a certain extent, maintaining a consistent purchasing volume can enhance exposure and attract new potential buyers to participate in the GMX ecosystem.

Suggestions

  1. Use “Convert ETH to GMX” for Option 2
  • We have noticed some comments about the option to “Convert ETH to GMX” instead of “Convert GMX to ETH.” Some users feel that this wording implies that there are extra fees involved in converting GMX back to ETH, which could be inconvenient for those who prefer to receive ETH rewards only. Similarly, we have introduced a VKA buyback option, allowing users to choose to convert their USDC reward to VKA via Uniswap, or receive the USDC reward directly.
  1. Utilize Swap Aggregators for buyback
  • Given that there’s $1.01m liquidity for $GMX in its native pool on GMX, the high volume conversion of ETH to GMX might affect the amount of potential reward to users negatively due to fees and limited liquidity, which leads to dissatisfaction from them. To optimize this solution, we suggest utilizing Swap Aggregators as part of the buyback mechanism, in which, it can achieve the effect of reducing GMX’s circulating supply in the open market.
2 Likes