Dolomite Launches Full Support for GLP
Dolomite now fully supports GLP as a collateral asset and full GMX account transfers, allowing users to borrow against their GLP while still retaining all rewards, opening the door for advanced hedging, looping, and diversified farming strategies.
We are incredibly excited to announce an important milestone for Dolomite — the launch of full support for GLP! 🎉
This will be the first release that really leverages the unique strengths of Dolomite and gives you the ability to do things you were never able to do before with your GLP.
What is Dolomite?
Dolomite is a decentralized money market and DEX built on Arbitrum — essentially a protocol supporting lending, borrowing, trading, margin, and hedging. Dolomite’s protocol offers greater capital efficiency and broader asset support than other protocols are capable of. The flexibility of Dolomite’s protocol is exemplified in its ability to support GLP as a collateral asset while passing on all rewards and yield to users.
What is GLP?
GLP is the GMX platform’s liquidity token. It consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset.
On Arbitrum, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in ETH. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.
Users generally take an interest in GLP because, due in large part to the popularity of GMX, it offers a very healthy yield, generally around 20% APR, but at times as high as 50%.
Why GLP?
- GLP is one of the most popular assets on Arbitrum, with almost $500M in TVL.
- GMX has been hugely successful.
- Many users and potential partners have an interest in the strong yield and rewards that GLP produces.
- Several projects have been built on top of GLP.
- Dolomite can enable users and partners to make greater use of GLP than has before been possible.
What can you do with GLP on Dolomite?
You can now deposit GLP to Dolomite, where you will continue to receive GLP rewards and yield. You can then use that GLP on Dolomite’s Borrow page as collateral for loans. While borrowing against your GLP, you will continue to earn the yield from the GLP while also having full access to the borrowed assets, either to use the borrowed assets on Dolomite or to withdraw them from Dolomite.
GMX and esGMX staking are currently supported in the Dolomite interface, allowing you to earn esGMX rewards. Additionally, Dolomite will soon support GMX as a collateral asset, allowing you to borrow against your GMX, staked-GMX, and even your GMX that’s being used to vest esGMX!
What’s unique about Dolomite’s integration of GLP?
Dolomite is the first to pass along all GMX rewards and multiplier points that GLP earns to the users who hold their GLP on Dolomite. You can even use your GLP to vest esGMX into GMX while borrowing against it! This means you don’t need to choose between using your GLP on Dolomite and earning rewards from GMX. You can use your GLP as collateral for borrowing while continuing to earn GMX rewards, Dolomite’s protocol does not take any fees from anything earned in the GMX ecosystem, instead passing it all along to the user. This includes:
- ETH rewards
- Multiplier points
- esGMX rewards
- Vesting rewards
- Any other staking or fee-based rewards
Fundamentally, we believe users, institutions, and protocols that want to run their own strategies shouldn’t be hampered by Dolomite cutting into their strategy’s viability by taking a portion of the rewards on a protocol-level. For future assets where it applies, Dolomite’s protocol can even support tokens retaining voting or other native capabilities all while being used as collateral for borrowing.
Dolomite also supports full account transfers from GMX to Dolomite, allowing loyal GMX users to migrate their rewards, multiplier points, and esGMX to Dolomite without skipping a beat!
What strategies can be performed on Dolomite using GLP?
Dolomite’s integration of GLP opens the door for users and partners to perform several advanced strategies to hedge, maximize yield, and more.
Delta-neutral GLP — You can perform a strategy on Dolomite to hedge the volatility of the price of GLP while still retaining much of the yield GLP generates. This strategy is performed by using GLP as collateral to borrow amounts of ETH and WBTC proportional to their composition in GLP. Those assets are then sold to USDC. This effectively “shorts” those assets, meaning the position becomes more valuable when ETH or BTC lose value against USDC. Conversely, the GLP you hold becomes less valuable when ETH or BTC lose value against USDC. But by holding the short, any value that your GLP loses is cancelled out by the gains from your short, and vice versa when the price moves in the other direction. By using this strategy, you can cancel out fluctuations in the price of GLP but keep the yield GLP generates minus any interest and trade fees on the borrowed ETH and WBTC.
Leveraged GLP — You can also go in the other direction, increasing your exposure to GLP. This compounds the amount of yield you can earn, but at the risk of decreases in the price of ETH or WBTC causing a liquidation. This strategy is performed by using GLP as collateral to borrow USDC or any other asset that you would like to use to purchase more GLP. Those borrowed assets are used to purchase GLP, which is then deposited as collateral, allowing for more to be borrowed and the loop to be performed again. By performing this strategy, you can hold significantly more GLP than you were originally able to purchase, and subsequently earn significantly more yield. You can also choose to loop as many or as few times as you would like, settling on an amount of leverage that matches your risk tolerance. At launch, the maximum LTV is set to 83.33% (or 120% collateralization), which enables up to 5x leverage.
Soon this looping action will be able to be performed right on Dolomite with just a couple of clicks, no need for the repeated purchasing and depositing!
Diversified Farming — You can increase the capital efficiency of your funds and diversify your yield by using your GLP as collateral to borrow assets that you then deposit into another yield farming strategy, providing greater yield than just holding your GLP. This works thanks to arbitrage opportunities created by the aggressive interest rate model Dolomite currently offers.
How to use GLP on Dolomite
For a complete guide and more information about the integration, check out the Dolomite docs here: https://docs.dolomite.io/integrations/gmx-glp
Conclusion
This is an incredibly exciting step for us at Dolomite, and one that we’ve put a lot of development hours into.
But this is just the beginning. Dolomite aims to unify the DeFi ecosystem as well as cooperate with other protocols that want to increase the utility of their ecosystem assets while enabling greater capital efficiency. We have plenty of other assets, integrations, and partnerships in the works that we can’t wait to share that will help unlock the dormant capital in DeFi.
You can learn more about Dolomite and try it out for yourself at dolomite.io.
We would love to have you along with us for this journey, so come join the community on Discord or on Twitter.
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