Gmx v2: new low-latency chainlink feeds

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  1. PROPOSAL SUMMARY

As part of the continuing efforts to decentralize GMX and create greater resilience through modular maintenance and development of crucial portions of the protocol (governance discussion), we propose to make Chainlink the oracle partner of GMX V2 and GMX the exclusive launch partner of their new low-latency oracles.

Chainlink’s new low-latency oracles can provide more granular real-time market data to better enable crypto and non-crypto markets on GMX V2, compared to existing Chainlink reference feeds and other industry oracles. These oracles have been under development since last year, including continuous design and development inputs from GMX core contributors. These new oracles were designed to leverage the strength of the decentralized Chainlink Network to address the needs of perpetual exchanges and other price-sensitive DeFi products.

The primary economic parameter for this proposal is an allocation of 1.2% of protocol fees generated by the GMX Protocol towards the services of Chainlink and the Chainlink Network for providing their low-latency oracle solution future development and technical support utilized by GMX. Protocol fees include the fees paid by users, currently proposed to be position open/close fees (“margin trading”), borrow fees, swap fees, and any other fees that the GMX Treasury subsequently retains a portion of from the protocol.

This proposal brings a key infrastructure solution and development partner to help GMX with its critical oracle-related needs, directly aligning Chainlink to GMXs continued growth as a leading decentralized perpetual exchange. The introduction of sustainable economic incentives helps to ensure that oracle network data providers and node operators provide independent, transparently verifiable, low-latency data that is fundamental to the successful operation of our markets. The partnership and economic incentives help ensure the prioritization of low-latency data feeds for specific assets, market parameters needed, and coverage on new chains required to meet the GMX Protocol’s growing needs.

Arbitrum testnet now has a beta version of the low-latency oracle deployed by Chainlink, and testing by core contributors is ongoing.

  1. APPROVAL

If governance approves using the low-latency Chainlink feeds for GMX V2, Labs, and contributors are prepared to complete the agreements and updates required to integrate them into the protocol.

Any material change to the economic terms or permanent discontinuation of this understanding will come to governance.

  1. DISCLAIMER

The information, content, and materials provided in this proposal or associated governance discussion are for general informational purposes only and do not constitute financial or investment advice, nor a legally binding agreement.

Note that discussions and voting involving contributors may occur on GMX DAO social media platforms, but contributors are independent actors, and nothing discussed or proposed should be understood as an obligation for an individual contributor to act.

Please conduct your own research and consult with appropriate professionals before making any decisions based on the information provided in this proposal or any associated discussions.

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Spot reserved for Proposal Updates

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If I understand correctly, the 1.2% is part of the 10% allocated to the treasury?
It seems it is a negociated deal with chainlink, I see it positively although I don’t have any benchmark on the industry standards. If we extrapolate the past 3M fees, it would amount to more than 2.5M$ for a year, not a bad deal for chainlink. I have a few questions though :

  • How is the exclusivity going to work? How much time of exclusivity would GMX have?
  • When is it going to be live also on other chains? And how is it going to impact launch on other chains if v2 if dependent on the feed ?
  • Fee sharing with chainlink kicks in only when it is live ?
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Thank you @coinflipcanada for bringing forward this proposal to the GMX community! All of us at Chainlink Labs are excited to expand the collaboration between our two ecosystems and accelerate the adoption of the DeFi economy as a whole. We believe that GMX is in a strong position as a leading decentralized perpetual exchange and that this integration will further strengthen GMX by providing secure access to ultra low-latency financial market data.

As the VP of Go-To-Market at Chainlink Labs, I’ve worked closely with Coin, X, and many GMX contributors since last year to understand the GMX ecosystem’s unique requirements for data oracles and help direct the development of Chainlink’s low-latency oracles toward meeting those needs to support GMX as our launch partner. We see this integration as being crucial to enhancing the protocol’s performance, hardening its data security, helping mitigate frontrunning risks, and providing long-term sustainable access to essential Web3 infrastructure. By aligning our technical roadmaps and sustainability goals, we see this proposal as an important step in accelerating DeFi as the much-needed alternative to the status quo of the existing financial system.

The new Chainlink low-latency oracles will utilize the same set of oracle node operators and multi-layered data aggregation mechanism currently deployed in existing Chainlink reference feeds, but operate via a pull-based mechanism to meet the speed requirements of DeFi derivatives. Once the data is published on-chain, the nodes’ signatures will be cryptographically verified, providing a strong degree of tamper-resistance when settling user trades. We plan to continue refining the low-latency oracles in collaboration with GMX as the protocol continues to expand and evolve.

Decentralized oracles are critical to the ongoing utility and security of dApps within DeFi. In GMX, oracles provide a source of financial market data that users act upon to open, close, and liquidate perpetual positions. With this proposal, a mutual economic framework will be created, helping ensure that GMX has long-term access to Chainlink’s low-latency oracles, which can operate in a sustainable manner. The fee-share percentage in this proposal takes into consideration the unique architecture required to deliver secure low-latency oracle services, as well as ancillary support that helps facilitate GMX’s growth and development.

Chainlink’s role in the DeFi ecosystem is to ultimately serve as an enabler, providing access to the richest set of off-chain data and resources required by dApps to support their growth and realize the vision of a more trust-minimized economy. The success of Chainlink is intrinsically linked to the success of Chainlinked protocols, which this proposal helps facilitate. I’m excited to work together with the GMX community for the many years to come.

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Absolutely in favor of this collaboration as proposed. It’s great to see a close collaboration between two core building blocks of web3. In working on this integration it is my hope that the intrinsic learnings and benefits will benefit the entire defi industry eventually.

In a sense it seems the added revenue will support innovative developments and support that is essential to continued growth of the gmx protocol while remaining robust and resilient.

I don’t know enough about the tokenomics model employed by chainlink, but independent of the needed (and appreciated) support provided to GMX will there be ways for other market participants to benefit from innovations in the low latency feed space using only decentralized means after some period of time? Is there thoughts on whether the exclusivity will be limited in time? Thanks.

Onwards!

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What does low-latency oracles mean for GMX and what security tradeoffs are made

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Very happy to see this proposal take shape. I feel that fast, low-latency price oracles are significant added value for a perp DEX. They will help provide traders with an even more CEX-like trading experience, further enhance security and stability, and extend the competitive advantage that GMX has.

The suggested fees feel significant, yet realistic. I’d also echo @nulos questions, as those would be relevant details to have.

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Is there any figure available on how much not having low-latency oracles affects us? I’m just thinking we should compare apples with apples, the fees we pay need to be reflected in increased volume/better UX on our side.

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So, GMX is going to become the exclusive launch partner for Chainlink’s low-latency oracles.

Low-latency oracles will be Chainlink’s paid feature, accessible for other reputable protocols, I guess?
1.2% of the fees is now a common standard for all protocols that want to use new oracles?

Please share Chainlink’s stance on the future availability and price of your development for other players.

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I would like a bit more detail on how low latency oracles will benefit GMX specifically (is this with a view to non-crypto markets?).

Also, as others have said, does this 1.2% come out of the 10% proposed for the DAO? Is this 1.2% in perpetuity or with a time limit? How does it compare to the cost of existing Chainlink oracles?

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They mention they will post once per block, which seems like a fixed price, which could be divided between various other DeFi apps

Why is a percentage of profits being promised over a fixed price? It does feel much more in favor of Chainlink

What are the protocol profits that can be made by switching to low latency - can this be stimulated?

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It’s $136.1m fee earn by GMX Protocol by past 365 days,
Does it means we need pay $1.6m (1.2% of protocol fees ) / year for Chainlink’s new low-latency oracles ?

That seems a little expensive.
As exclusive launch partner and especially they got help from GMX core contributors， Is the price fair ？

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Chainlink low-latency oracle is important because now we use the price from Keeper which is actually quite centralized. The mechanism of Keeper already brings lots of fuds such as “GMX team could exploit all GLP by themselves”. By using the new Chainlink oracle, the security of GMX would improve a lot. Thanks for your effort

But Chainlink is more like Saas , so it sounds more reasonable to use a fixed subscription fee. If still wanna “pay by use”, the “num of transactions” is more reasonable than “fee”, we could charge a “Chainlink fee” at each trade as the “keeper fee” for now.

So my suggestion is to discuss 2 options:

  1. Fixed price (such as $500k?)
  2. Charge “Chainlink Fee” at each trade from traders to pay Chainlink (such as $0.01/trade?)

And GMX should always get the lowest price from our contribution and bargaining power.

Summary: This oracle is very important but fee structure could be modified.

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@nulos you understand correctly the proposed 1.2% is part of the 10% allocated to the treasury, but if the treasury proposal were not to pass then this 1.2% would be a standalone fee.

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The exclusivity is specific to GMX being the launch partner of Chainlink’s low-latency oracles. GMX contributors have worked closely with Chainlink Labs on the development of the low-latency oracles since last year, this solution has been customized to fit the protocol’s needs which enables GMX to be the first using this oracle solution. GMX will work with Chainlink to deploy these feeds to address our initial set of desired assets and chains, but eventually these oracles should and will be utilized by others who are also contributing towards the cost of this infrastructure as GMX is.

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Hey guys, thank you all for the thoughtful questions and enthusiasm around the proposal. I’ll do my best to answer batches of relevant questions about this proposal periodically as they come in.

We’ll aim to address this as well as the other relevant questions about how low-latency oracles operate below.

To understand how low-latency oracles help GMX, we must first outline the unique challenges and requirements of price oracles for derivatives protocols in DeFi. Three considerations need to be made:

  1. Price oracle updates must feature extreme low-latency to ensure data made available to the platform is fresh; otherwise, traders can become exposed to stale price execution, and liquidity providers can become exposed to value extraction via MEV techniques.
  2. Oracle price data must be kept private before trade settlement; otherwise, malicious actors can extract value from traders by frontrunning oracle updates, such as by viewing data on another blockchain before it’s relayed or reading the transaction mempool.
  3. The oracle infrastructure must be decentralized, both at the node operator and data source level, to help ensure high trust-minimization guarantees and robust market coverage.

With these requirements in mind, Chainlink Labs has actively worked with contributors to GMX in developing this new low-latency oracle solution that uses a pull-based data delivery mechanism to provide GMX with access to high-frequency data, where oracle reports will be made available off-chain for every block to be used as needed to settle user trade transactions. This is in contrast to a push or trigger based model where data is continuously streamed on-chain (reference feeds). This architecture is what allows the oracles to operate in a low-latency manner and provides greater economic efficiency as data only needs to be published on-chain when required.

On the question about security, the new low-latency solution will utilize the same set of node operators and multi-layered data aggregation mechanism currently deployed in existing reference contract-based Chainlink Price Feeds. This allows the new oracles to retain the same level of manipulation-resistance but provide access to data on a higher frequency basis to meet the need of DeFi derivatives. Low-latency oracles will regularly generate oracle reports off-chain, where a decentralized oracle network cryptographically signs the oracle reports. The reports can then be fetched off-chain and validated on-chain by checking the cryptographic signatures before being consumed by the GMX protocol to settle user transactions.

In addition to providing wide market coverage, this solution helps mitigate the risks around frontrunning by keeping oracle reports private until trade transactions are settled. Both the reduction in oracle latency and the improvement in frontrunning risk mitigation can help GMX further reduce trading fees and increase both the platform’s efficiency and user experience.

I will aim to address questions about the structure of a percentage fee here.

This proposal includes the integration of Chainlink’s low-latency oracles into the GMX protocol, however, it also goes far beyond that. As the GMX protocol seeks to increase its decentralization, it will need a strong oracle partner to address and build solutions that can meet GMX’s oracle requirements both today and into the future. By offloading oracle development from core GMX contributors, they can focus on improving the core business logic of the GMX protocol to continue being a pioneer in DeFi derivatives innovation by adding new functionalities. Additionally, new and existing users are provided peace of mind regarding the oracle infrastructure used by GMX.

We are looking at this collaboration as a long term alignment opportunity between two DeFi pioneers, whereby Chainlink Labs would become the de-facto oracle team for the GMX protocol and strengthen the relationship between our two ecosystems and communities. Chainlink Labs can tackle GMX’s most pressing oracle needs, including the deployment of new additional low-latency feeds, expansion to additional blockchains, improving existing low-latency oracles with additional functionalities, and providing access to additional oracle solutions such as Chainlink Automation to enhance GMX’s usage of Keepers, and many other forms of future collaboration. Therefore, the fee structure in this proposal facilitates the creation of a win-win relationship, boosting the growth and decentralization of the GMX protocol.

The fee structure of this proposal reflects our strong belief in the future growth potential of the GMX ecosystem and the enhanced level of support that will be provided to help make the GMX protocol as successful as possible. Future usage of Chainlink’s low-latency oracles by other protocols may incorporate a different fee structure depending on the different types of integration and level of active support provided to the integrated protocols. Arbitrum is the initial chain the low-latency oracles will be deployed to, with future chain integration work occurring after validating the Arbitrum deployment with GMX.

Chainlink Labs will continue working with the GMX community and core contributors on an ongoing basis, including aligning our technical roadmaps to prioritize the chains that GMX plans to expand to. Initial work is focused on launching on Arbitrum and ensuring the protocol is operating as expected. After deploying on Arbitrum, we’ll focus on deploying Chainlink’s low-latency oracles onto new chains. Given the improvement in architecture of Chainlink’s low-latency oracles compared to existing Chainlink reference feeds, the chain integration process can be streamlined.

That is correct. The fees outlined in this proposal will only kick in after the low-latency oracles have been integrated into GMX on mainnet.

I appreciate the questions posted by the community and I know there’s more I haven’t yet addressed, I aim to post a followup in the near future.

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By Stand alone fee, you mean a fixed fee? Or 1.2% of all fees?

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thanks for sharing

i) can we know more details around how 1.2% figure was calculated
ii) will a ‘pay by usage’ model be better?

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1.2% should be acceptable quantum for now. But for how long until this agreement has been reconsidered again? What is the tem of the deal last?

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1.2% is very unreasonable. The income of the gmx agreement is higher than 99% of the agreements on the market. For some agreements, such as lending, the annual income is not as high as a week’s gmx. This is more beneficial for other protocols. What’s more, gmx expects its revenue to double, and the amount of commission will be very large at that time. My opinion is only for fixed amount fees

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