The GMD Protocol: A Cutting-Edge Platform

The GMD Protocol (website) is a cutting-edge platform designed to optimize and aggregate yields from various sources. It is built on top of existing applications and utilizes the GMD reserve token.

One of the critical features of the GMD Protocol is its use of delta-neutral or pseudo-delta-neutral strategies. These strategies allow the platform to aggregate yields from an index pool or an LP (liquidity pool) and distribute them among its constituent assets. This helps to eliminate the risks of impermanent loss and limits exposure to unwanted assets.

Additionally, the GMD Protocol employs advanced risk management techniques that allow it to constantly monitor and adjust its strategies, ensuring it can consistently deliver optimal results. The platform also provides a user-friendly interface and various tools that help users to manage their assets.

Vault

Their first products include single-stake vaults for Bitcoin (BTC), Ethereum (ETH), and USDC. These vaults are built on top of the GMX and are designed to provide users with high security.

GMD's three vaults (BTC, ETH, USDC) are designed to automatically compound over time, meaning that the value of the assets stored in the vaults will appreciate in real time. This is achieved through a yield farming strategy, where users can deposit their assets into the vault and earn a return on their investment through GMD tokens.

When users stake their assets in the vaults, they will receive gmdTOKENS representing their positions. For example, a user who stakes USDC will receive gmdUSDC tokens. These tokens represent the user's original positions in the vault and can be used to redeem the underlying assets at any time.

The GMD tokens appreciate at their annual percentage yield (APY) rate. Users can use these tokens to form liquidity on Uniswap V3 as gmdUSDC-USDC, gmdETH-ETH, and gmdBTC-BTC pairs. Allowing instant entry of the vaults in case the vaults are filled. The GMD Protocol encourages stakers to earn extra trading fees from Uniswap with minimal to 0 impermanent loss.

Yield

The vault assets can now earn an APY greater than 17%, as the company has removed the APY restriction from the smart contracts. This means the yield earned on these vaults can now vary and be adjusted depending on market conditions.

During periods of high fees, such as when the GLP yield was 50%, the APY for the vaults can now reach any possible height. This is a significant benefit for users as it allows them to earn a higher return on their investments during periods of high market activity.

This new feature of GMD's vaults allows for more flexibility and adaptability to market conditions. By removing the APY restriction, the vaults can better align with the current market conditions and give users a higher return on their investments. This is a significant advantage for users, as it allows them to earn a higher return on their investments in a rapidly changing market.

ETH example

The protocol compounds half of the ETH rewards earned from the Delta-Neutral Vaults of the GLP. In contrast, the other half is collected as performance fees/protocol revenue and distributed to $GMD stakers in WETH. Additionally, $GMD earns WETH rewards from the GLP in the GMD Reserve. The protocol also earns fees collected through protocol-owned liquidity, which are converted to WETH and distributed to $GMD stakers.

Regarding real-yield APR calculations, let us assume a total single-stake TVL of $1,000,000. Using this example, the $GMD APR (Annual Percentage Rate) would be calculated as follows: At 20% APR from GLP, 10% is compounded for the Delta-Neutral Vaults, and the other half is collected for $GMD Stakers. As a result, $100,000 a year will be collected for $GMD stakers. $200,000 worth of reserve in GLP earns another $40,000 a year. Assume protocol-owned liquidity collects $50,000 annually ( 35% apr on the lp). The team plans to take 30% of the total performance fees. The total revenue is 100,000 + 40,000 + 50,000 = $190,000 a year => GMD$ earns about $133,000 after performance fees. Assuming 10,000 tokens staked at $50, $GMD earns approximately 27% APR.

In summary, The GMD protocol earns revenue from various sources such as Delta-Neutral Vaults of GLP, GMD Reserve, and Protocol-owned liquidity, which is then distributed to $GMD stakers in the form of WETH. The real-yield APR is calculated by taking the total revenue earned, subtracting the performance fee and dividing the remaining amount by the total value locked and the number of tokens staked. This results in an estimated APR for the $GMD token holders.

Tokenomics

The $GMD token is the governance token of the GMD Protocol and is backed by a yield-generating reserve.

The GMD Protocol has a maximum supply of 80,000 $GMD tokens. Out of these, 17,000 $GMD tokens are locked as $esGMD. Through several funding rounds, these tokens are used for OTC (over-the-counter) swaps for partnerships or long-term investors. This allows the protocol to secure partnerships and bring long-term investors to the project.

Another 9,000 $GMD tokens are added on Uniswap V3 and partnered decentralized exchanges. This helps increase the trading volume of the $GMD token and provides liquidity for traders on these platforms.

Lastly, 54,000 $GMD tokens are floating within the community. These tokens are available for trading on various decentralized exchanges. In addition, they can be used by community members to participate in governance and earn rewards through staking.No more tokens will enter circulation except for potential $esGMD vesting.

Delta Neutral Vaults.

The GMD Protocol utilizes a strategy called the “GMD pseudo-delta-neutral strategy” for its Delta-Neutral vaults, which includes three main components:

1. the Delta-Neutral Ratio,
2. Manual rebalancing of deposits
3. GMD GLP Reserve (The Reserve).

Delta Neutral Ratio

The GMD Protocol's use of the "pseudo-delta-neutral strategy" for its Delta-Neutral vaults means that the single-stake assets deposited into the vault will be allocated and adjusted to have the same weight as the composition of GLP's USDC, ETH, and BTC. This strategy will use the deposited assets to mint GLP and earn yields from the GLP yields. This approach aims to neutralize the overall portfolio value's exposure to the volatility of any single asset.

Manual Rebalancing

The GMD Protocol team manually rebalances the amount allocated to each of the three vaults weekly to achieve a Delta Neutral Strategy. This is done to follow market movements strictly. This manual rebalancing allows the GMD Protocol team to be nimble and responsive to changes in the market, so the deposited assets are always protected from unnecessary volatility.

GLP Reserve

The GMD Protocol's approach to managing market volatility is to create a reserve to absorb the risks. Instead of trying to eliminate market volatility, which is entirely impossible. The GMD team decided to raise funds and create a reserve to absorb the risks. This reserve is the Protocol's GLP reserve. The reserve has several functions and benefits that aim to protect the deposited assets in the Delta-Neutral Vaults.

One of the main functions of The Reserve is to absorb the risk of the Delta-Neutral Vaults underperforming due to impermanent loss. This is achieved by making up for the difference between the Delta-Neutral Vaults' underlying GLP value and the users' staked assets. In this way, the reserve acts as a buffer that protects users' assets from market volatility.

The reserve will always consist of GLP worth at least 10% of the total TVL of the three Delta-Neutral Vaults.

The funds for the reserve will be provided 100% by the GMD Treasury, which means that the GMD Protocol will bear the costs of creating and maintaining the reserve. The reserve will also gain the GLP's profits from traders' losses. Based on historical data, traders are statistically destined to lose collectively, and the reserve is significantly more likely to benefit from the volatility financially.

Conclusion

Overall, the GMD Protocol is a powerful and versatile platform that offers a range of benefits to users, including improved yields, reduced risks, and increased control over their assets. It is a valuable tool for optimising yield-earning potential in today's fast-paced and ever-changing crypto markets.