Gains Network Design Mechanism: How the Platform Works During The FTX Crisis
Key Points:Gains Network uses special mechanisms to survive the crisis of last year.
gDAI, one of the LP tokens, helps users limit their risks. GNS will redeem GNS if the Trader loses excessive collateral.
Luna caused an incident in which GNS’s LP ran out of money and GNS was sold to DAI to make up the difference.
Both GMX and SNX Perp are based on a project – Gains Network. Since the Luna crisis last year it has seen its native token GNS increase by more than 10x. Its transaction volume and fee income also reached new heights. This is inseparable with its constant innovation in mechanisms. This article will provide a detailed overview of Gains Network’s development history and competitive advantages. Gains Network’s mechanism can be described as a platform that allows you to see through many DEX-PERPs if you have a basic understanding.
LP is a stable currency that supports cryptocurrency, stock and foreign exchange transactions.
Two-way funding rate: One party pays the other party at the same rate as CEX Perp
GMX is a full-guaranty model. This means that every 1 ETH multiposition GLP bottom layer has 1 ETH support. This allows GMX the ability to survive the violent bull markets. Gains Network, which has only stablecoins at its bottom, has to deal with the risks. Gains Network has three mechanisms to manage risks on the transaction and LP sides. The core of these mechanisms is: Asset spot liquidity, which determines slippage on-site transactions and prevents price manipulation
Asset price volatility and the long-short ratio determine how much it costs to continue holding positions and how well you can deal with unilateral market conditions.
To build a stable LP, you need to combine a net worth model with liquidity adjustment and a cash flow cycle.
Gains Network uses the triple mechanism Spread, Rollover Fee and Funding Fee to manage risk on the transaction side. Spread: Additional opening costs. The more liquid assets, the more expensive the spread. It is used to prevent price attack and facilitate the listing small currencies.
Rollover Fee: A fee that is based on spot volatility and used to manage trader’s leverage.
Funding Fee: This price is determined by the difference in long and short positions, and the spot volatility. If long/short is greater than 1, the short pays the long, and vice versa. It is used to balance long-short ratios and avoid excessive unilateral exposure.
Spread is the additional slippage that must be paid when opening a new position. The slippage for oracle pricing should be dynamically adjusted to the depth of the transaction pairs from the oracle source. (CEX) This will ensure that the cost of manipulating prices in the market is always greater than the profit. Spread is negatively related to the size of open positions and the impact OI has on the market, and positively related to the depth off-market spots. The 1% depth above for longs and the 1% below for shorts will be the parameters of each pair. The Rollover Fee can be paid for both short and long positions. Fung Fee is calculated based on the long-short ratio. Both fees are paid by one party. The figure below shows the exact formula. The exact formula is shown in the figure below. In a violent bullmarket, the fees paid by multiple parties will rise quickly to cover the losses and control the long short ratio. These fees can also increase transaction costs. In cryptocurrency, an asset class that can serve as Index Asset LP (a violent bull market), the fees paid by multiple parties will rise rapidly to cover the losses of the counterparty and control the long-short ratio. In the example below, $1k short $10k BTC. Funding Fee (s), = -0.0005%. Rollover Fee = 0.043%. The final Fee to be paid is ($1k *0.0043%- $10k 10k = 0.00007%). This means that you can still earn interest if you open short positions.
Fee income/Trader profit and loss creates an additional buffer to prevent price drops.
Incentivize long-term lock-up funds, adjust the time of entry/exit dynamically, and avoid liquidity issues in extreme situations.
The net value products have the advantage that all pledgers are treated equally and extreme situations are shared. The old LP model was capital preservation. However, under the deficit, the last person who runs away will not receive a penny. It is exactly the same as FTX so it is easier to panic in a critical moment. The most difficult thing here is the heavy machinery of Buffer. Mint’s new GNS will pay part of the Gains Network income to users, while the DAI that was originally used to generate income will go into gDAI to create the over-collateralized buffer. Trader’s profit and loss will be over-collateralized Under certain circumstances, it will also enter the Buffer, which makes gDAI not guaranteed capital in name, but in fact, the price will not drop most of the time, which shows that it is well aware of the public’s “loss aversion” psychology.At the same time, in the case of over-collateralization, Gains Network will take part of the profit brought by the trader’s losses to repurchase GNS and keep the over-collateralization rate fluctuating within a safe range. Gains Network will not be in a position of large additional issuance over the long-term. The Buffer will pay the source of the discount and will lock up LP for a long-term. The so-called dynamic adjustment means that the lower the over-collateralization rate, the slower the withdrawal, which increases the ability to resist risks. It is strange to do this, but it is the right thing to do. Gains Network was later improved in many ways and performed well in the panic caused FTX. In June, the triple risk control mechanism for the transaction side was fully capped. It was then able to resume normal operations. In September, it began to capture that hot spot of the depreciation in foreign currencies against the US Dollar. This was known as Return to Public View. At the beginning December, gDAI was capped and deployed to Arbitrum at the end. This caused a surge in currency prices and business data at this year’s beginning. Gains Network’s high-efficiency team has allowed it to continue to grow and achieve phoenix nirvana. These assets have the best trading experience, so the products can stand alone. It has also been able to compete with GMX by having a two-way funding rate and other factors. Additionally, it has successfully acquired customers in cryptocurrency. These are inseparable from Gains Network’s excellence, which is the greatest asset of this growing project. Considering that market orders account for about 70%, the GNS staking share is about 0.07/0.16×70%+0.03/0.16×70% = 36.25%, and the gDAI share is about 0.03/0.16 = 18.75%. The limit order that was paid to NFT Bots (execution bot) is the portion that entered the gDAI buffer in the previous tweet.
As I mentioned in the tweet, the mechanism of this tweet is complex. It is difficult to copy and easy to reverse if it isn’t copied.
LPs that have not been fully collateralized are able to operate with high capital efficiency.
Gains Network appears to distribute a large portion of the team’s income. However, in most current projects such as UNI Maker, Maker, Lido etc., their treasury revenue cannot or can barely cover team’s expenditures. They still need to continue selling coins. It’s quite remarkable that GNS can survive on revenue sharing. We know you’ll be sighing after reading this. The so-called DEX Perp is not a simple statement that Traders and LP are counterparties. It was only after GMX adopted the low risk Index Asset full mortgage model and the great details of its team that a product was finally made that could be used by people. However, in order to trade unchained assets like stocks and foreign exchange, we must use Gains Network’s synthetic asset model. It is iterative until we see the dawn. We encourage you to do your own research before investing.Join us to keep track of news: https://linktr.ee/coincuHaroldCoincu NewsTags: DAIDEX PERPETHFTXGains NetworkgDAIsigns