Interpretation of GMD Protocol: YFI on Arbitrum based on GMX
Its product design largely helps investors hedge against non-compensable losses, while the protocol itself uses hedging strategies to earn actual returns and distribute dividends to investors.Author: Morty, Deep Tide TechFlow
The GMD Protocol is a yield optimization and aggregation platform built on Arbitrum, similar to YFI. Its products are designed based on the GLP of the derivatives trading platform GMX, allowing users to deposit WBTC, WETH, and USDC into a delta-neutral vault, while using these assets to purchase GLP, which then distributes yields generated by professional strategies to stakers.
The product design largely aims to help investors hedge against impermanent loss, while the protocol itself employs hedging strategies to earn actual returns and distribute dividends to investors. After depositing assets into the vault, investors will also receive gmdToken certificates. This design also lays the groundwork for future support of gmdToken by more DeFi protocols.
In addition, in mid-January this year, GMD launched a new product feature in collaboration with Buffer Finance: the GMD BFR USDC Vault. Buffer Finance is a decentralized binary options trading platform. GMD users can stake USDC to earn fees from Buffer's binary options trading and share profits from traders' losses. The GMD BFR USDC Vault depends on Buffer's deposit cap.
$GMD is the native token of the GMD Protocol. $GMD stakers bear the risk of GLP's impermanent loss while also benefiting from the losses of GMX traders. At the same time, $GMD stakers will receive a portion of the vault's earnings.
Additionally, there is another token in the GMD Protocol ecosystem called $esGMD. $esGMD will be used as a token for OTC exchanges when GMD Protocol collaborates with other protocols, and tokens obtained through $esGMD exchanges will be returned to $GMD stakers.
$esGMD stakers will also receive protocol revenue dividends, with a higher proportion. In the future planning of the protocol, $esGMD may be distributed as rewards to vault depositors or used to participate in governance bribery. If one wants to convert $esGMD to GMD, a waiting period of one year is required. Meanwhile, the GMD protocol will also buy back $GMD and lock $GMD as $esGMD.
Basic Data
Next, let's take a look at the basic data of the GMD Protocol:
Now, after two months of development, the GMD protocol's TVL has reached around $5.89 million, of which GMD manages GLP worth $4.03 million. It is worth mentioning that the BTC and ETH vaults are at full capacity, and the total staked amount in the USDC vault accounts for 92% of the vault's capacity, nearing full capacity.
In the distribution data of GMD Token, 44.45% of $GMD is staked, 1.88% of $GMD is used for providing liquidity, 21.33% of $GMD has not been distributed, and 32.35% of $GMD is not staked.
Future Development
On January 29, the GMD Protocol will launch on Avalanche.
The delta-neutral vault built on Avalanche GLP will introduce four vaults: USDC, AVAX, WETH, and BTC.b, with a deposit fee of 0.5% and an initial vault cap of $500,000.
To deploy the protocol on Avalanche, GMD sold 2,500 $esGMD at a price of $40. Of this $100,000, 70% will be used as the protocol's GLP reserves on Avalanche, and 30% will be deposited into Trader Joe to provide liquidity. Subsequently, the GMD team will introduce more incentive measures.
As is well known, GMX is built on both Avalanche and Arbitrum, so GMD Protocol's multi-chain expansion specifically serving GLP is even more reasonable, creating deeper business space for the protocol. Moreover, while GMX is very popular on Arbitrum, the GLP yields on Avalanche should not be underestimated. Therefore, we can deduce that the GMD Protocol will also have more development potential.
Additionally, prior to this, on January 19, GMD announced a partnership with Trader Joe, the largest Dex on Avalanche, to migrate part of its liquidity to Avalanche. Of course, this is just part of the collaboration; GMD is actively developing the aGMD Token and hopes to establish liquidity on Trader Joe. Furthermore, the GMD team will explore building packaging contracts for the Liquidity Book feature launched by Trader Joe.
In my personal understanding, the launch of the aGMD Token is actually a further enhancement of the capital efficiency of the GMD protocol. As mentioned above, the aGMD Token is likely to be a certificate token for users' deposits in the vault, similar in logic to Lido's stETH, which can be applied in various DeFi scenarios. This is also the main reason GMD needs support from Trader Joe—just as stETH requires support from Curve liquidity.
In addition to deep cooperation with Avalanche, GMD has also mentioned an upcoming collaboration with another leveraged trading platform, Gains Network, which is also worth looking forward to. Furthermore, GMD will issue an NFT project, with specific information yet to be revealed.
Conclusion
From the various perspectives mentioned above, the future growth potential of the GMD Protocol comes from the following four aspects:
Deployment on Avalanche;
Achieving a relatively deep cooperation with Trader Joe;
Collaborating with Buffer Finance and soon launching more partnerships with other DeFi protocols, such as Gains Network;
The GMD team's product delivery capability is optimistic, and they will also launch an NFT project in the future.
However, we cannot overlook the potential smart contract risks inherent in on-chain DeFi protocols, which are dual risks, thus their strategy heavily relies on GMX.
According to public information, the GMD Protocol completed its second smart contract audit in January. The first audit was conducted by Solidity Finance, and the second audit was completed by independent auditor pashov.
