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Gains Network Deepdive
Gains Network is a decentralized derivatives trading platform built first on the Polygon network and expanding to other blockchains.
gTrade is the flagship product of Gains Network, a decentralized synthetic leveraged trading platform built on Polygon. It allows for trading not just cryptocurrencies but also stocks and forex with higher leverage than competitors like GMX. Specifically, gTrade offers 150x leverage for crypto trading, 50x for stock trading, and 1000x for forex trading. On gTrade, all trading pairs are settled in DAI, and users must deposit DAI into gTrade's DAI vault. When a user opens a long or short position, the corresponding amount of deposited DAI is temporarily locked in the vault until the position is closed.
gTrade uses an oracle to obtain the current price of the trading target. This means that opening a long or short position does not involve buying or selling the asset. Instead, users make their trades based on the current market price. As a result, the platform's trading activities are essentially a competition between traders and liquidity providers, and gTrade operates according to the market's 80/20 rule, where only 20% of traders make a profit. In contrast, the remaining 80% incur losses.
Thanks to its synthetic architecture, Gains Network's gTrade is a decentralized leveraged trading platform designed to be liquidity-efficient, powerful, and user-friendly. Unlike other platforms, users on gTrade do not take ownership of assets. Instead, all trades are over-collateralized and do not affect the overall price of the asset. In addition, users can trade directly from their wallets without undergoing KYC identification procedures.
The protocol behind gTrade revolves around the ecosystem's ERC20 utility token, GNS, and ERC721 utility token, NFTs. GNS and NFTs are designed to be used within the platform, allowing ownership of the protocol through revenue capture and governance.
The goal of Gains Network is to make gTrade the most adopted decentralized leveraged trading platform and to transition the organization into a DAO. The DAO's purpose is to create DeFi products that generate revenue that can be distributed to stakers. The organization also plans to launch new products like a casino and metaverse.
The GNS token is the central element of the Gains Network ecosystem. The GNS token started as the GFARM2 token on Ethereum, distributed in an ETH pool and a GFARM2/ETH LP pool. It was later migrated to Polygon and had a 1:1000 split to GNS.
The gTrade platform operates similarly to an algorithmic stablecoin, where equilibrium is maintained through the issuance and burning of tokens. In the Gains Network's version, the system uses GNS and DAI, with a balancing act between the rewards for winners and the penalties for losers. The system works by taking the profit from winning trades out of the DAI trading vault and using the losses to buy and burn GNS when the trading vault is overcollateralized. Unlike its predecessors, GNS is no longer minted when the DAI vault is undercollateralized to avoid the issues that arose with other algorithmic stablecoin systems.
There are three other ways to mint GNS:
- GNS rewards for providing liquidity in GNS/DAI pools
- Earn GNS by participating in the referral program
- Hold Gains NFTs and run a bot that executes limit orders and liquidates on gTrade in exchange for GNS.
Every time GNS is minted as a reward to a user, an equal amount of DAI goes into the insurance. This provides valuable support for every GNS. gTrade uses the actual demand created by its platform to increase the value of GNS, and users do not have to worry about GNS being inflated like many tokens in the market. Currently, 25% of the initial supply tokens have been burned.
gTrade is taking a unique approach by integrating NFTs into DeFi products to explore and uncover the full potential and value of NFTs. Historically, NFTs have primarily been used as profile pictures. However, as increasingly unique and intricate NFTs are created, people become tired of profile pictures.
To address this, gTrade has developed a new generation of NFTs called Gains Network NFTs. These NFTs come in five tiers: Bronze, Silver, Gold, Platinum, and Diamond. By providing these NFTs, traders reduce spreads when trading. In addition, there is the ability to run bots to earn rewards for executing liquidation and limit orders. Finally, there is the option to stake up to three NFTs to boost LP rewards.
Gains Network is working to give NFTs real value support. This added value makes NFTs more appealing to high-frequency traders and algorithms, as the transaction fee reduction allows them to save more on transaction fees. As long as the transaction fee that can be saved is greater than the price of the NFT, traders will be more likely to buy it. The value of NFTs is also backed by the needs of traders, making them a more viable investment option.
Real Yield is a popular term in DeFi, referring to protocols that can capture value, generate actual demand, and create value from the market. gTrade is a product that can generate Real Yield. To avoid the problems of early DeFi projects and pursue the real income of the platform, gTrade shares the platform's revenue with GNS stakers. All rewards come from the platform, which includes:
- 40% of the market order fee (0.08%)
- 15% of the limit order fee (0.08%)
- 40% of the transaction closing fee (0.06%)
70% of orders on gTrade are market orders, which means that nearly 33% of platform revenue goes to GNS stakers.
How does trading work
gTrade operates using synthetic assets and a GNS and DAI liquidity pool. The process on the platform is as follows:
- Open a $500 short position on ETH using 20x leverage.
- The system consults oracles to determine DAI's current price and the required collateral. The oracles consult at least seven exchanges to filter out distortion.
- If the trade is booming and ETH's price drops, you close the short position at a 20% lower price.
- gTrade calculates your earnings and pays you in DAI from the vault.
With this system, the user never buys the asset and does not borrow funds to create the leveraged trade. Instead, as traders lose, the DAI vault accumulates funds and uses the extra DAI to buy GNS and burn it. This causes the GNS token to dilute when traders win and deflate when they lose, leading to the overall net deflation of the token. Trading fees fund the liquidity pool rewards and other rewards, such as NFT bots and affiliate programs. Approximately half of the fees generated by the gTrade platform go towards these rewards.
The growth and advancement of on-chain derivatives are closely tied to the performance of financial markets. With the high performance of Layer 2 solutions and advancements in sharding technology, the development of on-chain derivatives will grow in the coming years.
Investing in "Real Yield" products can be reassuring in a bear market, and these types of assets are more reliable for calculating income. During a bear market, when most traders lose money, Gains Network is expected to generate more business income than other products, providing a more stable investment opportunity.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.