[Modified] Proposal to authorize buybacks for points program to improve Open Interest

Proposals
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Concerns About Liquidity, Buy‑Backs and Potential Exit Liquidity

Hello GMX community,

I’ve been following the recent governance discussions and proposals to use protocol fees for open‑market GMX buy‑backs. As a long‑term supporter of the protocol, I felt compelled to share some research and perspective on why aggressively buying back GMX may not serve the broader community as intended.

1. GMX liquidity is razor thin. GMX is listed on a number of centralized exchanges, but actual depth is modest: Binance – the deepest venue – has roughly USD 83 k of bids and asks within ±2 % of the current price; most other CEXs offer just a few thousand dollars of depth, and combined daily volume across all CEXs is only in the low millionscoingecko.com. On decentralized exchanges the situation is worse; the largest Uniswap V3 pool (Arbitrum) holds around USD 160 k on each side of the ±2 % band, while most pools have less than USD 3 k of liquiditycoingecko.com. Any sale of more than a few tens of thousands of dollars would move the price significantly.

2. The token supply is highly concentrated. According to on‑chain analytics, the top ten wallets hold over 80 % of GMX, with the top 50 wallets holding more than 94 %. A single individual has publicly held around 200–237 k GMX, and other large wallets contain 500–700 k GMX each. In other words, a handful of actors control most of the circulating supply, while the free float is tiny.

3. Buy‑backs have been offset by large whale sales. Data posted in the “Dynamic BBD Adjustment” thread shows that the Buy‑Back & Distribute (BBD) program has repurchased about 1.6 million GMX since launch. Of this, roughly 933 k GMX was compounded, 408 k was sold, and 288 k remained dormant. More importantly, during the same period the protocol experienced three major sell‑offs: a 300 k GMX whale dump, a ~500 k GMX sale after a v1 exploit, and a ~400 k GMX sale due to price manipulation. These sales total about 1.2 million GMX, effectively cancelling out the buy‑backsgov.gmx.io. In other words, the program has so far served more as exit liquidity for large holders than as a net reduction of supply.

4. Illiquid whales are essentially trapped. Because GMX’s order books are so shallow, any whale holding 200 k–500 k tokens would need weeks or months to exit without crashing the price. Instead of trying to solve this by artificially boosting price via buy‑backs, we should acknowledge that large holders are locked in by the very illiquidity that underpins the token’s value. Using millions of dollars of protocol fees to provide them with liquidity creates perverse incentives and diverts funds from growth.

5. A better path forward. Buy‑backs can momentarily boost price, but they don’t address the underlying issues of low trading volume, concentrated supply and limited product differentiation. I believe the community’s long‑term interests would be better served by:

  • Investing fees into product development, marketing and partnerships that increase volume and demand.

  • Improving transparency around treasury use and buy‑back execution.

  • Exploring ways to broaden token ownership and reduce dependence on a few large stakers.

  • Focusing on sustainable APR in ETH (real yield), rather than giving out more GMX that is quickly sold.

GMX has built an innovative protocol, but tokenomics tinkering won’t fix fundamental issues. Continuous buy‑backs risk becoming an “exit ramp” for whales while leaving small holders holding the bag. I encourage everyone to weigh these points carefully before supporting proposals that might inadvertently hurt the long‑term health of the ecosystem.

Thanks for reading and for fostering an open discussion.

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Tbf to your points, the free float on LP + binance is within reasonable values, TVL of GMX pool on arb is 5.4m ad with regards to the 2±% band at 160k, we must factor that GMX is 9$ currently that is good depth for the current price requiring 17k GMX to move.

Additionally this buybacks proposed is not to be given out immediately as it is meant for a points program to increase Open Interest within the platform…
did the math above and the amount quoted is a marginal increase to buyback weekly… it is a 1 year twap purchase given how marginal increase it be, it wont help any whales exit… and the sole purpose is to up OI. The concentration of wallet is a valid concern but i dont think top 10 owns 80%, the largest staker owns around 400-500k GMX have to recheck the dune analytics but to my knowledge, 500-700k holdings you are seeing is most likely smart contracts holding it.

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Thanks saulius for that, after checking on the code base:

We have to modify line 68-83 , several ways we could rewrite this to have a function that we add ACL that only gmx approved addresses and just allow parameter of token address and token amount.

Adjustings emits and variables, _incrementAvailableFeeAmounts to remove version parameter.

Should not take much dev time as it be just readjusting the current claim function and adding a modifier to whitelist only treasury addressess to pass the usd. Audit wise low SLOC count too shouldnt be a huge issue to add.

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I don’t disagree with you at all - but what are you suggesting as an alternative? Right now, previous major tokenomics changes have yielded catastrophic results:

  1. MP Burn removed the incentive to not sell during bear markets, and burning them didn’t end up brining in tons of buyers that were put off by other people having 200% APR. Also it apparently “decoupled” us from ETH which turned out to be a net-negative.
  2. As you said, the Buy Back & Distribute mechanism just ended up serving as an “exit-liquidity provider”, and (even more hypocritically) most everyone in the community just immediately converts their claimed GMX back to desirable tokens.
  3. Letting GMX be a GM pool opened the token up to manipulation by fee farmers who would extract the stakers’ wealth by shorting+apr combos.
  4. The Solana “expansion” has so far taken more liquidity off of arbitrum by having to transfer it to the solana network, as well as induce a year-long price-suppression mechanism to the tune of $100k sells per month.

I mean what changes has the DAO made to the $GMX tokenomics that yielded positive results for the token? The top ten wallet holders have lost a staggering amount of unrealized wealth, - you really think they’ll stick around if he can see a exit opportunity? OP is proposing that exit opportunity without realizing it. Remember, the people reading this are the same people that mocked Arthur Hayes for selling when $GMX was $60. “Long-term thinking” can be in short supply here, that’s why some of this stuff needs to be spelled out and I’m grateful for @ShoeStar for bringing up his concerns.

If we want to incentivize the various whales & stakers to not use the Buy Back Bot as their personal exit-liquidity device, we should incentive them to not unstake by bringing back Multiplier Points that reward holders for not seeking out “greener pastures”. And then maybe OP’s buyback scheme could stand a chance. Otherwise we’re still just treating the symptoms and not the disease.

I get the topic of discussion here is incentivizing traders, but the buyback mechanism isn’t the right vehicle. It’s like you’re doubling-down on one broken function in order to fix another broken function.

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We still have to find a way to incentivize traders to stay, and based on other perps points program. It makes sense to get gmx as the airdrop. Treasury is not holding sufficient gmx to conduct this program thus the proposal.

Treasury holdings can be seem above, in the image posted.

For ref this wont be the only company that does it:
LayerZero just bought 10m
Hype does it via fees
BNB does it

We be buying back for points program to incentivize traders to stay, as shown in calculation if monthly twap its marginal increase towards monthly buybacks, and thus this shouldnt be seen as a exit liquidity, it is a one year twap and not a single buyback in bulk…

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Yes, I totally agree.

XDev had set up esGMX (as well as MP’s) as tools to incentivize using the GMX ecosystem and to grow the base amount of users. And they worked! Perhaps we could incentivize traders with a new round of esGMX (which can’t immediately thin our usdc liquidity like the current buyback program does) funded by the treasury as a compromise solution. That way you’re rewarding traders but not by instantly perpetuating the problems that @ShoeStar listed.

Those programs are all significantly, SIGNIFICANTLY healthier than GMX is. They didn’t have a Q come along and make multiple changes to the protocol that yielded catastrophic side effects (many of which had been forewarned).

I’ve been advocating a “back to basics” approach because that system was working before the community started making these unnecessary & ultimately ruinous changes. That “back to basics” approach would alleviate your concerns as well as accomplish the very things this platform needs to survive:

  • We do what you want and airdrop/reward “points/gmx”, but in the form of esGMX (with obvious workarounds treasury making allocations to mint more or a new kind of esGMX if the available quantity isn’t around). PROVEN SOLUTION: esGMX provides the dual benefits of incentivizing traders to use the platform, and incentivizes them to stay since they can either stake or vest.
  • We turn off this stupid-as-hell buyback bot and make the real-yield either ETH or USDC (or wBTC). Everyone is already just insta-converting their $GMX claims to USDC or some other desired token anyways, and getting real-yield in a desired coin will add to the incentives for actual humans to buy & stake $GMX. Plus it helps address the issue of the buyback bot merely being a exit-liquidity-bot.
  • We get leaner, by closing out the GM Pools where no one is staking (a lot of the single-sided pools that Q introduced) as well as discontinuing the $GMX GM pool (also a Q idea) since its resulted in fee farming that’s just further extracting $$$ from the ecosystem.
  • And finally - Re-introduce an MP program. The whales weren’t selling until people started bringing up this wealth-obliterating proposal in early Spring 2024. The notion that “If people see someone with 200% APR, they won’t buy the coin” has been been proven false, and my warning that taking away MPs will be catastrophic during a bear has been proven true. Let’s just go back to this - it was a proven success.

We can make the GMX ecosystem healthy again. We all remember how amazing it felt to see GMX climbing the “Crypto Fees” chart, occasionally breaking the top 4 or 3 spots. We can go back to where traders are incentivized to use the protocol while not to the detriment of stakers. We can go back to a period where stakers aren’t selling because of a genius “don’t sell” mechanism that reigned them in. We had a Garden of Eden, and a snake was able to tempt virtually everyone in the community to make one poorly-conceived decision after another. We stand a better chance of re-establishing paradise by turning back to X’s original vision rather than doubling-down on more tokenomics tinkering. I look at the proposals by Saulius, you and Harry and it just looks like re-arranging deck chairs on the Titanic. None of them address the root issues while my “back to basics” plan does.

So I’m saying to you Jun Wei, if we execute your plan BUT make it some variation of esGMX rather than GMX, then your methodology will yield results that are to the benefit of the traders and (at the same time) not to the immediate detriment of the token holders. The whole concept of esGMX was a brilliant way to grow our ecosystem before - so let’s try using that tool in our toolbox before we engage in “Major Disruptive Change With Unexpected Terrible Consequences #475”.

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The mechanism of how this points program be distributed is actually not stated, it be in a separate proposal once it has been accumulated, as stated multiple times in this proposal, i am ok with the idea of esGMX as the trading incentive but of course we need to gather the sufficient GMX first before locking it back up.

Main goal is to first get the points program started, before voting the distribution given that be 1 year away.

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I would be against this program if it just to get some traders chasing points into GMX. I believe this could be temporary boost if GMX is not tackling other problems to keep traders in once attracted. I’m very much in favor of marketing and using part of treasury to buy to token to market GMX by incentivizing traders could be great, but it should be part of bigger plan. Not just giving away tokens to traders. Worst case we could be handing out free tokens to the current traders (not that they don’t deserve to be rewarded) and not attract any new.

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Its meant to attract new traders, with points program people tend to come and hopefully through the calculation the points (airdrop) offset fee’s thus they trade more on gmx instead of other perps? and doesnt mean GMX cant market the program alongside. But end of day we only have 100+k GMX in treasury thus this proposal is needed else we cant conduct any form of program to attract new traders…

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I guess all traders would get points right? I understand that we want new traders in, but i would against discriminating between new and old traders. To add, I think that setting up that points alone won’t do the trick we would have to market the points program to the larger public too, making it well known all around that a points program for GMX is available and involving marketing to actually get new traders in. That’s what I mean with a comprehensive plan, rather than just handing out points hoping people will come on their own.

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That is for sure, no where did i indicate there be a segregation, anyone is free to farm for points in hopes for airdrop, marketing wise is a given and in one of the reply i even stated that we should have GMX twitter post (Monthly buyback for this airdrop program).

The exact plans would require team to comment as i cant force them to market etc.

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Hi BTC!

Thats a great question!. I think this requires 2 seperate answers for 2 seperate outcomes.

  1. We should in the near future, return to being paid in another currency. There is room for conversations in terms of Eth, USDC/T, WBTC. This should depend from a risk perspective I would argue. You are correct about being compensated in GMX as this creates a price suppresison force on GMX. Additionally, we have to unfortunately accumulate GMX for a points reward system as this seems to be a better option for attracting new traders, either that or give gmx some sort of fee discount tbh. I would also like to allocate some treasury funds to actually treasuries if thats okay form a regualtory perspective so diversify revenues. Another way to incentivize traders is to add RWA’s and put less emphasis on coins that have very low volume and liquidity.

  2. We can expand the chain and make it more, thus providing a wider audience of users, however, GMX may lose sight of the main focus of trading. We could use treasury funds to create a whole new prediction market, adding a new market base, additionally, I love the idea of adding foreign Stable Coins, we could have a HUGE FX market, again attracting a whole other type of user. GMX is honestly, just people putting their own liqudity into a pool because they aren’t using it right? Imagine how much GMX owners are from different countries? I think people would deposit thier own native stabel coin no? THis would however, require lots of time and funds, which are longer term solutions because we can actually increase value of our services. For short term, Simply switching to Eth, WBTC, or stable coins as payout for yield, and a sort of reward point incentive and or reduced swap fees for holding gmx, due to low supply we would want to denominate that benefit by every 0.1 gmx or so. As I was writing this I realized an FX market wont work because 99% of the stable coin market is denominated in USD, scratch that.

    image
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To sume it all up, lets chang ethe yield back, do a points program, and focus on growing the GMX ecosystem by attracting new users due to our new value added services. Of course we can also throw out money to get influencers to shill out on us.

OR my favorite direction.

We should take 40million from the treasury and open up a leveraged trading and either go big or go home.

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I would focus this proposal on the points program and move other topics to the other topic. One note; I don’t think changing from buying GMX back to ETH will make any difference or if any make it worse, now at least some GMX are burnt/compounded and with the ones that are sold it should not have a net effect as they were first bought and then sold = net 0.

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Agree .
I already shared my thoughts HERE on ideas to giving away free money to new traders as an incentive.

So, its ok to have some funds and plan to attract new traders, but not via free-money incentives. :see_no_evil_monkey:

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Oh sure dude, I didn’t mean to make it seem otherwise. To be honest I always assumed it’d have to be an initial “vote to re-institute a points program”, and then subsequent votes to drill down on the specifics.

Yeah I mean as long as you ignore the past 4 full years of data, I can see your point. But we know how the ecosystem operated before BB&D, and we know how it faired after. The itty-bitty sliver of “GMX that will then be taken out of circulation” (which at this point isn’t that the only benefit?) pales in comparison to the benefit of offering a token that yield’s staking rewards that people actually want. As mentioned by others earlier, most everyone is just converting their staking rewards to desirable tokens immediately anyway. Plus it also had the (like all Q proposals) unforeseen consequence of harming the ecosystem - in this case by making our USDC liquidity on the GMX site paper-thin. I asked a question several posts above, for anyone to give an example of the DAO tinkering with the tokenomics that yielded successful results. Not neutral results, but rather the intended desired results. And in neither case has anyone yet provided an answer.

It makes me agree with @russiamanbit in his sentiments that the goal should be to providing new traders/liquidity-providers/stakers with a protocol that meets their needs so they can use it rather than the scores of competitors out there. Right now, Han, we put ourselves in a situation where new traders aren’t being lured in by the benefits of GMX vs all the other “casinos”, and new potential new buyers of $GMX look at the state of the tokenomics and immediately do a 180. You gotta fix the MP’s, the Exit-Liquidity Bot, and the GMX fee farm exploit. If $GMX is desirable, then esGMX is desirable. If esGMX is desirable, then using it as an incentive for traders makes our trading platform more desirable.

This two-year “incentive-removal program” we’ve been journeying on needs to stop, as well as this nonsense that its all a zero-sum game (ie, in order to benefit traders, we must hurt stakers). We have the data of what worked. Rather than experimental tinkering, let’s go back to features that worked on a fundamental level.

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Anyways, Jun Wei, I think a lot of people (including myself) are pretty aligned with your views on the matter. If you do end up pushing this to proposal, please keep the various voting options broad/general enough to allow for further discussion/refinement, as I’m sure there is a happy compromise solution for most everybody.

I fall into the “points/esgmx” category because it mostly mitigates the “zero-sum game” issue of how to reward traders without harming stakers (minus some very slow token inflation).

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Thanks will be seeking more feedback too, and adjust according to feedback. For now open to suggestions

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Thank you, Jun Wei, for moving this proposal forward. I had an opportunity to chat with him, and we’ll be working together on a new proposal to bring more structure and help form the Treasury Committee. The goal is to better utilize the funds toward additional resources.

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Thanks @Saurabh , for now i will void this current proposal, and work on the new one with Saurabh to be posted on gov forum asap. Thanks to all whom provided feedback

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Proposal has been drafted and currently pending internal stakeholders feedback before posting.

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