GMX Update 2

Proposals
22

Hi,

I would like to give my point of view. First, I will start with the most pressing challenges GMX is currently facing and later I will tackle some of them.

Current issues (ordered from most pressing to less pressing):

  1. Onboarding new customers to the platform is limited due to Arbitrum slow growth/adoption.
  2. Liquidity provision (GLP) is not enough despite being the rewards to GLP holders. This leads to having to reward external GLP providers with higher returns.
  3. Liquidity provision (GLP) incentives must be kept forever if the protocol wants TVL. This is a big issue because all the value in fees that the protocol is getting is giving it away to liquidity providers. This is not a long-term solution imo as the protocol can’t maintain value internally.
  4. GMX and GLP are cannibalising value to each other. This is not healthy for the ecosystem (e.g. when rewards were incremented from 50% to 70% of the total, we saw an influx of funds from GMX to GLP and also many users understanding that this move diminished GMX value proposition). Especially problematic as GMX is the governance token and GLP is basically the backbone liquidity.
  5. Floor price is a great idea but at the current speed the capital is not efficiently used and sits iddle (even if you convert to GLP).

I want to tackle problems 2, 3, 4 and 5 with what can bring massive value back to the protocol and GMX (its token). This is the solution firstly used by OHM, which is Protocol Owned Liquidity.

Let’s quickly dive into how this works and why its solves the previous problems mentioned. So protocol owned liquidity would regard to exchanging GMX for crypto assets (e.g. ETH). The team would use these crypto assets to convert to GLP solving problem 2. As team deploys GLP, the team will get fees (hence solving problem 3), which can be used to add more GLP (hence reducing problem 2 further). This Protocol Owned Liquidity will also be part of the price floor making it a more interesting concept as the protocol increases its own liquidity (hence solving point 5). One might say that by offering GMX to the market, it might reduce its price growth potential but I disagree. As the protocol holds its own liquidity, rewards distribution can be switched towards a higher rate for GMX holders as GLP is owned mostly by the protocol and the value is kept internally rather than externally to GLP providers.

So, while I understand the move to AVAX is good to solve problem 1, I hope we can get some discussions going on the use of Protocol Owned Liquidity. And I’ve read already that X mentioned that the team is considering this, but I think it is a must for GMX, a lot of value to be captured. Thanks for reading and sorry for the long long post!

cheers

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23

X has mentioned that we are exploring OHM bonds to help grow the protocol owned liquidity. I agree that the end goal of protocol owned liquidity is key; however, it will take time to grow that liquidity so in the meantime the esGMX rewards are necessary to grow the ecosystem quickly and expand our revenue, fees and most importantly our user base.

Great feedback.

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24

Agree with KR.

From the outside, looking in, i understand the perception that liquidity is a major obstacle or driver of growth. However, in truth, it’s more complicated and while rapidly growing the glp pool helps the protocol grow and accommodate more users, it’s overly simplistic to assume that capitalization automatically results in utilization. Considering user stats, there’s other obstacles. I admit that’s it’s the chicken and egg problem and sustainable / organic growth is often the best way to approach this.

I’m not against working out a discounted OHM- like liquidity sourcing scheme if/when esGMX / eth rewards don’t encourage further growth, but I think so far the protocol grew GLP effectively and fairly organically using esGMX & fee rewards during bootstrapping phase / year one. Expansion to another chain may require some sort of additional bootstrapping incentives, so I’m curious to see if another model could be tried, but I’m actually fairly happy with the way gmx developed and grew on arbitrum, considering the BSC issues we all experienced.

25

Tks X.
Would like to be clarified on this point: “max capacities for tokens”.
In source code, “max capacities for tokens” is checked based on USD or its native unit of account.
For example, max capacities for ETH is 4,000,000 USD or 1000 ETH (assumed 1 ETH = 4000 USD).
If max capacities for ETH is checked based on ETH native unit of account, I think Asset Risk is no problem.
If max capacities for ETH is checked based on USD unit of account, I think Asset Risk is NOT RESOLVED.

26

Congrats Teams. GLP AuM is >$100M now. Using high yield to bootstrap GLP is absolutely killing it. As we grow bigger, here is my line of thinking for our secret weapons to go to Top10 DeFi Protocols. Pls bear with me.
GMX Flywheel to fly to Top10 DeFi Protocols.

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1 Like
27

I’m more bullish on zkSync 2.0 but I support X and team if we want to deploy on Avax. Will follow the team to Avalanche Chain.

1 Like
28

zkSync is a bit away from being fully run.
X has previously mentioned that they have been exploring Starknet, very similar to DyDx
DyDX had special access to develop and lots of support from Starknet, once is open to public I hope we will start to build there

29

This makes a lot of sense to me, definitely would like GMX to be on Olympus Pro when they launch on Arbitrum.

Didn’t include it in the post as it is dependent on the Olympus timeline, but will include this in the roadmap post that we should be publishing this week.

30

The USD price is stored on mint / swap / burn, so e.g. if price of USDT is $1, 3 million USDT is used to mint GLP, if the capacity is $3 million then no more USDT can be used to mint GLP, if the price of USDT changes to $0.5, and 3 million is swapped out, then the capacity counter would be at 1.5 million and another 1.5 million USDT can be used to mint GLP

31

comments as a newbie, things to come to mind when choosing DEX: which chain with less gas? >>> is eco system large enough? >> what kind of values i would have as user/player?

2 Likes
32

Hi everyone,

I know things have moved on somewhat but a couple of thoughts I wrote down a fortnight ago but didn’t post because I had surgery:

There has to be a real focus on attracting new users and currently the barrier of entry and understanding GMX/GLP are critical.
In the world of xx,000%+ yield via OHM (& forks), lets think about what our key proposition here is – the ability to generate super-yields on ETH, arguably higher than anywhere else at the moment.

Directly responding to xdev_10

1a/1b. Explanation of GLP should be linked to the exposure (effectively an ETF) and the yield you can earn by holding. Don’t overcomplicate the ETF holding more than a handful of proxy assets.

Very simply, if like most you hold ETH & BTC, you can get circa an 80% exposure to those assets while earning a higher yield than anywhere else. You can extend this further and reflect that this is the highest unlevered yield you can earn on ETH anywhere in DeFi at the moment

Need to really go for the simplest explanation and the lowest lying fruit first.
I don’t think you need to be increasing the awareness of the derivatives exchange yet, it needs to be planned out attacking lowest lying fruit first by getting eyes on what we’re actually doing here.

2a. I don’t know how much bandwidth project devs have here but really there should be 2 products to attract more sophisticated users:

  • GMX - Should be a simple platform like it is today. Neat, straightforward charting functions, ideally 1-click position open/close.
  • GMX Pro – DYDX/Coinbase Pro style interface that shows detailed position information.

2b. Concern about proposed reward structure and liquidity.
Reward structure should be trialed as a close ended soluti.on rather than being open ended and releasing esGMX over a long-time frame
Maybe released as a minimum number of positions opened on GMX.
I like proposal (ii) but for the sake of providing an opposing and non-consenting view, I am worried about the dilutive nature…

2c. Referral link is great idea. Capped referral and maybe less than 25 esGMX? (I wrote this a while ago, think this has been addressed)

3a. As mentioned by others, need to have isolated and cross as separate products.
3b. Not a fan. Once again as mentioned by others, is actually a great idea but introduces a level of complexity that the average new user will not utilize. Too overwhelming and adding no value. KISS.
3c. Makes sense, such an easy thing to do.
3d. Any reduction should be scaled gradually in 10bps increments. I don’t think the current 1.5% is a barrier for anyone and probably leads to some of the revenue generated. Any reduction will inherently introduce more arb systems.
3e. AVAX is the flavour of the month. Why not Fantom? Alternatively I really like the idea of BSC. Gambit is already there so this isn’t a huge extension.

I do have some existential questions for GMX. This platform is all nice enough but I’m questioning the potential to go from $100m TVL > $3Bn TVL.

No one on GMX is here because they need an ETF style exposure to crypto. Let’s be honest, few GMX users today has bought GLP for a diversified exposure, you’re kidding yourself if you think that. We’re all here to ape. You need a certain level of sophistication to even get onto the platform (per Degen_literacy comment of onboarding which in its current format is painful as hell).

As DeFiMan mentioned, BSC makes sense and seems like the easiest thing to do to engage an audience rather than being on AVAX.
If anything we should just leech of Binance and attract users from there rather than trying to pull users from the existing AVAX ecosystem, which is largely already committed to other projects.
How do we even attract or gain the incremental user on AVAX? Generally a more advanced user than someone directly from a CEX.
The whole idea of the lowest lying fruit and minimizing the pain of onboarding > leaning on Binance and BSC is the only way to do this to minimize gas fees and maximise users. zkSync is the actual logical solution but still too far off, BSC is the next closest option.

I think (but haven’t quite thought through how this would work) the long-term goal should be that you can buy GLP via any CEX and then send it over for super yields. Imagine if you could buy GLP directly on Binance, bring it directly onto GMX to stake.

Anyway some late thoughts, hope it helps.

1 Like
33

Hi, thank you for the thoughts on it

2b. Trialing the rewards makes sense to determine the amount that should be allocated

3e. BSC has been having RPC node issues for a while, so it has been quite difficult to work with, they had an upgrade recently but it doesn’t seem to have significantly improved things

The thinking is that the Arbitrum ecosystem would take a while to be built up, so what we want to figure out is whether having GMX in a chain with a larger amount of liquidity and decent usage would make a difference

Easiest way to test this would be on the chain with the next highest TVL and that isn’t having RPC node issues

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