Overview
Following the snapshot vote passing the proposal to switch from the Buyback and Distribute model (BB&D) in place since July, Gains Network switched to a Buyback and Burn model (BB&B) on Nov 14th. That proposal resulted in a temporary one-month change in the Single Sided Staking (SSS) reward distribution (currently 54% of the protocol’s revenue).
This proposal is to extend the BB&B for another month, and opening the discussion to potential alternative distribution breakdowns.
The BB&D distribution allocated 90% of SSS rewards to stakers, 10% to the governance fund, and 0% to burning $GNS tokens.
Since Nov 14th, the distribution shipped 0% to stakers, 10% to the governance fund, and 90% to $GNS burns.
The currently active proposal declared that ”after this one month period, Gains Network will return to the current distribution for the community and team to reassess the impact and consider the next steps forward”.
This new proposal intends to supersede this statement, by moving the discussion and assessment forward just long enough to enable continuation of the burn for another month without cessation, should the vote succeed. Significant support has been shown by the community to continue the burn, and it has been expressed by some community members that enforcing this “pause” in burning would most likely be unpopular with the community and viewed as semantics, given the support (see the Telegram Poll Screenshot). Delaying until an unknown date may introduce doubt as to whether burning will be reinstated, and reducing uncertainty is a factor in ongoing market confidence that has been hard won lately.
This poll was conducted on the Gains Network main channel:
Screenshot captured on December 6th, 2024
Justification and Rationale
1. Effects of Burning Since Nov 14th
Burning is still ongoing at the point the forum post is live, so the data is not yet fully extensive for the month.
The community is encouraged to provide their own (data-driven) analysis of the Burn to contribute to a holistic view.
- Raw Price Action: The overall crypto market has been positive since the start of the burn, so this metric should keep that in mind. But analyzing the price action in a little more detail can help paint a broader picture.
$GNS was in a constant downtrend since a local peak this February of $6.71. Until Nov 4th, bottoming under $1.50.
It began to recover post US Federal election to a high of $2.05 on Nov 12th, and then fell to $1.80 marking that local bottom exactly when the burn started.
The price immediately and decisively began an uptrend, recovering from dips quickly including a significant 130K $GNS dump on Nov 28th, by wallet 0x79d8C918fd24ee4Cd61F98Eee9A102eE4132A7b8 that was fully recovered in one day.
From the start of burning at $1.80 until Dec 6th at $2.88, the price has risen 60%
- Relative Price Action: As GMX introduced the Buy Back and Distribute model that Gains Network did prior to switching to Buy Back and Burn, they are the most logical competitor to compare price action.
It’s useful to compare price action for the 2 weeks prior to enabling burn, while both protocols were employing the same model, as well as the period since:
2 weeks before burn, Nov 1st - Nov 14th
GNS: (1.80-1.75)/1.75100 = 2.8% Gain for GNS pre burn
GMX: (27.25-21.38)/21.38100 = 27.5% Gain for GMX pre burn
Delta = negative 24.7% vs GMX
Since burn enabled, Nov 14th – Dec 6th
GNS: (2.88-1.80)/1.80100 = 60% Gain for GNS since burn
GMX: (38.70-27.25)/27.25100 = 42% Gain for GMX since burn
Delta = positive 18% vs GMX
In summary, GNS went from -24.7% to +18%, a difference of +42.7% performance vs GMX. This is despite the sharp increase in GMX’s price since they announced Buyback and Distribute for the LP pools tripling their current Buybacks from 30% of revenue to 90%.
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Community Engagement: The original discussion proposing burn more than a month ago marked a very significant increase in community engagement in the Telegram groups, and has remained elevated since.
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Community Sentiment: The sentiment has turned much more positive since the burn began, and while this cannot conclusively be placed on the burn, there have been many comments praising it.
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Community Social Media Engagement: There has been a significant increase in community posts and engagement on X, bringing attention to the new model and the positive price action.
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More Compelling Speculative Narrative for Bull Market: Giving the community a speculative narrative to rally around has very likely contributed to the increased social media engagement. There’s little doubt that it’s a much more ‘sellable’ narrative during a bull market to say ‘the whole supply will be burned in 4 years’ than ‘buy GNS with a down only chart and get 7% yield and hope that becomes 20%’, at a time when people are looking for a token with a reason to 10x or more.
2. Continued Maximizing Burn Impact at Low Prices
- Current Price Opportunity Remains: At the current $GNS price of approximately $2.88 compared to $3.23 at Arbitrum launch on Jan 17th 2023, and 77% below the 2023 high of $12.48 on Feb 17th 2023) — the quantity of tokens that can be removed per dollar spent still represents a significant opportunity. ApeChain has brought in new revenue that didn’t exist at the start of the burn period, so even though the price of $GNS has risen, this extra revenue stream helps offset the price rise, keeping the burn effective.
3. Long-Term Benefits of Reduced Supply
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Support for Protocol Stability: As $GNS serves as a backstop (see Home | Gains Network for documentation for the gTrade protocol), a lower circulating supply strengthens the token’s future resilience in the event of substantial trader profits. This burn aligns with long-term protocol health, potentially lowering volatility risks and providing additional value to the remaining token supply.
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Scarcity and Market Confidence: With the circulating supply further reduced, market confidence in $GNS could continue to improve, potentially leading to price appreciation. A scarcity-driven price increase would ultimately benefit the community and stakers when regular reward distributions resume.
By continuing this burn-focused strategy, Gains Network can capitalize on $GNS’s still relatively low price, enhance token scarcity, and potentially improve long-term value. This extended period also allows the protocol to better assess the effects of the burn mechanism on token stability and market response, without losing the momentum that has been built, further contributing to a data-driven decision-making process for future tokenomics strategies.
4. Next Steps
This forum post is intended to work out the next steps, and feedback is important. Possible outcomes include the following, but it’s up to the community what is put to vote on the upcoming snapshot:
1. End the burn: Although the poll on TG is favoring the burn, only a vote by token holders is official; this remains a possible outcome. As does ending it to give an opportunity to discuss before another vote is proposed.
2. Continue the burn for another month, with a simple process to vote Yes/No to extend or end each month: Either continue burning, or return to the Buy Back and Distribute (BB&D) model if NO receives more votes on any given month. This would reduce the amount of work that’s required to bring the vote to the community, unless a new model is desired.
3. Continue the burn for another month, then return to BB&D: no further voting required unless a new proposal is made, following the guidelines of proposal submissions.
4. Continue Burn Indefinitely Until a Future Vote Passes to End It: A proposal that follows the guidelines would need to be submitted, followed by a snapshot vote to supersede the status quo of burning under the current model.
5. Another proposal altogether (such as burn/distribute combination): A hybrid approach is possible. Or burn for 3 more months, or until $GNS reaches a certain price, then move to a hybrid approach. This is an opportunity to bring up your ideas.
Let the discussion begin…