[DISCUSSION] Token Utility: Discounts and Feature economy

Token Utility

Welcome to new gear, GEARHeads,

This is a pre-GIP to start a long term discussion on utility and what we can possibly enable with $GEAR. There are multiple approaches to how this can be done, multiple mechanisms but the goal, like we had with 0xCider, is to have something that suits Gearbox the most. I’ll start with a broader view and then narrow it down to what my initial approach to it would be.

My approach here is largely based on segregating USD(Core) Revenue through key revenue streams and GEAR Revenue through added avenues of monetisation. Core revenue then to be used for growth purposes of the protocol in a sustainable method while GEAR revenue enables to fuel any LMs or token related spends so as to not inflate the supply.

So let’s begin

Ideology:

Correction in revenue streams, no permanent $GEAR inflation, minimize $GEAR spends otherwise(Revenue pegged only), Create opportunities for people to spend $GEAR on, get $GEAR liquid staked for benefits. Revenue share as per core concepts of Discounts and Allowances(D&A) to push proper P&L management.

Revenue

Let’s start with the first, currently Gearbox has two key revenue mechanisms

  1. APY spread
  2. Liquidation fee

APY spread is largely enabled by our liquidity pools while our focus on lowering liquidations, and overall protocol risk, means liquidation fee will never be a key focus source of revenue.

There is, though, the case of our CAs. CAs were mined for $7.3m, this wasn’t a direct DAO expenditure but with tokens going out was still an expenditure incurred to 5% of the supply. The CAs further are designed with a “Renting” out model effectively. To have no direct individual source of revenue indicates a significant risk to direct ROI from an impact assessment POV. This makes CAs enablers of revenue and part contributors.

Fee structure across protocols and CEXs follow a similar structure

  1. Borrow Fee
  2. Liquidation fee
  3. Account related fee

Even in terms of GMX, the positional fee to open and close an account is 0.1% of overall value, 0.2% effectively. While this is rather high given slippage with real assets, this is where CAs can effectively turn into direct revenue generators and the same should be explored. But like we have for our APYs, at the lowest possible meaningful level.

Meaningful levels are easy to determine if we model scenarios against existing data but haven’t been done for this pre-GIP as this is largely to kick off a discussion.

Now, getting down to how we can actually do it.

So what is this utility you talk about?

  1. GEAR as a D&A booster(eg BNB on binance)
  2. GEAR as Gated and Early access enabler to strategies and collaterals
  3. GEAR as core of a feature economy(Coins in Zynga poker etc)

GEAR staking to enable lower borrow APY and opening fee(BNBesque)

This is a good read on what encapsulates D&A though execution mechanisms vary significantly: Concept And Types Of Discount And Allowances | Business-Marketing

The aim of introduction of D&A as a cost line to our existing P&L will be to help manage the spends while ensuring it doesn’t hinder growth. While a 15-20% D&A cost line might seem smol, that’s largely because the Web3.0 approach has largely been to have blanket share/discounts on all positions irrespective of size and distribution. The key goal of D&A is to optimize incentives towards growth levers and then tier them to reduce spends towards the lowest contributors.

Effectively the more you stake, the more your discounts are even though the cost line for the protocol remains in place.

So what all can D&A boosting bring as utility?:

  1. Stake GEAR for Positional Fee discount on opening CA: deducted from staked accounts in pool, won’t require gas(correct me if wrong please)
  2. Lowered borrow APY for your positions: Reduced Borrow rate by 15% is effectively a 45% discount. This can create massive gains as 6x equals 3% additional APY for WETH as collateral.

The fee paid here can then further be divided between base asset and GEAR, the GEAR from the generated fee can then be used to fuel an LM for stakers or to create a deflationary GEAR economy

None of it comes out as an additional from treasury

GEAR for Gated and Early access

Collaterals pose a significant advantage to your leveraged positions on Gearbox. Being able to borrow an asset the same as your collateral asset effectively means you have exposure to directional assets without having to take directional exposure to your position. This is the core reason why liquidations on Gearbox have been as low as they have been.

The other side being requests to high APY strategies, adapters.

While the goal of Gearbox is to be a permissionless universal adapter, getting there would require time, multiple iterations and testing. As we move to fulfill these demands by increasing scope, we can use it to $GEARs advantage. Stakers can again gain access to these strats and collaterals earlier than others(unless it’s a security concern, in which case they might have to fulfill certain requirements to gain access). A lot of this will be up to Risk Committee but again is a suggestion that can help lock up and deflate supply.

GEAR as a base for Feature Economy

With V2 coming in, we have seen how features can disrupt existing user behavior and enhance experience. What they can also do is increase edge.

Developing the protocol further in a way where the new features are categorized as “UX improvers: necessities” and “UX edge improvement” can help us premiumise and effectively monetise features.

Say something like

  • Bots for limit orders
  • Account automation bots
  • Advanced positional Analytics
  • Notification bots

None of these are given necessities but can provide edge to users if they wish to and this is where we can have lock up tiers or Subscription models(I am extremely Web2.0 I know)

Further Suggestions

  1. Staking enables locking up and should be a part if the terms are for longer time lines
  2. Staking should further be monetised and used to create a deflationary GEAR model
  3. Deflationary GEAR can otherwise be partly be used to fuel an LM for stakers, incentivising them while still keeping the economy deflationary
  4. The features and “premiumised” spending options can be used as GEAR spend mechanisms instead of further Dollar monetisation. This keeps core revenue streams safe(APY spreads, positional fee) and automatically creates a positive loop on D&A.
7 Likes

A token buyback and burn program should be launched

gear should have more uses, so that everyone is willing to hold it.
Why do those who have not opened a ca account hold it?
Why do those who hold a ca account hold it?
Give them a reason to hold, the value of gear will be highlighted

Can we give tokens value?

For example, give CA access by the number of coins held, even for collaborative projects by holding a certain number of gears to gain access to leverage. Alternatively, the same percentage of leverage multiplier and quota is given by the number of gears held. If I have 10,000 Gear tokens, then I can have a leverage quota of 10,000usd, just the quota, if I want to use it, then I need to have 3000-5000 principal and a maximum leverage of 5X. Instead of just setting the bar so high that only stablecoin whales can participate, and this quota factor can be increased by the growth of the pledge time (or by growing the quota by pledging more Gear for a single coin). At least this model is profitable for users until 1gear=1usd.

In addition many people say that the total number of our tokens is too much, we can vote to destroy part of it, I think this is the most direct way to raise the price of a single coin, but not a way to improve marketcap, unsustainable, so I hope that before finding a reasonable and sustainable way to destroy, we can first restrict the team to unlock, or restrict the team address to sell on the contract, because the verbal guarantee is very low credibility, if I am a newcomer The situation I am facing by buying gear now is that the token in the hands of the team takes up an increasing proportion of the circulating volume, while the number of tokens in my hands stays the same and the proportion gets smaller, there is no contract to guarantee whether the team sells or not, and the tokens I have purchased have not yet been used for any purpose (including governance purposes, as there are few proposals).

And I hope to give a plan as soon as possible, because confidence is lost gradually because of time.

My English is very ordinary. I hope you guys can understand what I said.
I do sincerely hope Gear can be better, instead of worrying about the coin price, I should take the initiative to give my opinion in DAO. And I hope to discuss it soon and make an informed decision as soon as possible. (As you have noticed, very few people actually come to give their opinions)
The market has gotten better in the short term, but maybe tomorrow…
Thanks.

4 Likes

My main concern is if we want GEAR to be utility, governance, or both. I don’t think this matters much except in option 3. If the intent is for gearbox to be a DAO, but then you make GEAR a base for the feature economy, then now you have a bunch of ppl holding GEAR who are not really invested in the protocol or making governance decisions, just using it. Maybe that’s a net good thing, as those ppl can still delegate to more active paricipants, but I have a feeling you’d have to move beyond simple coin weighted governance for something like that.

For gated access, is the assumption that riskier strategies will have some sort of TVL cap in the future?

I think we also generally have to ask two questions:

  1. what actions do we want GEAR holders to take
  2. what resources to we have to pay them to taking those good actions

We want people to participate in governance, decentralize the protocol, provide liquidity for GEAR, provide liquidity to borrower accounts, use the protocol, and be in it for the long term.

You could look to something like veYFI as a good potential example, with the intent that gauges are launched for LPers and rev is shared between LPers and veGEAR lockooors. Plenty of variations of this that can be riffed on. Since subsidizing LPers is the best all-around thing the protocol can do IMO (allows much more freedom for CA expression and creativity). If you just give CA’s incentives, then they aren’t really using gearbox.

2 Likes

caveat being don’t make it so it’s required for these ppl to hold GEAR. Otherwise it’s just a barrier to entry that makes the product shitty. Discounts and Allowances is a good start as muggle mentions.

I support this proposal as is and am ready to vote. The sooner the better imo

I support you,The usefulness of tokens is urgent

All 3 points lgtm and I agree with ov3rkoalafied that we should people hold GEAR therefore I think most of the points should be based on veGEAR or alternative tokenomics where holding the token is encouraged.

Perhaps AC could be brought in to give some guidance on the economics of (ve)tokens.(I thought it would be crazy.:slight_smile:

2 Likes

to be honest I believe that there are so many way to make gear be more useful and also help gearbox this project to be more famous and successful. But in order to achieve all the goals,how hot this project is, is one of the most important thing.Therefore, if the price of the gear token goes up, more and more people will start to know what is gearbox and start to use it. The value of gear token goes up is not only help people to have more confidence to hold the coin and also can help the project.
Some people might say that a lot of people in DAO community only want their token goes up and sell for the profit. It is true and we should not hide this problem. What if we keep having different strategy about how to increase the value of the token? I believe FOMO will let people keep their gear for long time. For example, luna, even luna is down right now but the price of luna went up create so many benefit to the terra blockchain.

Yeah, to further add to this, if we copied veYFI it would look like this:

  1. a portion of revenue is used to buy GEAR for the gauges program
  2. veGEAR lockers get to decide what pools get GEAR via the gauges (vote for ETH, DAI, BTC, etc)
  3. Anyone who LPs is eligible for GEAR rewards, proportional to their deposit. If they do not own any veGEAR, they will get 10% of their rewards and the remaining 90% will go back to veGEAR lockoors. If they own veGEAR, they can get a boost, all the way up to getting 100% of their share (and veGEAR gets none of their share).

nice n sustainable, creates incentives for entities that provide a lot of liquidity to also own gear or for locking as a service protocols. It allows the lending side to be continually incentivized to make CA accounts smoother and better.

some pieces that would be cool to take from veALCX:

  1. use a BPT token instead of naked GEAR, to always have deep liquidity for the token. IL and slippage is dampened which is cool and means you don’t have to pay that much more to lockoors.
  2. the mana system - a separate token you earn that can be used to boost your gauge vote, unlock early, or sold to others that wish to unlock early. An evolution of the rage quit system basically.

Neither veYFI or veALCX are live or fully live yet, so can see how these go. But a merger of the two I think would fit gearbox quite well.

… there’s nothing to ve for right now…

Sayonara.

I know, I’m just worried that newcomers will be concerned about whether there will be a lot of selling. I didn’t say the team was selling.In fact, everyone is just waiting for the next step. :smiley:

The best way to stimulate the value of #GEAR and increase its value = making it possible to receive ETH royalties for steaking, just like it works for GMX!
This stimulates the entire ecosystem!
You steak assets to get GEAR, you steak GEAR to get ETH
Think about it!

Wouldn’t it be nice for us to complain less and support more?

This discussion is super useful, and all opinions matter - also because there is no currently “gold standard” in tokenomics anyway. ve- is liked by many, but is also hated by as many. Anyway, we’ll figure out the most organic and intricate way. Just wanted to point out that regardless of the direction chosen, it won’t be a 1-month timeline. Because this requires lengthy discussion + modelling + implementing into the core protocol + audit + making sure it works with governor alpha. So just be mindful of that.

No rush - let’s make sure to find the best model.

My thoughts were actually the opposite - in the direction of giving CAs incentives:

Gearbox is essentially a capital efficiency middleware. We generate good organic APY for lenders through a large number of ways capital can be used.

From that standpoint, it seems logical that the next step would be creating a system to direct this capital. We can give CAs incentives to lever up and supply liquidity into particular assets and strategies, on a per-token level. This brings bribe wars and all the other cool stuff - it would essentially be similar to something like Tokemak, but vastly superior due to more organic TVL and larger composability.

I.e., if you’re Balancer, you can just stake GEAR / veGEAR into all available Balancer pairs so that people bring leveraged liquidity into Balancer and boost your overall TVL. If you’re Convex, you can direct liquidity into cvxCRV to improve the cvxCRV peg or just Convex pools to generate more fees for CVX stakers. Due to high levels of composability, there is a vastly larger number of use-cases for gauge staking and bribing than other gauge models, in my opinion.

Implementing this would be somewhat a challenge from the engineering standpoint, but should be doable.

2 Likes