Overview of Gambit V2 , Next-Gen DDEX (Derivatives DEX) on Arbitrum💡
What is Gambit Protocol and the USDG ?
USDG is a stablecoin pegged to the dollar that can be minted by anyone using BTC, ETH, BNB, BUSD, USDC or USDT at 1:1 Ratio. The provided assets are held by the system to enable zero-slippage swaps and leverage trading up to 30x for users.
Since USDG aims to maintain its price at 1 USD, it would be straightforward to think of it as a stablecoin, however, its behaviour is more similar to an LP token, and that's where things get more interesting; The minting of USDG can be viewed as providing one type of asset, e.g. ETH, and in return earning a share of fees on all system assets (BTC, ETH, BNB, BUSD, USDC, USDT) and all activity (swaps + leverage).
🛡 Impermanent Loss Protection & Risks
You would also not have to consider issues such as impermanent loss (IL), since you only need to provide one asset to receive this interest-generating stablecoin. Similar to LP tokens in AMMs such as Uniswap, the worth of USDG has some relation to the worth of the assets used to mint it. If the worth of the assets decrease, then USDG's peg could decrease below 1 USD.
This risk is mitigated by the other stablecoins in the system as USDG can always be redeemed for them at a 1:1 ratio. This could be considered IL protection that is effective up to a certain extent. Since the provided BTC, ETH and BNB can be used by traders to open long positions, the increase in assets in times of negative price movements extends this IL protection.
🔮 Oracles & Capital efficiency
On capital efficiency, the protocol uses the latest price from Chainlink as well as the price on PancakeSwap to provide zero-slippage swaps. This allows the system to provide competitive rates, even with a comparatively much smaller amount of capital. Similarly, the pricing for leverage trading uses Chainlink and PancakeSwap, with PancakeSwap's pricing being excluded for liquidations, this means that traders will not get liquidated by sudden wicks, and can have a better peace of mind.
💰 Fees Distribution :
Fees are distributed in the following percentages:
30%: Bonds
20%: USDG holders
50%: Deposited back into the protocol to over-collaterise USDG
📈 Profitability :
Thanks to its unique system, Gambit can allow high leverage trades on its smart pools increasing capital efficiency by several orders of magnitude compared to all existing DEXs & CEXs.
Since it’s Mainnet on April 28, Gambit has distributed $740,000 profits in BNB from $732M volume with $4.5M in average liquidity.
The daily average volume is $13.8M which gives a Volume/TVL Ratio >3, the highest in DeFi. And since USDG capture 20% of all profits done by the protocol, $148,000 as been distributed to an average supply of 5.3M tokens giving 19% average APR to the these holders, all without tokens inflation.
♟ The GMX & Vested GMX tokens :
Initially Gambit Protocol was divided into 3 tokens (GMT, xGMT & XVIX) to avoid being considered as a security and to support the holders of the first project.
But now all tokens have merged into GMX to remove the friction from multiple tokens in the design of new features.
GMX is the governance token and can be used to purchase bonds. Vested GMX is a farming rewards which can be used for bonds or be staked to incrementally become 1 GMX over a period of 1 year.
💸 Bonds :
Bonds can be purchased at anytime with GMX & USDG. The amount of GMX you need for bonds is (USDG to be bonded / USDG supply) * GMX supply
USDG in bonds continue to earn 20% of fees
Bonds receive 30% of fees and have a 14 days unbonding period
Every 24 hours, the protocol checks if it is under-collaterised, if the protocol is not under-collaterised, it would distribute fees as usual to both bonded and unbonded USDG. If the protocol is under-collaterised, it re-adjusts its fee distribution such that 80% of USDG fees go to bonded USDG and the remaining 20% is distributed to unbonded USDG.
Redeeming bonds when the protocol is under-collaterised would incur a penalty equivalent to the percentage of under-collaterisation. For example, if 1000 USDG is locked for bonds and redeemed when the protocol is under-collaterised by 5%, then 950 of the locked USDG will be returned and the remaining 50 USDG will be burnt.
On the other hand, if bonds are redeemed when the protocol is over-collaterised, the redeemer will receive bonus USDG equivelant to the percentage of over-collaterisation. For example, if 1000 USDG is locked for bonds and redeemed when the protocol is over-collaterised by 5%, then 1050 USDG will be returned.
If the bonds are purchased when the system is over-collaterised, then the difference in the over-collaterisation percentage will be used to decide the bonus USDG to be received, the penalty percentage will still work in the same way. For example, if the bonds are purchased when the system is over-collaterised by 5%, then the purchaser receives a bonus only if they redeem when the over-collaterisation is more than 5%.
⚙️ Price Floor :
GMX have a mint price in terms of each whitelisted asset
Minting GMX using an asset increase its mint price for that asset
The assets received from minting is 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) / (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 price floor in each of them.
🧭 Improving the stability of the USDG peg :
Ideally, with the long positions and fees, USDG should become over-collateralized by itself over time
However, if it 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 and stability of the USDG peg
🚜 Farming :
Liquidity mining is 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
Bonds are incentivized with 50,000 vested GMX per month
🔍 Summary of Supplies :
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
250,000 GMX team tokens, vested over 2 years
1,000,000 GMX tokens reserved for marketing and partnerships
Circulating Supply at launch : 7,136,525
Total Supply after 1 year : 7,856,525 + 2,040,000 vested GMX
🖇 All Links :
Official Website : https://gambit.financial/
DefiLlama : https://defillama.com/protocol/gambit-protocol
Twitter : https://twitter.com/gambitprotocol
Telegram : https://t.me/GambitProtocol