Gains Network
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Gains Network

gTrade v6.1

The endgame of our trading model.

Introduction

Capital efficiency is the key to success for any protocol. If a protocol with $10m TVL offers the same UX as another protocol with $100m TVL and therefore generates the same fees (= 10x better capital efficiency), it will probably also reach $100m TVL due to the APR being 10x higher, and then it will offer a 10x better UX than the other protocol. 10x higher liquidity efficiency means one protocol can reach the same UX with 10x less liquidity, but it as well means it can offer a 10x better UX with the same amount of liquidity.

  • The leverage isn’t borrowed, it is synthetic.
    → We can offer higher leverage than any platform at a fraction of the TVL.
  • We use true median spot prices instead of our own derivatives price.
    → Gives a much better UX to traders by eliminating scam-wicks.
  • All pairs listed share the same liquidity pool and don’t need to be held by liquidity providers (only DAI).
    → We can offer the widest possible range of pairs, with great UX.

It is the best possible evolution of our trading model, keeping our biggest strengths and further expanding our offering of both leverages and trading pairs while finalizing the risk management for our DAI vault stakers.

v6.1 major changes

We achieve this by introducing the following:

  1. Funding fee
    → Charged on net exposure (long/short open interest, collateral x leverage).
    → Doesn’t make revenue to the protocol, only incentivizes the opposite side of our total net exposure.
    → If more long exposure, longs pay shorts proportionally, and inversely.
    → Eg. if $1m OI long and $200k OI short and funding fee APR at 30%, 0.3 * (1,000,000-200,000) = $240k / year going from longs to shorts. Longs would pay 24% / year and shorts would earn 120% / year, on this pair.
  2. Rollover fee
    → Charged on collateral and how much time the trade is open
    → Eg. 5x $20k trade generates $100k of volume and pays fees on that, however, it is much riskier to the protocol than a $1k trade at 100x, as the first trade could win $180k from the vault, while the latter could win $9k.
  3. Dynamic price impact
    → Based on the 1% depth above and below the current price for each pair
    → Prevents exploiting pairs by opening a trade on our platform and later manipulating the spot price, even if liquidity is low.
    → Could replace spreads long-term (we will probably keep a smaller spread at the beginning, which means it’s probable small position sizes will pay less spread than they do now)

Other changes

  1. The fee to update a guaranteed stop loss (eg. on cryptos) has been divided by 2 (from 0.03% to 0.015%).
  2. Liquidation prices are now dynamic, as there are fees to keep trades open.
    → eg. if you’re getting paid funding fees, your liquidation price will go further away from your open price, and it inversely gets closer if you pay rollover/funding fees.
  3. New contracts allow us to update the funding fee, rollover fee, and 1% liquidity depth parameters automatically using a bot, which is very convenient to keep them up to date.
  4. Spreads will be divided by 2 on all pairs and probably even further reduced depending on the statistics we get after v6.1.
  5. The closing fee on collateral + PnL will go from 1% to 0.5%.
  6. Max collateral per trade will go from 35k to 50k, and later closer to 100k.
  7. The maximum open interests per pair will reach reasonable levels again (they’re clearly below what they should be at the moment).

ETA

The v6.1 update is already live on the testnet (contracts are ready and fully unit tested), and the website backend/frontend has been adapted (the frontend testnet release will be done the day after this article is out).

Conclusion

The goal is to be fully flexible and to be able to offer trading on the most pairs possible (historical data shows only 35% of our volume came from BTC/USD and ETH/USD before delisting the 20 pairs recently) with the widest range of leverages (there’s no reason to miss out on 2x-4x volume).

Thank you for reading!

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