Hi gTraders,
We are delighted to announce that over the past several months, Gains Network has been collaborating with several community representatives and advisors on a plan to progress the protocol toward a more incentive-aligned and decentralized future. Today, it is ready to be shared.
TL;DR:
Dev fund revenue 100% redirected to $GNS staking
New 6/11 multi-sig replacing the current governance fund
NFTs and their features fully deprecated against $GNS compensation
NFT bot revenue redirected 80%/20% to GNS staking and oracles
Supply increasing by 4.36M tokens or 14% (dev: 1m $GNS, NFTs: 3.36m $GNS)
$GNS revenue-capture share going from 33% to 60%+
Average existing $GNS staker earning 60% more at the same revenue
Targeted to go live September 1st or slightly after
The purpose of the plan is two-fold:
Development fund alignment with $GNS & governance fund transition to multi-sig Consolidation of GNS NFTs into $GNS Both pieces of the plan have been thoroughly iterated on to reach their final version. The remainder of this post will be used to explain the motivation, logistics, and expected outcome of each.
The team, advisors, and community representatives involved in the plan all agree that these changes are needed for Gains Network to achieve its highest potential and that the earlier they are made, the more we increase our chances of succeeding at the highest levels as a protocol.
Part 1: Development fund alignment & governance fund transition to multi-sig Before diving into this portion of the plan, it’s necessary to share how gTrade’s revenue is currently distributed amongst protocol participants.
The most recent month’s fee split, June 2023, will be used to showcase the standard distribution:
33.5% to $GNS stakers 17.2% to $DAI stakers 16.33% to governance fund (protocol’s wallet) 16.33% to development fund (founder’s wallet) 14.2% to NFT bots 2.44% to referrals Note: Day-to-day fee distribution fluctuates based on trading activity, type, source, etc.
The development fund currently receives ~16% of platform fees. 100% of its fee earnings would be re-routed to $GNS stakers against compensation in $GNS tokens.
Ultimately, this plan was brought forward to better align the incentives of internal contributors with token holders and community members. The development fund receiving a direct percentage of fees is not fully aligned with the growth of the $GNS token. This leads to the next piece of the plan — how dev fund earnings would be replaced with token value & earnings:
To compensate the dev fund for the fee adjustment, 1M $GNS tokens would be minted. There are several reasons for this amount:
At current $GNS prices, this equates to 1–1.5 years of dev fund earnings — agreed upon by all parties. When the collapse of Terra (LUNA) under-collateralized gTrade’s liquidity vault last year, the dev fund had to sell 1.03M $GNS tokens at $0.50 to solidify the health of gTrade. The $GNS was bought back around $3, resulting in a net loss of about 859k $GNS. The total share of the supply owned by the dev fund would remain relatively low at 7.25%* compared to other projects.
(1272465 + 1000000) / (30345867 + 1000000) * 100 = 7.25%
The minted $GNS tokens cannot be sold for at least a year, and are eligible to be staked for protocol earnings. The dev fund currently holds 1.27M $GNS tokens; that total would be increased to 2.27M, all of which would be eligible for single-sided staking. Earning from $GNS token staking directly aligns internal contributors with the community token holders — this is the overarching goal.
It’s worth emphasizing that the minting event proposed here is a one-time action, put forth to balance the development fund’s direct revenue stream deprecation and align incentives (while further decentralizing the protocol’s revenue distribution).
Despite the $GNS supply increase, the revenue earned by each staked $GNS significantly increases. Here is the detailed impact:
Before factoring in the tokens being added to the $GNS staking pool and the resulting dilution, this re-routing of fees increases total $GNS staking rewards by ~49%. The supply would increase by just under 3.3%. With an additional 2.27M $GNS staked for fee rewards, the pool TVL would increase and rewards would be diluted by just over 10%. Taking into account the increased rewards and dilution of the additional staked $GNS from the dev fund, the rewards for the current $GNS stakers are going to increase by on average approximately 35%****
16.33 / 33.5 * 100 = 48.74% ** 1 / 30.34 * 100 = 3.29% *** 2.27 / 21.9 * 100 = 10.36% **** 1.49 / 1.1 = 1.35 -> 35% increase
Additionally, this first part of the plan introduces a brand new 6 out of 11 multi-sig between core contributors and community representatives which will replace the current governance fund address, which is currently used for protocol treasury and protocol smart contracts admin access control.
Since the inception of Gains Network, the vision has always been to progressively transition to a DAO or a similar structure. This vision sits in the second section of Gains Network’s docs:
As the protocol matures, it’s important to take steps toward realizing this vision. This plan marks a big step in that direction as it fully aligns the development fund incentives with the $GNS token for the long term, and represents significant progress toward the decentralization of the governance fund.
Part 2: Consolidation of GNS NFTs into $GNS The 1,500 GNS NFTs were distributed over 2 years ago to early community members who provided a significant share (>1%) of the initial liquidity for the token.
The current benefits of holding an NFT are: reduced trading spread, boosted $GNS staking rewards, and the ability to run a liquidation/limit order bot for rewards.
The benefits vary for each of the 5 NFT types:
The current floor prices for each are:
Bronze: 1.7 $ETH (= 740 GNS*) Silver: 1.65 $ETH (= 718 GNS*) Gold: 2.5 $ETH (= 1088 GNS*) Platinum: 5 $ETH (= 2176 GNS*) Diamond: 28 $ETH (= 12814 GNS*)
using a GNS/USD price of $4.41 and ETH/USD price of $1919 (their respective current market price at the time of writing)
GNS NFTs have traded more than 1,300 ETH in combined volume on OpenSea.
The SSS boost and spread reduction drive considerable value to these NFTs, but their unique value proposition to the platform has always been their ability to run limit/liquidation bots. Unfortunately, the current NFT bot system is not efficient, nor profitable for the majority of botters due to its competitive nature. Very few NFT holders run bots profitably, and although the system was intended to promote decentralized participation, it can only ever be as decentralized as the price oracles are.
Without the NFT’s ability to run limit/liquidation bots, their main value proposition would become the boosting of rewards in the $GNS staking pool. However, this means they compete directly with the $GNS token, while not providing any real value to the ecosystem (the $GNS token is used directly in the protocol as a backstop for gTrade’s liquidity vaults).
Therefore, we have found that the protocol should focus its efforts on the $GNS token, as it has a real utility in helping scale trading volume and increasing vault safety. It also makes participating in the ecosystem easier, consolidating everything into the $GNS token. For some traders, the reduced spreads enabled by GNS NFTs were an attractive feature — this is a feature gTrade plans to reintroduce in different forms in the future.
GNS NFTs and their features would be deprecated against a $GNS compensation.
Their liquidation/limit order responsibilities would be delegated directly to the oracles who by definition will have less latency to trigger orders. As a backup, anybody will also be able to trigger orders, but there won’t be any direct incentive to do so.
The fees currently going to NFT bots would be distributed with an 80/20 split to $GNS stakers and oracles respectively, and their other attributes would be disabled (staking boost, reduced spread).
Before sharing the expected benefits of this portion of the plan, let’s first detail what current GNS NFTs would be redeemable for once burned:
Bronze: 800 $GNS Silver: 1,200 $GNS Gold: 1,800 $GNS Platinum: 3,700 $GNS Diamond: 12,000 $GNS The methodology used to calculate the $GNS compensations for each tier has been to take the average $GNS price paid for all sales that happened on OpenSea since their listing.
There would be 2 options for NFT holders to redeem the $GNS, with no deadline:
Receive the $GNS immediately against a 25% penalty (penalty directed to the gov fund to be used strategically and/or burned, as decided by the community) Receive linearly vested $GNS over 6 months, beginning from the date of redemption (staked throughout the vesting period) Here is the estimated impact:
This would mint 3.36M $GNS*, increasing the current supply by ~11%. The redirection of 80% of NFT bot fees would increase total $GNS staking rewards by ~34%* (independent of part 1). With the NFT staking boosts removed, the $GNS staking rewards would increase on average by another ~17%**** for stakers without NFTs.
(500 * 800) + (1200 * 400) + (1800 * 300) + (3700 * 200) + (12000 * 100) = 3.36m ** 3.36 / 30.34 * 100 = 11.07% *** 14.2 * 0.8 / 33.5 * 100 = 33.91% **** (20.2816944414 + 5.315336911) / (16944414+5336911)) = 16.69%
Conclusion: Combining Parts 1 & 2 Here is the full plan:
Redirect the direct trading revenue from the development fund to $GNS staking Establish a 6 out of 11 multi-sig to replace the governance fund address Retire GNS NFTs: redirect NFT bot revenue 80/20 to $GNS staking and oracles, deprecate their other features (staking boost, reduced spread) The combined impact: 4.36M $GNS tokens (~14%* of the supply) would be minted between development fund compensation and GNS NFT compensation — all subject to vesting (1-year vest for 1m $GNS dev fund mint, 6-month linear vest for NFTs or 25% penalty), and eligible for staking rewards. Taking into account everything (redirected revenue, deprecated nft boosts, mint, diluting), each staked $GNS would receive ~60%** more rewards compared to now (with the same total revenue). The percentage of gTrade’s revenue going to $GNS staking would go from ~33% to ~61%***
4.36 / 30.34 * 100 = 14.37% ** (100 + 48.74 + 33.91) * (100 + 16.69) / 100 * (100–3.29–10.36–11.07) / 100 = 160.45% -> 60.45% increase *** 33.5 + 16.33 + 14.2*0.8 = 61.19%
All changes are targeted to go into effect September 1st, although possibly slightly after depending on development time.
We are going to be hosting a Discord AMA on Saturday at 1 PM UTC, will be answering all questions in the official Gains Network telegram, and are looking forward to hearing the community’s sentiment!