[WIP] Boosting GLP rewards through vesting GMX and GLP

Introduction

I propose adding a feature that converts GMX and GLP to to veGMX and veGLP in order to boost GLP rewards while having a positive price impact for. (the ve- prefix meaning vested in this case)

Short Description

The new Tokens, veGMX and veGLP would, when minted, be set to vest linearly over a user-selectable time frame to turn into GMX and GLP. They are non-transferrable.
They continue to receive the same rewards as their non-vested counterparts, except that veGLP receives a boosted share of fees, instead of the usual 70/30 split.

Calculations

The boost would be calculated as follows.

Let x be the value of GMX converted to veGMX at time of conversion divided by current value of veGLP held.

Let c be the base GLP fee share.

Let d be the maximum fee share of veGLP.

Let g be the time vested in years.

a(x) would then calculate the fee share for the veGLP:

image

b(x) represents the boost percentage that changed fee share would entail.

I’ve created a Desmos Graph where you can play around with the numbers.

Closing Remarks

This is just an idea in an early stage. Feedback would be greatly appreciated.

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In near future we might need to encourage GLP migrations to the chain where the capital is needed the most. I guess we shouldn’t lock GLP.
As for veGMX, we already have Multiplier Points to boost the hodler’s share of rewards.
(It is questionable whether having MPs is good or bad for the future of GMX,)

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The GMX would have to be bought and ''locked" to boost GLP rewards. Thats the whole Idea, also lockup or vesting etc. to discourage mercenary capital. It helps pump GMX and allows GLP liqidity providers to increase their rewards if they wanna take a stake in the protocols future.

As for moving the capital between chains, there could still be a option to do that. Would be some coding effort though I’d imagine.

I guess esGMX is enough of an incentive to hold GLP for years
You said the word “pump” And I think we need not to “pump” it, but grow it steadily

Like your effort, but the calculation is quite complex to me - and I’m sceptical if we want to make the reward system more complicated, rather than more straightforward, to stimulate user adoption.

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It could be greatly simplified. I just tried to come up with a flexible solution. The specific Implementation is still far away and I thought I could just throw some Ideas into the discourse.

The core Idea is that a user can lock up some glp and gmx together to boost the fee share he received from glp.

I think this would be a good Idea as it encourages users to establish a long-term position in GMX and GLP. It also alleviates selling pressure of GMX and makes sure there always is enough liquidity in GLP as a part of it would be locked.

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I agree that could be an interesting way to encourage longterm investment - and particularly the stickiness of GLP, as GMX already has MP performing a similar function.

Agree with this take - the protocol should only be incentivizing behavior that aligns with its best interests, and I’m not sure I see a strong rationale for rewarding GLP holders who promise to avoid pulling liquidity any more than those who can. It splits rewards in favor just of people who are ‘bullish trade volumes’, and those people clearly need no more incentive to keep their GLP put already. Any costliness imposed on LPs by indirectly reducing their rewards is likely to have a net negative impact on the amount of GLP in total - which should be all we really care about.

Second, there is already a mechanism aligning long term holding of GMX with MP, as described. There’s little value in reducing optionality of GMX holders by forcing an escrow - large holders will eventually be able to find liquid means of achieving the net neutral or short position anyway, if they’re desire is to sell. GMX protocol shouldn’t be trying to induce mechanisms to mechanically prevent selling, it should only be worrying about optimizing it’s future revenue/profitability as the incentive to hold in the first place.

There would be no costs to LPs as the bonus yield would come from a changed fee share, fees that would go to GMX instead go to locked GLP.

GMX holders don’t even need to care unless they already hold GLP, they aren’t in any way coerced to lock their GMX, as that wouldn’t change their rewards for GMX. Also they would be able to vote on the change.

Only users holding GLP would have to think about whether they want to boost their rewards by locking both GLP + GMX.

I partly agree, but If we have something like Multiplier points for GMX why not Introduce a similar scheme for GLP. If we were to only care about future revenue/profitability as incentives to hold, why would we even have MP for GMX? Why reward in esGMX when they will eventually be sold? The reason is that tokenomics/token performance substantially impacts protocol usage, specifically a badly performing token detracts people from using said protocol.

First off I’ll say thank you for putting this proposal out, it is certainly an interesting consideration. The way GMX/GLP is structured currently is like a positive cash flow equity. Money flows in, money flows out proportional to each shareholders share %. It’s pretty simple and straightforward.

Enabling a bonding mechanism like this could potentially reduce the volatility of available liquidity. Rather than all liquidity being “at will” cash, it gives the protocol a way to introduce duration (and by extension, convexity). As liquidity is locked into longer duration bonds, they are compensated with higher yields (following a classic positive yield curve), and the protocol liquidity becomes sticky insofar as those bonds pay a convincing enough yield. However, the bonding mechanism itself could become it’s own source of volatility, and the rises and falls of the bond yield curve cause periodic disruptions in liquid supply. The oscillations of the bond curve are probably worth the risk if the goal is to source long term liquidity, as it guarantees that at any given time there will at least be a great majority of the liquidity available. Greater liquidity supports greater utilization. Greater utilization supports greater fee capture. Greater fee capture supports cash flow. And cash flow supports DCF valuation, which accrues value to the GMX token. Not bad.

Implementing a bonding mechanism could range between trivial to quite complex. The main thing I would worry about is how the rates are set. I could foresee scenarios where long duration completely overwhelms short duration rates and liquidity growth from sources who have high liquidity availability as one of their priorities stops entirely. In bond markets, liquidity prefers short duration - and if it is treated badly by long bond rates, a lot of liquidity will simply not participate. Should always be enough of an incentive on the short end (GLP) to attract that liquidity, because short duration / current shares is generally the vast majority of available liquidity in any such markets.

At present I do not see a need to implement a bonding mechanism. Liquidity has been growing rapidly on Avalanche as yields still remain quite juicy. It is worth considering for future implementation.

It seems to me the most reasonable course of action at present is to focus on developing the trading platform so that it has the functionality and seamlessness of a CEX. A good product speaks for itself and develops loyal users. That’s where real value is realized and ultimately what we are considering here, product loyalty. Since the token price has incentives aligned to the success of the platform itself, the latter is all we need to consider to arrive at the former.

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Thanx for sharing ideas!

My point is such is rather against it. At this point in time at least.
What problem we trying to solve by this solution ?
As to me - GMX behave pretty damn good. And I vote for let it go this way a little bit … a few months may be… and somewhere in summer estimate situation around tokenomic.
GMX already eat some time for newcomers to take their heads around it logic… GMX GLM esGMX multiplier points etc… :laughing:
So I think its really not that good idea to introduce additional level of complexity in the system.
May be little later… this year…

And my second point - I prefer having my liquidity actually liquid.
I like GLP A-LOT! because it allow me to buy dip when GMX is under local dump. So I usually trying to support GMX via part of my GLP liquidity.
If there will be extra boosted GLP pool I think I will lock my liquidity there as long term holder… but I wouldnt be able to support GMX anymore.

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