[GNS]: Redirection of Revenue from BB&B to SSS

[jomahe]

Overview

This proposal champions the transition from the buyback-and-burn (BB&B) model back to a single-sided-staking (SSS) tokenomics model. Under this proposal, all protocol revenue currently directed toward BB&B would shift toward SSS rewards for $GNS stakers.
We are proposing amendments to the old model to enforce a withdrawal timer for staked $GNS (similar to gToken vaults) and staking rewards distributed as gTokens for autocompounding within the vaults.

Justification and Rationale

1. Following the transition to the BB&B tokenomics model as suggested by the original and amended governance proposals in November and December of 2024, Gains Network has burned 9.07 million $GNS tokens, representing a ~26.6% reduction in the supply in just under a year and a half.

2. Though this model originally supported the price of $GNS tokens in a bear market, falling protocol volumes and suspected price manipulation by centralized exchanges have eroded the sentiment of the community, with many long-term holders making public their decision to sell.

3. The decision to redirect protocol revenues toward SSS rewards represents a benefit in ways including, but not limited to, the following:

   • Relief to $GNS token holders in the form of stablecoin yield through staking
   • Further alignment of team incentives with those of the protocol owners ($GNS holders)
   • Increased investment appeal of the $GNS token to outside investors

4. The integration of a withdrawal timer and rewards distributed as gTokens incentivizes $GNS stakers to keep their rewards in the Gains Network protocol, bolstering the health of the vaults.

Impact Analysis

The proposers expect that follow-through on this proposal will have the following impacts:

1. $GNS holders will withdraw their tokens from centralized exchanges in favor of receiving staking rewards on-chain.

   • Notably, the current $GNS supply is lower than the maximum number of staked tokens observed (at 27.1MM). Assuming a similar staked-to-supply ratio of ~80%, the burn achieved during by the BB&B campaign represents a ~36% increase in the rewards earned per $GNS token.
   • Currently, Binance offers yield to $GNS holders on their platform in the form of $GNS tokens. This allows the exchange to short the price of $GNS, buy the token back at lower prices, then distribute the $GNS yield to holders on their platform

2. A renewed interest in $GNS from outside investors

   • With the prospect of earning stablecoin (and $ETH) yield by staking $GNS, now increasingly rare within the crypto ecosystem, the proposers anticipate increased interest in the $GNS token from outside investors.
   • Alongside the marketing campaigns for the upcoming trading competitions, this represents a strategic opportunity for the community to attract new investors with the promise of earning yield on the elevated volume during this time.

Risks and Mitigations

1. Further $GNS burn will be limited to trader losses from vaults.

   • It must be noted that the prices of $GNS make continuation of the BB&B model attractive as a long-term path. However, trader losses will continue to apply negative pressure to the supply. The proposers expect that switching to the SSS model is in the best interest of the health of the community and protocol long-term.

2. Protocol revenues leaking

   • A large critique of the SSS model was that it allowed for protocol revenues to be siphoned out of the protocol and to be largely unproductive for the growth of the product. The proposers anticipate that introduction of a withdrawal timer, along with distribution of rewards as gTokens will mitigate this effect and further contribute to the health of the protocol.

Following a successful period of enhancing token scarcity, we expect that re-introducing SSS to Gains Network will have a profound impact on the competitive positioning and community sentiment of the protocol. We are excited to hear your thoughts in the discussion forum. Some potential points of discussion:

• Length of withdrawal timers for $GNS stakers
• Pushback on redirection of revenue
• Diverting a percentage of revenue from BB&B to SSS

[jomahe]

My thoughts on the points I believe need addressing:

• Withdrawal timers should follow the epoch system currently in-place with gToken vaults, but could be dynamic in the same way depending on the staked-to-supply ratio (e.g. a higher amount of staked $GNS reduces the number of epochs waited for withdrawal)
• It’s my opinion that diverting a only a portion of revenue from BB&B → SSS would represent a weaker APY and reduce the appeal to investors that diverting all revenue would. I think this should be an all-or-nothing decision until the protocol begins to observe elevated volumes once more.

[Meme_Man]

Three big things I see immediately,

1. What kind of consideration has been given for the tax implications this would impose in most jurisdictions (staking income vs asset appreciation). From the way I see it, this would probably make the token less attractive to investors, particularly large ones that have to seriously consider the effect of taxes.

2. Somewhat related to 1, but what about the losses suffered by investors from being unable to compound? BBB compounds as efficiently as possible, whereas having to manually sell the USDC (or whatever token is paid out, be it gUSDC, ETH, etc.) to buy GNS both slows down compounding, and adds in a lot of transaction fees to the process.

3. What happens to the Gains trading pool? If users all stake tokens, then there’s no incentive to keep GNS in the trading pool (as the current APR is much lower then any potential staking pool would have)

[CryptoCaptain]

I appreciate the proposal and the effort behind it, and I do think it is good that the community is discussing different options. That said, in my view, it is still too early to make this kind of change.

As investors, we have already endured a lot through this period. We stayed through the bear market, through low volumes, and through the pain that came with it. For me, that is exactly why now is not the right time to switch direction. A bear market with weak volume is the worst possible environment to make a major tokenomics change. If a switch ever happens, it should happen during a full bull market with strong activity, where it can have maximum impact and attract the most attention. Doing it now feels premature.

The buyback and burn model has already achieved a lot. A significant amount of supply has been removed, and I do not think we should stop that process too early. We still need to keep reducing circulating supply. Many OG holders who sold have already made that decision, and in my opinion it is too late to start changing the whole strategy because of that. We need to stay focused, continue burning, and be patient.

I also want to ask for more clarity on the part about changing team incentives. What exactly would that look like? I do think revisiting team incentives is a good idea, especially now that the team has been reduced significantly. If the team is smaller, but incentives remain broadly the same, then it is fair for the community to ask questions.

Personally, I would support a structure where the team has much more visible skin in the game. Something closer to a high-performance, milestone-based model would make sense to me. Set ambitious targets, and if those targets are achieved, then the team gets rewarded in a meaningful way. For example, incentives could increase if the protocol achieves sustained volume milestones, such as $1 billion in volume over a week, or if price and growth milestones are reached. That would send a very strong message to the community and to new investors that the team is fully aligned with outcomes.

So overall, I am not against discussing changes. But for me, the timing is wrong. BBB has done a great job, and I think we need to stay patient, focus on rebuilding volume, and continue strengthening scarcity. If staking is reintroduced, it should be done later, when volumes recover and the broader market is in a much stronger position. That is when the switch would have real strategic impact, not now.

[corranito]

At this stage, considering the market and the need to drive volume back to the platform, revenue from the protocol should be dedicated to investing for growth. It shouldn’t flow to buybacks or staking revenue.

The graveyard is full of companies who bought back their stock until they went bankrupt instead of investing in their business

[jomahe]

1. None, to be frank. it’s a cost associated with making the transition. You say that the move to SSS would make the token less attractive to investors, but we’ve seen in real time as long-term holders exit citing that GNS used to pay their bills, represent a source of income, etc.
2. Perhaps an autocompound option could be worked into the system as well. The gTokens idea is not fully fleshed out yet. Would be happy to discuss further in this forum or the TG!
3. Staking rewards could easily be integrated into the gGNS vault as well for GNS vault yield on top of staking rewards.

[Meme_Man]

I appreciate the response! As for paying bills, both the APR and price of GNS fluctuate so much that there’s no guarantee of income even a few months from now, let alone the years/decades you would need for reliable income. I have a feeling most “long term holders” have a cost basis well above the current price, so they’d be likely to sell regardless as the current yield isn’t paying out nearly as well as it did historically.

As for point 2, if going back to SSS ever happens, an auto-compound option would be absolutely amazing. It reduces the paperwork, time and effort a long-term holder would need to put in to maximize returns on GNS (which in all honestly is my primary opposition to the switch).

[jomahe]

Thanks for the thoughtful reply. By further aligning team incentives with those of the holders, I meant that would occur implicitly because the $GNS holdings of the team would earn them yield and further tie their performance and that of the protocol to their own livelihoods.

Right now with BB&B in place, we’ve sort of removed the gold standard, if you will. Yes, the token is burned, but with sinking volumes and sell pressure outweighing the buy pressure of the protocol, what does it matter if the token is being bought and burned if the price isn’t appreciating?

I think further discussion of aligning team incentives with those of the protocol owners is an important discussion to be had, but beyond the scope of this thread.

If staking is reintroduced, it should be done later, when volumes recover and the broader market is in a much stronger position.

In a perfect world, I’d tend to agree. I think that continuing to burn down the supply at these prices would be great for the protocol long-term, but recent events have many wondering whether or not a long term is in the cards for us. Again, a return to (a revamped) SSS provides the protocol owners with temporary relief and a new narrative to attract outside investors.

Furthermore, the majority of burn we’ve witnessed is through trader losses, which will not be affected by this transition. We’d still be burning quite a large amount of tokens as vaults regain their health and we’re comfortable turning the burn back on.

Thanks again for your thoughtful reply!

[Truth_Speaks]

I think this is a great discussion to be having, but for me it’s a bit early to make a call on switching things up.

The team already set a direction and committed to April/May delivery. Most of what they’re working on is clearly aimed at fixing volume — RWAs, fees, leverage, and new engagement mechanics. That’s the main challenge right now.

So I’d rather see that play out first before making a major change to tokenomics.

That doesn’t mean “just wait and hope” though. There should be a clear point where we step back and ask: has this actually worked?

If we start seeing real improvement in metrics - consistent volume, fees coming through, RWAs getting used, traders sticking around, then we’re in a much stronger position to introduce something like SSS from strength.

If we don’t see that, then yes, the case for adding a yield layer becomes much stronger, especially if the goal is attracting new capital. I also agree that reinvesting into the protocol is the right move for now, at least while the team delivers on what they’ve outlined.

Right now the proposal feels more like a reaction to price and sentiment, which is understandable, but changing tokenomics in a weak environment without knowing if the product direction is landing feels premature.

I’m not against SSS at all , I just think the order matters. Protocol health comes first in this transition phase.

Personally, I’m leaning towards giving it another month. Let the team deliver, watch the numbers, see how the vault performs, then take a clear position based on that.

[CryptoCaptain]

I hear you. For me still the point no real clear direction from the team and only solution seems like well lets just switch on SSS. For me still need more then that, team alignment, better comm, roadmap, clear direction that volume and features are there or at least coming. But tend to agree BBB or SSS if team is not committed and volume is not sustainable/not coming back, makes no difference really if you BBB or SSS as end of the day usage/volume is all that matters. So yes SSS might give back the momentum, but for me its still early until we clear the house and have clear vision and momentum within, then use SSS as a booster on steroids when time is right.

[CryptoCaptain]

100% agree. We should use it from strength, not out of desperation.

[Trayzer]

I am opposed to returning to SSS even if it’s buyback distribute (which imo it absolutely should be if we do return to SSS).

I think it’s short sighted, and doesn’t consider current market conditions. I think people are looking to blame the price on anything other than the real reasons; our revenue has collapsed and all altcoins have collapsed.

I do not agree that it will positively affect price at all. It didn’t in the past and that’s why it was overwhelmingly voted out back then.

You can certainly argue that BBB didn’t support the price based on the chart, though it’s hard to know where it would be in its absence. But there’s no denying the supply has been massively reduced, and would continue to do so at a pretty good rate with the price being as depressed as it is.

The main reason the token price is low imo, is because the protocol is making way less in fees than it was when the price was higher. The amount of SSS that holders would receive compared to the past is drastically lower. We had many periods where the APR was in excess of 25% and sometimes pushing 40%, and it had no effect on the price at the time. People did not react to higher SSS. The price would hover around the same price whether it was 5% for a week or 40% for a week.

One might argue it stopped people from selling, but it cannot be argued it made buy it; it observably did not. Removing BBB will take away what is now our only buyer, and I think it’s crazy to think suddenly people will show up and buy a chart that looks like GNS to earn SSS now, when it had little effect back when we were a potential growth story and people still believed in crypto.

And let’s say they do show up, and triple our price (which would take an impressively larger amount of buys in excess of what BBB is doing {first you have to find enough buyers to replace the BBB, the likelihood of which is ridiculously low in the current market imo}). We would be worth $2, and our SSS would be the same as US treasuries. How sustainable is that? Our new buyers will be exit liquidity. While all that SSS money just evaporates out of the protocol.

Anyone who used to live off SSS (I was one) would be getting ~10% of what we were getting back then. Nobody who was enjoying the fruits back then will be impressed with what they would get today.

BBB keeps the money in the protocol. It’s burning while our price is in the toilet. We either get our trading volume and fees up, or we are going to do poorly either way. But in a world where we do have a bright future, it will shine far brighter if we have less tokens then, than if we get lunch money today.

IF there is a desire to distribute fees to holders, I strongly believe it should go to LPs only. At least the protocol would get something for its money. This was the original distribution method, and each time it was changed, everyone thought ‘this time it will drive the price up’. You’ll all be just as disappointed this time imo when it still doesn’t do it. At least with LP rewards, we will have stronger liquidity to better hold the backstop that is GNS’s actual utility.

SSS is pissing in the wind. BBB or LP rewards is firming up the backstop. Let’s not be short sighted over lunch money. Better yet, let’s focus 100% of attention on the only thing that matters: trading fee revenue. Fix that, and BBB will deliver better than anything else imo.

[Kenjisrealm]

I completely agree with this view.

Token holders’ living expense isnt protocol’s mission, protocol should only stick on protocol growth along with token holder long-term benefit. BBB is the best fit under current circumstance and for long-term growth.