Evolving Gains Network Tokenomics: Introducing Buyback and Distribute

Gains Network, known for its flagship leverage trading platform gTrade, announces a significant update to its tokenomics model. This update, which introduces a buyback and distribute mechanism for the $GNS token, marks a pivotal moment in Gains Network’s evolution. It represents a more intentional approach towards long-term value creation and retention — aiming to improve incentive alignment and position the protocol for sustainable growth.

Need for Change

The current Gains Network model created imbalances that threaten the long-term sustainability and growth potential of the ecosystem

Problem 1:

• Over 60% of direct revenue from gTrade is distributed to stakers in collateral ($DAI, $USDC, $WETH)
• This approach fails to retain value within the Gains Network ecosystem

Problem 2:

• The governance fund currently cannot accumulate $GNS and holds less than 0.5% of supply
• Constrains the protocol’s ability to invest in campaigns, talent, partnerships, and make crucial strategic decisions

Key Updates in the Buyback and Distribute Model

$GNS Rewards

Staking rewards will now be distributed in $GNS instead of underlying collaterals. This shift retains value within the ecosystem and aligns stakeholder interests more closely with Gains Network’s success.

OTC Exchange Mechanism

A new OTC mechanism facilitates the exchange of collateral for $GNS:

• Collateral is made immediately available for $GNS sellers
• Users can sell X $GNS for Y $DAI (or other supported collateral)
• OTC rate is determined by 1hr TWAP + a premium offering a reliable arbitrage opportunity

Flexible Distribution

$GNS rewards can be sent to stakers, the gov fund, and to the burn address:

• Initial allocations will be 90% stakers, 10% gov fund
• Distributions can/will be adjusted based on market conditions

Current Data Insights

To understand the potential impact of the buyback and distribute model, let’s consider some key data points from 2024, based on gTrade’s performance:

• Average GNS price: $4.36
• Total staker earnings: $8,394,621.43
• Equivalent GNS tokens if used for buyback: 1,925,371.88*
• Average daily buy pressure: 10,696 GNS

*This figure will be smaller in practice if buyback and distribute indeed increases buy pressure

These figures provide context for the scale of the proposed changes. Under the new model, instead of distributing staker earnings directly in collateral, an equivalent amount of $GNS tokens would be bought back and distributed. This shift represents a significant change in how value flows within the Gains Network ecosystem.

Compound through UX

While auto-compounding is not implemented yet, a compound function will be made available through the UI, allowing users to easily reinvest their rewards.

Impact of the New Model

Increased Buy Pressure

The buyback mechanism will create consistent buy pressure on the market. Based on 2024 data from gTrade, this could result in nearly 4 million $GNS tokens being bought throughout the year. This sustained demand has the potential to positively influence the token’s market dynamics.

Price Stability

The OTC mechanism creates a soft price floor for $GNS, particularly beneficial during market downturns. Arbitrage opportunities help maintain this floor, reducing volatility.

Value Retention

Distributing rewards in $GNS encourages users to remain within the ecosystem. This approach aims to create a more engaged and committed network base.

Sustainable Growth

Increased allocation to the gov fund enables strategic investments in ecosystem development. This empowers Gains Network to make crucial decisions, form partnerships, and continue to drive innovation.

Market Adaptability

The dynamic distribution model allows for optimized strategies in both bear and bull markets:

• Bear market: Potential to increase rewards to stakers, maintaining engagement during downturns
• Bull market: Ability to allocate more to campaign initiatives and burning, potentially boosting token value

Upcoming Improvements

Rewarding Long Term Holders

A mechanism to further reward long term holders, complementing the buyback & distribute mechanism. The feature will aim to further align user interests with the long-term success of the ecosystem.

Governance Evolution

A gradual transition of ecosystem control to token holders, empowering the community to shape the future of Gains Network.

Closing

The introduction of the buyback and distribute model represents a significant step forward in Gains Network’s tokenomics. This change is primarily focused on creating a more robust and sustainable ecosystem through consistent buy pressure on $GNS and more strategic allocation of resources.

The buyback mechanism, by creating steady demand for $GNS, has the potential to positively impact token value and liquidity. Meanwhile, the allocation to the governance fund provides the means for continued development and strategic initiatives, essential for long-term growth.

As Gains Network implements these changes, the community’s engagement and feedback will be crucial in refining and optimizing the model. Stay tuned for further updates as the protocol embarks on this new phase of growth and development in the Gains Network ecosystem.