What makes Gains Network's daily revenue surpass GMX?
In one month, the market value doubled. What makes Gains Network's daily revenue surpass GMX?Author: R3PO, Deep Tide TechFlow
Gains.Network's gTrade is a decentralized perpetual contract exchange based on Polygon. After launching on Arbitrum, gTrade's monthly trading volume exceeded $1.7 billion, with monthly revenue surpassing $1.2 million. Its daily revenue on January 25 exceeded GMX, and last week its trading volume also surpassed GMX.
Currently, the market capitalization of $GNS is around $180 million, having increased by over 100% in a month. Recently, the platform's trading volume, user count, and trading fees have been continuously growing, allowing for sustainable income. R3PO believes that GNS is expected to welcome a new deflationary phase, and overall, the protocol is bursting with excellent development potential due to its strong product capabilities.
Investment Highlights and Expectations:
The product interface is very smooth, allowing transactions through a "one click" method after a single authorization without the need for repeated authorizations.
A wide variety of trading options are available, with nearly 100 trading pairs, including cryptocurrencies (40+), forex (20+), and tokenized stocks (30+), with large commodities recently being added.
Due to the relatively rich trading options, LP risk is diversified and profits are normalized.
Optimistic about Gains Network's future performance in the Arbitrum ecosystem and capturing market share from GMX.
Project Information:
Gains employs a model somewhat similar to GMX, but users provide liquidity to a treasury that only holds DAI instead of a basket of assets.
Like GLP, this treasury acts as the counterparty for traders on the DEX, where users deposit DAI collateral to open long or short positions. Users can also act as LPs in the treasury, where they will earn trading fees and internalize traders' profits and losses. Its flagship product is gTrade, a liquidity-efficient and user-friendly decentralized leveraged trading platform. It allows trading stocks, cryptocurrencies, and forex with leverage (up to 1000x). In addition to the exchange, Gains Network also has an NFT collection and staking program.
Gains has several unique features, such as supporting stocks and forex in addition to cryptocurrencies. The exchange is a "degens paradise" (degens refers to individuals participating in high-risk trading) as it supports leverage ranging from 100x to 1000x, depending on the asset class being traded, making it the highest leverage among all DEXs.
The entire gTrade trading platform operates on DAI and Gains Network's native token GNS. Leverage is synthetic, and the product modules consist of DAI Vault, GNS/DAI liquidity, and GNS tokens. DAI is withdrawn from the treasury to pay traders' profits (+PnL), or if the trader's PnL is negative, DAI is received from the trader. Through a single liquidity pool for all orders and the DAI treasury, gTrade can offer a variety of trading pairs and leverage products. There are 70 trading pairs on the exchange, including cryptocurrencies, forex, and tokenized stocks.
GNS has over 8,000 unique users, with about 300 daily active users as of December 26, 2022. The TVL is $21.94M, and the average daily new users have currently dropped to 10-30 users. The market capitalization of $GNS is $103M, achieving a trading volume of $22 billion while collecting $14 million in fees (0.08% of the position value), of which 32.5% is redistributed to $GNS stakers/LPs.
Other Product Features:
1) Oracle
Chainlink's DON (Decentralized Oracle Network) supports gTrade's information. gTrade has its customized real-time Chainlink node operator network to obtain the mid-spot price for each trade order.
2) Trading Fees
gTrade charges a fee of 0.08% on the leveraged value for opening and closing positions for all cryptocurrencies, and 0.008% for forex trades. Price impact (%) = (open contracts {long/short} + new trade position size / 2) / 1% depth {up/down}. The price impact for forex is 0, but applies to cryptocurrencies and stocks.
gTrade also charges funding fees based on the net exposure and volatility of the trading pairs, as well as collateral rollover fees to manage the risk of the DAI vault. Fees are allocated to the team, project fund, liquidity providers, and GNS staking, affiliates, DAI treasury, GNS/DAI LPs, and NFT holders executing limit orders and liquidations in a decentralized manner.
3) Leverage Permissions in Different Markets
● gTrade currently offers a leverage range of 4x to 150x for cryptocurrency pair trading.
● For stocks, the leverage range is from 3x to 100x.
Profit Model
gTrade is divided into two pools: the DAI pool acts as the "first line of defense," directly serving as the counterparty for traders, which can be understood as a vault insurance pool. GNS/DAI on quickswap serves as the "second line of defense." When a trader makes significant profits, causing the DAI in the insurance pool to drop below the TVL deposited by users, gTrade slowly sells GNS to acquire DAI from the "second line of defense" to replenish the DAI pool in the "first line of defense."
Conversely, if a trader incurs significant losses and the DAI pool exceeds 110% of the TVL, it indicates that gTrade, as the counterparty, has made money. The excess 110% portion of DAI will be used to buy back GNS in the GNS/DAI pool and burn it.
gTrade's profit model is based on a theory: over a long timeline, retail traders generally lose money. gTrade amplifies this theory's profitability based on high leverage and the high volatility of cryptocurrencies. According to this theory, by the end of December, it has run for 14 months with a cumulative PnL of -5.65m.
Alongside DAI, the protocol's revenue continues to grow, with cumulative fees reaching $15.68m.
Other Project Situations
1) Security
Gains Network has been audited by the renowned auditing firm CERTIK. CERTIK has identified 7 issues with Gains Network v9, of which 3 have been resolved and 3 have been confirmed.
The most critical issues are related to the project's centralization. The kynet Trust Score overall trust rating is 87/100, which is quite good.
2) GNS Token
The Gains Network economy is supported by its native token GNS. Its supply cap is 100,000,000 GNS, serving as a fail-safe mechanism that should never be triggered. GNS initially provided 38,500,000 GNS tokens. 25% of the initial supply was burned within a year, and the current supply exceeds 30.2 million, of which 75.2% is staked.
3) GNS Staking
$GNS can be staked to earn DAI through trading activities on gTrade, with 40% of market order fees and 15% of limit order fees allocated to GNS stakers. Gains Network claims that 70% of its trades are market orders, and an average of 32.5% of all fees will be used for $GNS staking. The current APY for the GNS pool is 2%, and for the DAI pool, it is 7%.
4) DAI Vault Treasury
The earnings from the DAI Vault treasury come from traders' DAI trading fees, which are also used to pay for traders' profits. Users can stake DAI based on the platform's trading volume to earn fees. If the treasury is under-collateralized, stakers may face losses. Since December 2021, and through various market conditions, no DAI staker has left at a loss.
5) GNS/DAI Mining Pool
Due to the decentralized protocol's need for a liquidity fund pool, users are encouraged to provide LP support in the GNS/DAI mining pool on Quickswap, while also earning GNS rewards and dQUICK rewards (while still earning Quickswap swap fees).
6) GNS NFT
To gain special benefits, users can purchase the project's native NFTs. There are 5 different types of NFTs that unlock exclusive perks. These NFTs provide a higher level of enhancement for LP rewards and single-sided staking.
Competitive Landscape
The main difference between $GMX and $GNS lies in the product; $GMX relies on perpetual and spot trading, while $GNS relies on synthetic asset trading. Perpetual and spot trading require liquidity pools to execute trades, which is why $GLP exists (and can face constant losses). However, it limits the number of tradable assets due to the need for liquidity.
In contrast, $GNS has chosen synthetic assets that do not require liquidity pools. They can list as many tokens as they want, thereby improving capital efficiency. Synthetic assets and forex/stock trading provide traders with new opportunities as they do not require any tokenization, liquidity pools, or third-party interactions. The limitation of synthetic assets is the need for data providers, as prices are not determined by quotes/demand on the platform.
GNS has over 8,000 unique users, with about 300 daily active users and an average of 10-30 new users daily. The market capitalization of $GNS is $107m, facing numerous competitors in the market besides GMX, with GMX being its most direct competitor, but GMX is constrained by its development team's lack of innovative drive.
Risk Warning
There is only one core developer among the team members.
The custom DON oracle lacks extensive verification basis.
The counterparty in the game is the trader, and profitability largely depends on the trader's trading level.
Only DAI is supported as the sole trading token, which, while aimed at avoiding regulatory risks, also increases limitations.
