$GNS Single-Sided Staking, Real Yield and Decentralization
Hi gTraders!
Not long ago, we launched our long-awaited $GNS Single-Sided Staking (SSS). This article will cover:
- How this update fits into our larger vision of creating a fully decentralized protocol
- The mechanics of $GNS SSS
- How our fee structure now accommodates $GNS staking
- “Real Yield” — what it means, its criteria and how Gains Network is leading the way
The Vision
gTrade is a decentralized synthetic leverage trading platform. Decentralization is a nuanced conversation — there are varying levels and shades to it. gTrade particularly focuses on the following pathways towards decentralization: sharing revenue with users (now), fully decentralized on-chain trading execution and oracles (now), fully decentralized website frontend & backend (soon), and decentralized governance (soon).
The most important requirements for a decentralized protocol are sustainable incentives that encourage users to govern it. In other words, a protocol needs to reward its users adequately (and sustainably) to keep the engine of decentralization running, in the same way miners are rewarded for providing consensus to PoW blockchains.
In line with this thinking, different roles in the gTrade ecosystem are incentivized in different ways. So far, there are five ways to earn on gTrade (outside of trading):
- Stake $GNS to earn $DAI
- Provide liquidity to the $DAI Vault and get rewarded in $DAI
- Provide liquidity in the GNS/DAI Pool and get rewarded in $GNS
- Hold a Gains NFT and run a bot that executes limit orders and liquidations on gTrade in exchange for $GNS
- Be part of the referral program to earn $GNS
All of the rewards above come from fees that are generated when people use the gTrade platform to synthetically trade on the price of cryptos, stocks and forex. This is a real use case, with real demand, and real revenue that is redistributed among the users of the Gains Network. You’ll notice that even the execution of limit orders and liquidations on the gTrade platform is decentralized. The platform does not execute these transactions — users with Gains Network NFTs execute the limit orders and liquidations. Running a liquidator on gTrade is like renting a service to other gTrade users.
These are a few design decisions allowing gTrade to move towards its end-state: a fully decentralized & sustainable protocol owned by $GNS token holders.
The line between users being participants vs owners is an important one for gTrade to traverse. As of now, $GNS Stakers are getting a portion of the platform fees, and in the future, governance will also be introduced into the Gains Network ecosystem — giving users more agency to refine the vision for the various products of the protocol.
The overarching focus of this article is how $GNS Single-Sided Staking works, where the fees come from, and how this implementation pushes our mission of decentralization forward.
Real Yield
gTrade platform fees are the leading incentive for stakers, liquidity providers, and bots — the rewards don’t come out of thin air!
Many DeFi projects in the past have “emitted” their tokens to onboard new users to their platform. The APY may look great, but returns from emission-based models are inflationary: you get paid in tokens that end up having less intrinsic value as a result of token-printing.
People are now realizing that the source of APY is more important than a knock-your-socks-off APY. It’s out of this realization that a desire for sustainable, non-inflationary yield has been born. Real Yield embodies the following qualities:
- Projects with real use-cases that offer a product/service users pay for
- A portion of the revenue generated by the protocol is redistributed to token-holders
- A native token with minimal inflation and with one or more use cases
We’ve tackled how gTrade meets the first 2 criteria in the last section.
But how does it meet the 3rd?
$GNS Token Updates
It’s important to note that the $GNS token had different tokenomics in the past. $GNS was minted and sold when traders profited (to maintain appropriate vault collateralization).
Statistically, traders lose more often than they win, regardless of the platform. This system made $GNS emissions net deflationary, decreasing token supply by 8.5 million tokens since protocol inception as more $GNS was burned (from traders losing) than minted (from traders profiting).
This held up well until the $LUNA crash. Many users had shorted $LUNA, causing a lot of $GNS to be minted in a short period of time to refill the DAI vault. Therefore, minting was stopped to prevent the inception of a negative feedback loop.
Typically, CEXs simply pause trading during times of volatility. We didn’t pause or halt trading during the Luna Crash. In fact, the protocol has honored every win made by gTraders during the period.
In response to this event, we then had to build a solution that matched our ethos and future vision. The majority of the changes in v6.1 were made to ensure that this cannot happen again (risk management).
Therefore $GNS is no longer minted by the $DAI vault to refill itself. However, we have kept other minting use cases that remain to be efficient ways of supporting the filing rate of the $DAI vault.
$GNS is minted in three ways:
- Providing liquidity in the GNS/DAI Pool to get rewarded in $GNS
- Holding a Gains NFT and run a bot that executes limit orders and liquidations on gTrade in exchange for $GNS
- Participating in the referral program to earn $GNS
As of v6.1, these are now the only three ways new $GNS is minted. $GNS is no longer minted to support the rare case of an undercollateralized $DAI vault.
Every time $GNS is minted as a reward, the equivalent amount of $DAI goes into the vault, therefore $GNS is never minted out of thin air.
This has two advantages:
- It significantly supports the growth of the $DAI vault collateralization
- And aligns incentives with protocol participants as they get rewarded in $GNS not $DAI
These changes make the protocol and token much more robust to outlier events, continuing on one of the most central use cases of the $GNS token: supporting the collateralization of the $DAI vault.
$GNS Single-Sided Staking
The introduction of $GNS SSS is in line with gTrade’s mission to bring users real yield. Users who stake $GNS are rewarded in $DAI. These rewards do not inflate the $GNS token supply.
Rewards for $GNS SSS are not emission based and 100% of rewards come from trading fees that we’ve “re-routed”.
- 40% of market order fees (0.08%)
- 15% of limit order fees (0.08)
- 40% of trade closing fees (0.06%)
Given that ~70% of gTrades are market orders, this means that nearly 33% of order fees go directly to stakers!
Users can also stake up to three Gains NFTs in the $GNS pool to increase their share of staking rewards.
Boosts per NFT Tier:
- Bronze ➔ 2%
- Silver ➔ 3%
- Gold ➔ 5%
- Platinum ➔ 8%
- Diamond ➔ 13%
Did we mention that holding a Gains NFT also gives you additional perks?
- Increased rewards from the GNS/DAI LP
- Spread reductions
- The ability to run a bot on gTrade
Within just a few days of launching, our $GNS pool now has the highest TVL (~$35,000,000) between all our pools and vaults, with a non-inflationary ~5% APY in $DAI.
Wrapping Up
gTrade has five avenues that offer real yield to users in the form of shared protocol fees. $GNS stakers, $DAI vault stakers, GNS/DAI LP’s, NFT bot runners, and referrers all benefit from increased trading volume.
The best way to meet our mission of creating the best fully decentralized protocol is to sustainably incentivize the many moving parts that allow gTrade to be run by its users. Real Yield (that comes from fee-derived revenue) is the vehicle that turns gTrade users into owners of the gTrade platform. The first step towards this vision was the implementation of $GNS Single Sided Staking which gave $GNS holders an even higher share of the Real Yield. The next step will allow the platform to be governed by these very same token holders.
We couldn’t be more excited about the future of gTrade. We’d be honored if you took the next steps with us, as an owner of the platform.
gTrade is a powerful, liquidity-efficient, and user-centric decentralized leveraged trading platform built by Gains Network.
