Proposal for reworked fee distribution and more sustainable protocol growth

Proposals
1

This proposal is a result and summary of an intense conversation with some of the core GMX community members:

1) As long as there are esGMX to distribute:

  • 60% of fees to be distributed amongst GLP holders. Holding GMX alongside GLP allows for higher esGMX rewards, while holding no or few GMX reduces the esGMX reward
  • 30% of fees to be distributed amongst GMX holders
  • 10% of fees to be used to buy GLP for the treasury

By buying and holding GLP, the treasury will acquire esGMX, which can be used for further expansion (chain integration, marketing…). The acquired ETH/AVAX can used to acquire more GLP, or to increase the GMX floorprice fund.

2) Once esGMX pool is empty:

  • 60% of fees to be distributed amongst GLP holders. Holding GMX alongside GLP allows for slightly higher ETH/AVAX rewards, while holding no or few GMX slightly reduces the ETH/AVAX reward
  • 30% of fees to be distributed amongst GMX holders
  • 10% of fees to be used to either buy back GMX, which can then be redistributed as esGMX, or to keep buying GLP for the treasury as long as required

3) Additional change to the current esGMX distribution:
The amount of esGMX distributed should be lowered to extend the duration further into 2023. This will help bring more people to the ecosystem in order to make it self-sustaining by the time esGMX runs out.

Happy to answer your questions on Discord/Telegram, where I will link this proposal.

4 Likes
2

I feel like this is a very important proposal to align the protocol with a longer term vision in mind.
Reducing esGMX distribution, makes it more sustainable in the long run.

The change to give 70% of the fee’s to GLP was made, because of the need for more liquidity during a Trading Competition and was never properly reviewed after.
As GLP is not fully utilized right now I think it would be very smart to take some of the incentives off of GLP and build Protocol owned liquidity. This would go a long way as the protocol would start to have a fixed amount of liquidity which cannot just be pulled at any time.
With owning GLP the protocol would also have a consistent revenue stream which could be used to incentivice development, partnerships etc.

I feel like this Proposal is really helps GMX sustain its growth for a longer period of time and I would definitely support a change like that.

1 Like
3

As far as I can see it, this upate would almost certainly…

  • … guarantee enough liquidity for all trades because the treasury provides it by buying GLP

  • … ensure constant protocol and TVL growth for the same reason as above and because GLP rewards can be used for any kind of protocol expansion

  • … limit the downside volatility of the GMX token price because of the additional incentive to buy and hold at least some GMX tokens alongside GLP

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GLP bought by treasury wouldn’t be nearly enough to sustain fast growth rate of GLP.

5

since we lack utilization, we don’t need to cut GLP supply by lowering % of fees received by GLP.

we need to increase utilization:

  • removing 1.5%
  • referrals
  • trading contests
  • other incentives for traders
    that could be done quickly.

then we re-evaluate utilization.
I don’t think we should change tokenomics ahead of big changes and X4.
who knows, how much GLP we will need.

esGMX rewards for GLP are running out.
If at the same time we cut the fee %, overall GLP rewards will drop dramatically;

and we need GLP supply to grow even in times of low utilization.
the best marketing for GMX would be “the place where you can open 9 figure position without slippage”

so, I support changing distribution of fees to:
63% GLP,
25% GMX,
12% treasury to mint GLP

but not now.

missing a month or two of growing treasury is not crucial for now;

the crucial part is to grow the number of traders, as well as GLP supply.

let’s focus on that. We have few hundreds of active traders, we need thousands of them.

5 Likes
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Hey, thanks for your comment. Please see my answers:

since we lack utilization, we don’t need to cut GLP supply by lowering % of fees received by GLP.

I disagree with this. Reducing the esGMX reward from 70% to 60% will not make people sell their GLP. Also keep in mind that this proposal also asks for the treasury to use 10% of all fees to buy GLP with. So, if anything, this would increase the supply, not decrease it.

we need to increase utilization:

  • removing 1.5%
  • referrals
  • trading contests
  • other incentives for traders
    that could be done quickly.

Totally supporting these, but they are not part of this proposal.

I don’t think we should change tokenomics ahead of big changes and X4.
who knows, how much GLP we will need.

I think, for now, we should treat any proposal as if X4 won’t have an impact, simply because we don’t know if it will. If it will have an impact, then the proposal needs to be changed/cancelled anyway.

esGMX rewards for GLP are running out.

This is exactly why this proposal asks for the treasury to buy GLP now and earn esGMX with it. Further, after esGMX is depleted, the treasury could buy GMX instead and distribute it as rewards. Lastly, this proposal pushes for a lower but longer distribution of esGMX so the cutoff won’t hurt as much.

If at the same time we cut the fee %, overall GLP rewards will drop dramatically;

As pointed out above above, I disagree with this point.

so, I support changing distribution of fees to:
63% GLP,
25% GMX,
12% treasury to mint GLP

Not much of a difference but might also work. Any specific reason for these numbers?

the crucial part is to grow the number of traders, as well as GLP supply.

Totally agree, and I think this proposal helps with both.

7

Not seeing a clear optimization here, compared to the developments from team. This will be a nuanced discussion for the rest of the protocols life: fee distribution, inflation and treasury.

True treasury = holders and users and team and developments.

2 Likes
8

i agree with this, that the treasury would not be enough to sustain a fast growth, but with increased fee’s via utilization the rewards would grow by itself. We changed the fee structure because we didn’t have enough Liquidity. Now that we have far more than needed (right now), I feel like we can review this metric and build something sustainable, which benefits the platform in the long run.

I agree with your assesment that we should focus on having enough Liquiidity in GLP to always allow traders to open big positions, but with current utilization this would still be possible.
We don’t know what the new updates will bring for the demand of GLP so I would agree that there is no rush to change this fee structure and we should probably wait a little longer to see the impact of the new developments.

I feel like your percentages for the distribution are also very reasonable and the exact weight should be but up as a vote with multiple options so the community can decide what the best weight for each asset is.

As you said esGMX rewards for GLP are running out and I feel like we should consider how we can have those rewards for longer (and maybe additional chains) without increasing GMX total supply. The idea presented in the proposal to at some point buy back some GMX to be redistributed as esGMX and cutting down esGMX emissions is a very good idea.

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Thank you for this proposal, I think it could make sense, we definitely need to look into the emissions schedule and plan for the long term, then have a vote to implement the changes.

I guess a missing piece in making these decisions is the details of X4, will work on writing that proposal once the work to remove the 1.5% rule is completed.

3 Likes
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Thx, looking forward to revisit this after we have more clarity on X4.

1 Like
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Overall great proposal, but lets wait for X4 indeed!

I also thought about another aspect. What if esGMX could be swapped for normal GMX (10:1 ratio for example). Team could use GMX from treasury/marketing to do this swap and use esGMX to increase the pool.

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Yup we are considering this as well, pros would be having esGMX be liquid for short term farmers and users in general, it would also allow for more esGMX to be bought back by the protocol, cons could be some additional selling pressure

1 Like