When we created each token, they had a clear purpose to us:
- XVIX: a token with a floor price
- XLGE: liquidity provider tokens
- GMT: the governance token for Gambit
- xGMT: the fee-receiving token for Gambit
As we work on the protocol and introduce new features, we’ve come to realise how much complexity and friction the multiple tokens adds to designing our tokenomics. Adding a new utility to one token needs to be done carefully to ensure the token’s utility is not outsized compared to other tokens. This has been a pain point that has been voiced by community members frequently as well.
We’ve battled with this constantly as each token has their own unique properties and merging them would be a very challenging task. In spite of this, we would like to propose what a migration plan could look like, for the community’s consideration as to whether the end result would be a stronger project overall.
Since we are planning to launch on Arbitrum in about two weeks, we view now as an ideal time to consolidate all tokens if it makes sense to.
Gambit V2
The current market caps:
XVIX
- Supply: 99,984 (excluding tokens locked during the last GMT swap and tokens in XVIX-ETH)
- Last Floor Price: 29.17
- Market cap: 2,916,533
XLGE
- Supply: 32 (excluding team tokens and tokens locked during the last GMT swap, team XLGE tokens will not be migrated)
- Price: 22,500
- Market cap: 720,000
XVIX-ETH
- Supply: 785 (excluding tokens locked during the last GMT swap and tokens held in proxy by XLGEs)
- Price: 682.27
- Market cap: 535,581
GMT
- Supply: 254,482 (excluding tokens in GMT-USDG)
- Price: 10.97
- Market cap: 2,791,667
xGMT
- Supply: 5,781 (excluding tokens in xGMT-USDG)
- Price: 90.31
- Market cap: 522,082
GMT-USDG
- Supply: 483,129
- Price: 6.68
- Market cap: 3,227,301
xGMT-USDG
- Supply: 150,191
- Price: 19.27
- Market cap: 2,894,180
The total market cap is: 13,607,345.
We could merge all tokens into a single token called Gambit V2 (GMX) with the following process:
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A migration page would be open from 22 June 2021 to 6 Jul 2021
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XVIX, XLGE, GMT and xGMT tokens can be burnt for GMX (IOU) tokens
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XVIX-ETH, GMT-USDG and xGMT-USDG will also be burnable with a 10% bonus of GMX (IOU) tokens, the amount of these tokens burnable will be capped at the current supplies: XVIX-ETH: 785, GMT-USDG: 483,129, xGMT-USDG: 150,191
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The conversion rate to GMX (IOU) tokens will be based on the prices in the snapshot above with each GMX being valued at 2 USD
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For example, 1 XVIX (29.17) can be burnt for 14.585 GMX tokens while 1 xGMT-USDG (19.27) can be burnt for 9.635 GMX tokens, with a bonus of 0.9635 GMX
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When we launch Gambit on Arbitrum, GMX tokens will be airdropped on Arbitrum to all GMX (IOU) holders at a 1:1 ratio
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The migration of full LP tokens is optional, if you hold LP tokens you can choose to only swap the XVIX, GMT or xGMT side of the LP tokens, the USDG side of the LP tokens can be redeemed for BTC, ETH, BNB, BUSD, USDC or USDT as usual
If all tokens are migrated, the max distributed supply would be 7,136,525 GMX tokens worth 14,273,051 USD, after including bonus amounts.
GMX Utility
If we carry out this migration, all current functions can be focused into one single token. GMX would be both the governance and utility token of Gambit.
We had previously proposed bonds in our Medium post Gambit: Chapter II. It has been three weeks since the… | by Gambit Protocol | Medium, and we can adopt a simplified version to improve the protocol while remaining regulatory compliant.
The fee distribution would be modified to:
- 50% to increase over-collateralisation
- 20% to USDG holders
- 20% to bonds
- 10% for GMX buybacks
The simplified bonds would work as follows:
- GMX can be bonded with USDG
- USDG in bonds will continue to earn 20% of fees
- Bonds will receive 30% of fees
- Bonds will have a 14 day unbonding period
The amount of GMX you need for bonds would be (USDG to be bonded / USDG supply) * GMX supply.
With this setup, bonds would help to secure assets and the peg during periods of short term volatility and fees are given out as rewards to incentivise this useful work.
Bonds will additionally be incentivized with 50,000 vested GMX per month.
Vested GMX can be used in two ways:
- To purchase bonds similar to regular GMX tokens
- Staked to incrementally become 1 GMX over a period of 1 year.
Liquidity mining would be incentivized with the following rewards:
- GMX-USDG: 50,000 GMX tokens and 100,000 vested GMX tokens per month
- USDG-USDC: 10,000 GMX tokens and 20,000 vested GMX tokens per month
Floor Price V2
The floor price of XVIX has served well in maintaining a minimum price for the XVIX token. A brief summary of how it works:
- XVIX began with a starting mint price in ETH
- If the market price of XVIX increases beyond this mint price, then arbitrageurs would mint XVIX using ETH
- This minting increases the mint price and the received ETH is sent to a floor price fund
- Every XVIX can be redeemed for ETH at: 0.9 * (ETH in floor price fund) / (XVIX supply)
- With the 0.9 factor, each redemption increases the redemption price
If we can consolidate all tokens, we can build a V2 of this floor price mechanism to provide a minimum price for GMX while improving the stability of the USDG peg:
- GMX would have a mint price in terms of each whitelisted asset
- Minting GMX using an asset would increase its mint price for that asset
- The assets received from minting would be sent to a floor price fund
- GMX can be redeemed for assets in the floor price fund at a rate of: 0.9 * (amount of asset in floor price fund) / (GMX minted using the asset)
This would result in independent floor prices for GMX in each whitelisted asset. If WBTC, ETH, USDC are whitelisted assets, then GMX would have a floor price in each of them.
Improving the stability of the USDG peg:
- Ideally, with the long positions and fees, the system should become over-collateralized by itself over time
- However, if the system does become under-collateralized, assets from the floor price can be used to gradually repay the debt
- This repayment can be done weekly over a duration of 12 months, together with bonds, this should significantly increase confidence in and stability of the USDG peg
XVIX currently uses a curve formula for the minting price; this can also be improved upon by replacing it with a linear formula, leading to smaller gaps between the mint price, market price and the floor price. The formula would be:
(GMX minted with asset * mint multiplier) + starting mint price
A larger number of GMX minted would lead to a larger floor price fund, but would also affect the velocity at which prices can move upwards. We propose to reserve 5,000,000 GMX for minting, this would lead to a floor price fund that can grow to be around ⅓ to ½ the market cap of GMX.
Summary of Supplies
- 7,136,525 GMX for migration
- 600,000 vested GMX for bonds distributed over 12 months
- 720,000 GMX and 1,440,000 vested GMX for liquidity mining distributed over 12 months
- 5,000,000 GMX for the floor price fund
Other supplies:
- The xGMT team tokens would be migrated in a similar way into 250,000 GMX tokens, vested over 2 years
- 1,000,000 GMX tokens will be reserved for marketing and partnerships
Circulating supply at launch: 7,136,525
To allow flexibility in building and launching more products, the GMX token will not have a hard supply cap, any change to the supply will be managed by a 30 day time-lock contract.
Go to Market Strategy
This migration could help Gambit with a much larger launch on Arbitrum:
- If 50% of XVIX is migrated to GMX, the burn vault would generate ~6.45 ETH worth 16,270 USD per week, these funds can be used for Gambit trade mining on Arbitrum
- If more than 100,000 or 200,000 USDG in GMT-USDG and xGMT-USDG is migrated, we can host a Gambit trading competition with 100,000 or 200,000 USDG in prizes
- The locked USDG on BSC will continue to generate fees, and 30% of these fees can be distributed to GMX on Arbitrum
An alternative usage of the ETH from the XVIX floor price fund would be to seed the initial ETH floor price for GMX, with a target price of 2 USD per GMX.
Trade-offs
If this proposal is executed, XVIX, XLGE GMT and xGMT would be phased out and replaced by GMX.
A summary of the trade-offs:
- XVIX: holders would be trading a token that is close to its floor price for a new token that is directly usable within the Gambit protocol but with a floor price that will need to be rebuilt. Further work that was planned for the XVIX project will be changed to be based off of GMX instead. This would allow us to simultaneously serve all holders equally, whether they are currently holding XVIX, XLGE, GMT or xGMT. XVIX holders will be able to have development work done directly on the token they hold instead of having to wait for a few months
- GMT: holders would be trading a token with a hard cap for a token with additional functions that can be utilized now instead of having to wait for governance to be set up
- xGMT: the core functions are similar with additional utility provided by the floor price, the majority of supply inflation would now be vested
We are grateful for all holders who have stuck with us through thick and thin, and we are open to suggestions and feedback regarding this proposal. Beyond the mentioned details, it is our desire to see all community members and holders united under a single token, as that would help build a strong base for the project to take-off.
In some ways, the segregation of tokens was necessary in the past, but we’ve also learnt from the experience so far as well as from the experiences of other projects and would like to improve things if we can.