The sluggish crypto market is showing signs of recovery under the blood of investment institutions, but most of them focus on old narratives or lace themes, and I am naturally skeptical about whether they can open up new tracks and break through. But reason tells me that when the personal judgment is at odds with the market, the personal judgment is often wrong… So I tried to sort out the development of the crypto industry in order to find the narrative of the next round of bull market. It happens that GMX’s recent performance cannot be ignored. .
GMX is a decentralized derivatives platform called “on-chain FTX”. Currently, the daily handling fee is second only to Ethereum and Uniswap (more than BNB Chain and Bitcoin!). Is it Derivative Summer?
However, the discussion of GMX seems to be stuck on the astonishing fee and the 20-30% annualization of the pledged tokens, and the discussion of the product itself is unclear. So is it the product or the marketing that makes GMX so great?
With this question in mind, I sorted out the development history of GMX since its inception. During the whole process of sorting out GMX, the thoughts of “thunderstorm” and “explosion” jumped in my mind repeatedly.
From Pond’s: XVIX
I saw that the introduction of GMX is basically based on the analysis model of the decentralized derivatives platform, and then gives an aftermath conclusion based on the market performance at that time, which has almost no reference value.
Then just look at the original form of GMX and the subsequent iteration ideas from the beginning, and I got an unexpected discovery – GMX was originally a Ponzi project.
The disruptive product GMX will launch in the future is X4 (which will be introduced in detail later). Let’s first look at GMX’s X1, XVIX, which was born in 2020. According to the team, this is a project that draws on the ideas of the first-generation algorithmic stable coin Ampleforth (AMPL). .
AMPL is a minimalist style in model design. To sum it up in one sentence, according to the price fluctuation of the stable currency AMPL, the asset balance of all AMPL holders will be increased or decreased proportionally every 24 hours. In other words, AMPL is always equal to 1 USD, but there is no longer 1 AMPL in your wallet (maybe 1.5, or 0.8).
The reason someone is willing to mint AMPL is because he is betting that if more people mint AMPL, then there will be more AMPL in his wallet, and vice versa. So, AMPL is not a Ponzi model, it is just a simple guess (the day AMPL is above or below $1) betting.
But strictly speaking, there is no similarity between XVIX and AMPL, it is not a stablecoin, and it is not even a guess size, because users can only profit by guessing large, so it is still a Ponzi model in nature.
I don’t know if it’s because of the team’s limited ability to express or deliberately. The product introduction of XVIX is too abstract and there is very little information. The following is the introduction after I visualized it, although it is still abstract…
XVIX issued the token XVIX with a maximum supply of 200,000, but the initial supply was only 100,000 (50,000 each were deployed on Uniswap’s XVIX/ETH pool and XVIX/DAI pool for liquidity pre-sale), and the other 100,000 were Flexible supply.
Users can deposit ETH to the platform to mint XVIX tokens (as for how many XVIX tokens can be received, a formula is used to calculate the floor price), or they can deposit XVIX tokens to redeem ETH (how much floor price can be used) Redemption is also determined by this formula), and the entire product is constantly minted and redeemed.
Let’s ignore the complicated formulas and go straight to the various results that can be derived.
Since there are only 100,000 XVIX tokens left, if more and more people deposit ETH and mint XVIX tokens, then the floor price of XVIX tokens will be higher and higher, and then more and more people can be redeemed. more ETH. Conversely, if more and more people redeem ETH, the floor price of XVIX tokens will become lower and lower.
Therefore, those who bet on the rise of XVIX tokens will deposit ETH and mint XVIX tokens, and then wait for the opportunity to redeem more ETH or sell directly on Uniswap. Those who bet on the downside will calculate the difference between the price of the XVIX token on Uniswap and the price of the redeemable ETH. Strictly speaking, it is just a pure arbitrageur at this time, not a real bettor, because you can only bet on the downside. It made a profit on its rise.
It is not difficult to see that the XVIX project is a Ponzi model and has no external income, so it is destined to be a Ponzi scheme.
Add leveraged tokens to fix Ponzi: X2
The Ponzi scheme was destined to be unsustainable, the team launched X2, a leveraged token project, this project is actually independent, but 50% of the income is used to incentivize users who deposit ETH and mint XVIX tokens, in addition 50% is used to incentivize LPs on Uniswap.
Leveraged tokens are very simple, which is equivalent to tokenizing the position of perpetual futures, and the position is automatically adjusted every two hours, so that the position will never be liquidated, but the price is that frequent adjustment of the position will consume a lot of funds. Therefore, the actual leverage is actually declining, so the capital efficiency is not high.
X2’s leveraged tokens support several tokens, and the leverage multiple can be 3 times, 5 times, or 10 times, and the platform itself does not have any risk, because it directly makes people who are bullish and bearish on a certain token bet, collateral is ETH. In this way, whether buying bullish or bearish, when the final settlement is made, the subsidy will be deducted from the loser and given to the earner, so there is no possibility of running away in a storm, and the platform can also earn handling fees.
At this time, XVIX has external income, so the possibility of collapse is reduced, but the premise is that the external income can keep up with the development of the product itself.
Going back to the original pure Ponzi model of XVIX, its Ponzi model determines that it welcomes ETH to come in to mint XVIX tokens, against which XVIX tokens are sold, so in order to inhibit the circulation of XVIX tokens, a series of harsh penalties have been formulated Rules to keep funds in XVIX.
For example, every transfer of XVIX tokens will destroy 0.43%. For example, if XVIX tokens are not in the vault or Uniswap’s liquidity pool, they will be destroyed by 0.02% every hour, even if XVIX tokens are in a vault that can be withdrawn immediately. To burn 0.01% every hour (unless it is in a vault with a 7-day delayed withdrawal).
We can see that the leveraged token project X2 is a very good small and beautiful DeFi product, but its value is only to delay the collapse of the XVIX Ponzi scheme.
Genius Stablecoin Mechanism: Gambit
The launch of the leveraged token project X2 to renew the life of the Pond’s project XVIX is quite good, but the Gambit that the team further launched later is a genius design (when I saw Gambit’s stable currency mechanism, I didn’t know that the team had XVIX and X2), but this idea is actually traceable.
Gambit has two parts, the minting (USDG) system and the leveraged trading system. For users, these two systems are independent, but in terms of actual operation, it is the interest generated by the leveraged trading to subsidize the stablecoin.
Specifically, if the mint deposits any whitelisted assets (such as ETH), they can mint USDG at 1:1 at the current price (assuming that the price of ETH is $2,000 at this time), and after a period of time, they can use the original price (or $2,000) and then redeem the originally deposited assets (even if ETH rises to $10,000, it can only redeem $2,000). That said, minters are natural bears.
At the same time, traders also deposit assets and open long leverage.
Part of the profit made by the trader comes from the increase in his margin, and the profit from leverage is the increase in the assets deposited by the mint. Conversely, if the market falls, the margin deposited by the trader will be liquidated according to the loss caused by the leveraged fall, and subsidized to the mint.
So Gambit’s mechanism has the following advantages:
1. It is more capital efficient than an over-collateralized stablecoin such as MakerDAO, and the mint has no liquidation risk (the risk is transferred to traders who open long positions);
2. There is also no Ponzi model of pure algorithmic stablecoins;
3. More importantly, there will be fees for minting, burning, opening, and closing positions, some of which will be allocated to USDG holders, and part of which will be used to increase the USDG collateral, so that it gradually changes from full collateral to over-collateralized stablecoins. For minters, you can earn interest by holding USDG without needing to lend or deposit into other systems.
4. In addition, whitelisted assets can be swapped with zero slippage.
Ponzi’s Bloodline Awakens: Gambit II
Such a genius design, but the team’s Ponzi’s blood awakening made them superfluous to add the governance token GMT, and even issued xGMT for PancakeSwap’s LP. What’s even more ridiculous is that they also launched bonds (essentially fixed deposits) USDG, only GMT holders are eligible). Users who hold these tokens can also share the fees earned by the platform just like holding USDG.
So you can fully understand the tokens issued later as the team is re-dividing the cake – 50% is re-deposited into Gambit as collateral for USDG, 20% is directly given to USDG holders, and 20% is given to xGMT holders Some, and 10% are for the token holders of the Ponzi scheme XVIX (XVIX has basically been replaced by Gambit at this time, and there are few traces on the Internet).
The purpose of Gambit’s series of operations is the same as the previous operations. 1) Encourage external funds as much as possible to deposit and mint their own tokens; 2) Encourage as much as possible to keep their own tokens (whether on their own platforms or in official liquidity pools); 3) As much as possible To encourage external funds to come in and mint into their own tokens…Russian Infinite Nesting Dolls.
At this point we can come to a simple phased summary.
XVIX, a Ponzi project, has no external income, but simply bets that someone will keep depositing ETH in. Later, when the fools of Bo silly games were not enough, the leveraged token project X2 was launched, and it continued to rely on the fees earned by X2. Blood transfusion for XVIX. However, the Ponzi project without endogenous value is destined to not be able to continue blood transfusion. In the end, the team simply started anew and launched the stable currency project Gambit.
There is no problem with the core mechanism of Gambit. Some people need stablecoins for hedging, and some people need leveraged transactions, all of which are just needed, and the project will also add the handling fee to the stablecoin collateral, gradually making the original full mortgage. The stablecoin becomes over-collateralized. But the Ponzi blood of the team is awakening, and they have put this stablecoin project that could run on its own on the fast track of token incentives.
They took half of the handling fee to encourage users to mint the stable currency USDG (there is no problem with this), and then compensated the other 10% to the users of the original Ponzi project XVIX (this is also excusable), but they put the rest 40% is used to incentivize GMT and xGMT, and they are packaged with USDG to lie in the liquidity pool and pledged. This series of incentives is essentially intercepting the current and forming a reservoir, so there will always be a day when the flood will be released.
So Gambit has a trading volume of US$61.44 million in one week of its launch, charging a fee of US$80,000, and a transaction volume of about US$400 million in three weeks after its launch, and distributed a fee of US$380,000.
However, this team still has some remarkable points in the product. They feel that the leverage that only supports open long is too limited. Later, they also introduced UniDex, an external derivatives trading platform, to support more leveraged products, and they will be able to charge more. more fees.
Replacing Stablecoins with LP Tokens: GMX
Gambit has developed very well under strong incentives, constantly attracting external funds to mint USDG, using these external funds as counterparties for leveraged transactions, and using the earned fees to attract more funds and USDG package (as a transaction Yes) come in, so you have more liquidity, you can carry more leveraged transactions, and then you can attract more funds from the earned fees… Continue to play dolls.
After the transaction volume increased, the team realized a problem at this time. This Ponzi plate can run on its own, so why should it use the stable currency USDG to restrain itself and directly use the handling fee to attract external funds as liquidity? It can also accept more small currencies “blue-chip encrypted assets”, so the derivatives trading platform GMX we see today was born.
GMX is the product of the team’s second complete re-start. In June 2021, before the official migration, they merged the previous complex tokens such as XVIX, XLGE, GMT and xGMT into one incentive token GMX (the value lies in the handling fee dividends). ) with a starting price of $2 and a maximum supply of 13.25 million, of which 6 million went back to investors in previous Ponzi projects (XVIX and Gambit).
Another token is GLP, which is the LP token, which is used to represent LP’s share (or equity) in the liquidity pool. Users can use any whitelisted asset to provide liquidity, and they are no longer receiving the stablecoin USDG, but the equity GLP of the liquidity pool. If the assets you deposit account for 1% of the total pool, then when the total pool size increases by 10 times, you can redeem 10 times the assets, and there is an incentive for handling fees.
But don’t forget, when the total pool size shrinks by 10 times, your GLP will also shrink by 10 times (if not including the fee dividend).
In order to avoid the emergence of a death spiral, the team set up a “floor price fund” to import 2 million GMX first. In addition, all the liquidity income of GMX/ETH and half of the income of Olympus bonds will also be converted into GLP and then continue to import the floor price fund. The reserve price fund is used to repurchase and destroy GMX, which ensures that there is continuous demand for GLP and can receive orders for GMX.
Next let’s predict the various possibilities of GMX.
When the trading volume continues to rise, the prices of GMX and GLP will follow the stimulation of fees, attracting more funds. At this time, the base price fund will not be used and will continue to increase; when the trading volume stagnates or decreases slightly, the attractiveness of the stimulation of fees Decrease, so sell GMX and GLP, the floor price fund can come in handy to undertake the selling pressure. But when the trading volume drops sharply, is the floor price fund enough?
The current total pledge size of GMX and GLP is $610 million, while the reserve fund is only $3.04 million. Of course, at least for now, there is still a steady stream of capital injections, so we should discuss when GMX and GLP will stop rising or even fall sharply.
If the team’s moves are only so far, I’d think it’s just a repeat of Luna’s fate, and it’s not far from a crash (but still quite a bit of upside for the final madness), but the team’s next plans make me For the time being, I put aside the thought of “thundering”.
Custom AMM pool, unwhitelist: X4
Although the team did not specifically say when the X4 will be launched, it is expected to be soon. It involves two functions, each of which makes me once again amazed at the creativity of the team, although I also vaguely feel that it will lead GMX to greater glory and greater destruction.
The first function is to customize AMM and benchmark Uniswap.
The difference between it and the AMM pools like Uniswap we usually understand is that the creator of this pool has too many custom permissions (and the permissions of the creator on Uniswap are actually no different from all ordinary traders), such as at any time. Transaction fees can be set at any percentage, and transaction fees can be set separately for the two actions of buying and selling, and even the price curve can be customized.
And a series of tools (ready-to-use exchange interface, liquidity, volume and fee tracking, and charts and utilities) will also be provided at that time, allowing the “transaction” page to be presented directly on the project side’s official website interface.
I believe that with the popularity of GMX, it can attract a large number of project parties to come in after going online, at least form a short-term prosperity, but what is the difference between this kind of too much authority for pool creators and centralized exchanges, not to mention that it does not have any access threshold.
The second function is PvP AMM, which allows traders to match long and short one-to-one, while also allowing LPs to participate. No matter how much you make or how much you lose, it will be settled from this small pool.
PvP AMM means that GMX cancels the whitelist and accepts various assets. Otherwise, the platform has to balance the interests of LPs with the demands of traders, resulting in not many coins that can be whitelisted.
Therefore, PvP AMM will allow GMX to not only attract leveraged users on the chain, but also provide leveraged trading services for small currencies that traditional centralized exchanges may not have.
It is foreseeable that whether it is a custom AMM or a PvP AMM, it can further bring more traders to GMX, thereby earning more handling fees, and attracting more people to pledge assets. This story seems very interesting here. good.
The discussion about GMX is basically to analyze it as a derivatives exchange, and then regard the prosperity of GMX as the prosperity of the derivatives market on the chain. I must admit that the GMX team has a lot of originality in products, and the series of products they have developed have a lot of places to learn from competing products, such as the current derivatives exchange GMX.
But it is exactly what we have seen in the five iterations of the GMX team. Excellent products are only incidental, and the real core is the Ponzi economic model – attracting external funds as much as possible and casting them into their own tokens. , and then try to prevent your own tokens from flowing out of the platform as much as possible, thus forming a capital pool like a damming lake.
If you use the derivatives exchange to analyze the myth of GMX, it is easy to think that the myth is based on stable and high fees that can subsidize users. And we can indeed find examples. In the past 20 days, an average of 1,500 users have made 300 million US dollars in transaction volume every day and contributed 360,000 US dollars in handling fees. There is still a big gap in the scale of 100 million transactions, but it is already amazing for DEX.
But the Ponzi model is not built on “steady income,” but on “continuously growing income.” The pledged users of GLP are not to earn a stable handling fee, but to hope that the scale of the pool can be larger, and more assets can be redeemed at that time, that is to say, there is always a time for redemption.
This article hardly discusses the derivatives trading of GMX itself, because the Ponzi model of GMX is the real core. The relationship between GMX as a derivatives exchange and GMX as a Ponzi model is almost equivalent to the Alipay Dragonfly device (doing a brush). The relationship between face payment) and projects that use it as a capital plate, since we are discussing this capital plate, it doesn’t matter whether Dragonfly’s financial technology is excellent or not.
I fully believe that the launch of X4 will bring GMX to a new peak, but its Ponzi structure is destined to usher in a sell-off in GMX and GLP when expectations for transaction growth stall. But I’m already looking forward to the GMX team coming out with new products that bring in external revenue.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/6-iterations-of-gmx-where-to-go-from-ponds/
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