The birth of #Realyield in DeFi has turned out to become one of the most recent remarkable innovations in DeFi. The concept of ‘Real Yield’ defeats the traditional model of introducing unsustainable APYs in yield farms thereby minting inflationary tokens in the process to attract a ton of user funds in the protocol.
These tokens are paid out as rewards and eventually claimed and dumped by investors as they offer no real utility. This model is unsustainable hence the need for a revamp.
This is why the ‘real yield’ narrative seems to be gaining traction amongst investors as Defi protocols work on distributing actual the revenue they generate to users rather than incentivize them with inflationary tokens. Interestingly, these rewards are paid out mostly in stablecoins or $ETH.
Some of the solid examples of DeFi protocols that have already adopted this model include – $dYdX, $GMX,Gains Network ($GNS) $GMD, DOPEX ($DPX) etc.
However, today we’re going to discuss GMD protocol and why it could be an undervalued gem right now…
But first, what’s GMD Protocol?
GMD Protocol is a yield optimizing and aggregating platform built on top of existing applications ($GLP & GMX). GMD Protocol is launched on the Arbitrum network.
Since the launch of GMD Protocol, it has helped bring in a ton of investors in the Arbitrum ecosystem because of its yield aggregating feature.
This will further help to put the Arbitrum ecosystem in the spotlight as the No.1 DeFi chain in the Web3 space.
GMD uses delta-neutral or pseudo-delta-neutral strategies to aggregate yields from smart vaults built on top of GMX & $GLP (a liquidity provider token of GMX Protocol and accrues 70% of the platform’s generated fees).
To better understand how this works, I’d like to briefly discuss GMX Protocol.
GMX Protocol is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. GMX exists on both Arbitrum and Avalanche ecosystems. Two tokens actually run the ecosystem – $GMX (the utility and governance token. Accrues 30% of the platform’s generated fees) and $GLP (the liquidity provider token and accrues 70% of the platform’s generated fees). This means that 100% of the platform generated fees are redistributed back to holders of $GMX & $GLP.
So, when you single-stake the coins ($BTC, $ETH, $USDC) in their respective vaults on GMD, GMD uses those to mint $GLP to earn yield on GMX protocol and distributes the yield back to users who staked either of those individual assets.
For example – If you single-staked $USDC in the $USDC vault on GMD, GMD gives you a receipt token $gmUSDC which represents your position in the $USDC vault, and then mints $GLP token with the deposited $USDC which goes on to earn yields on GMX protocol. The yield is eventually distributed back to you and redeemed in $USDC.
You can stake your tokens here…
https://app.gmdprotocol.com/vault
This strategy used by GMD Protocol is what is referred to as the delta-neutral strategy.
But there’s a catch…
As you already know, crypto assets are wildly volatile as the market moves.
There are 3 factors that might the delta-neutral strategy used by GMD Protocol :
- Impermanent loss due to price volatility + assets weight changes as people mint/redeem $GLP.
- Trader’s profit and losses from GLP pool
- Volatility from small assets in the pool.
In all of these, factor 2 seems to work in favour of $GLP as it’s statistically proven that traders will lose trades overtime. When traders lose trades, the market cap of $GLP increases as the holders of $GLP earn all of the fees from the lost trades while the reverse is the case when trades are won.
Factors 1&3 are the most disturbing as crypto assets are wildly volatile. LPs are often concerned about Impermanent loss, and this is a risk they are looking to avert.
That’s where the $GMD token (a risk-absorbing reserve) comes into play…
- $GMD will absorb the risk of single-staking vaults being underperformed due to impermanent loss.
- $GMD will also gain the $GLP’s profits from traders’ losses.
- Based on the historical data of GLP’s performance, $GMD reserve is significantly more likely to financially benefit from the volatility.
Now here’s what’s interesting…
$GMD token also accrues platform revenue and distributes to $GMD holders (Real Yield) besides benefiting from trader’s losses on GMX and absorbing volatility risks from the vaults.
$GMD Tokenomics
$GMD is the utility and governance token of the GMD Protocol. It accrues 70% of the platform fees and distributes to stakers.
- The maximum supply of $GMD is capped at 80,000 tokens.
- 16,000 $GMD is locked as $esGMD which will be used for over-the-counter (OTC) swap for partnership tokens/ long-term investors through several rounds of fundings.
- 9,000 tokens will be used to add liquidity on uniswap v3 and partnered decentralized exchanges on Arbitrum.
- 56,000 tokens will belong to the community.
- $esGMD can be vested in 365 days for $GMD.
- $GMD can also be locked and converted to $esGMD.
Initial mint is complete, so no more tokens will enter circulation except for potential $esGMD vesting.
$GMD token is a low market-cap token currently sitting at a MC of about ($4.4M).
However, you’ve got to be super careful about investing in low MC tokens as they are often wildly volatile but that doesn’t dispute the fact that GMD is a project to keep an eye on.
It has also witnessed a huge influx of users as nearly all the delta-neutral vaults get filled up and have the protocol expand them afterwards.
Infact, the TVL is currently sitting at $2.78M according to DefiLlama.
While the vaults’ capacity has recently been expanded to $3M.
Awesome stuff!
They recently announced amazing features for their new and vastly improved staking pool V2 for GMD & esGMD which include…
- No lock up on the staked tokens.
- You can now compound earned reward points to boost your $ETH yield. This is a move geared toward incentivizing long-term stakers as unstaking your tokens automatically burns all your previous reward points.
- 0.1% deposit fees to burn $GMD and reduce its circulating supply. This makes $GMD deflationary and may drive demand.
- $esGMD token offered to partners/investors during seed rounds/fundings can now be staked to receive $ETH rewards.
Insane stuff, right?
But that’s not all…
Sometime in November, GMD Protocol announced a strategic partnership with 3xcalibur protocol to help them bootstrap their liquidity AMMs on the Arbitrum ecosystem and increase demand for their products.
This helps them accrue more fees and volume for $GMD liquidity which in turn comes in as platform revenue and then distributed to $GMD stakers.
Also, users who single-stake their assets can comfortably enter/exit their positions through buying/selling the receipt tokens minted (gmdUSDC and gmdETH) on 3xcalibur or Uniswap. They can also earn more by providing liquidity which increases demand for the vaults and in turn helps increase protocol revenue.
Infact, 3xcalibur protocol have allocated $XCAL rewards (as promised in the Great Migration) to incentivize more liquidity for some of the pools created by GMD protocol.
Some of these pools include :
- vAMM- $GMD/$ETH
- sAMM- $gmdUSDC/$USD
- sAMM- $ETH/ $gmdETH
All of this looks really wonderful…
However, this is not financial advice of any sort and as such it’s required that you do your due diligence before investing or putting your assets in a vault.
If you want to learn more about GMD, you can follow their twitter account @GMDprotocol.
Discord server : https://t.co/CeLIpayTBD.
Website : https://t.co/LyFRFCSsLL
Written by : Paschal Ajaegbu.
