Strengths and Weaknesses
- User-friendly platform
- Fast order execution with 91 pairs offered on various markets
- Low gas fees on layer-2, and no scam wicks
- Highest leverages up to 1,000x
- 100% on-chain trade execution, transparent and decentralized
- Practice mode on the platform for users to practice trading
- Open Interest is limited, and fees for trading US stocks can be high, ranging from 3 to 5 DAI per trade
- Limited price impact: large trades do not cause significant shifts in asset prices
- Restricted collateral options: only one stablecoin, DAI, can be used as collateral for trades
- Vulnerability to systemic risk: the concept of gTrade is based on traders losing more than they win, which creates a potential risk to the system
Gains Network is a decentralized trading platform for derivatives, offering users a diverse selection of assets to trade with leverage, including cryptocurrencies, forex, stocks, commodities, and indices. Originally built on the Polygon blockchain, the gTrade platform has expanded to include the Arbitrum Network, a layer-2 scaling solution for Ethereum. Founded in 2021 by Seb, Gains Network has gained popularity as a forward-looking DeFi ecosystem.
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Functioning of the Protocols
The Gains Network Token (GNS) is a critical component of the gTrade protocol, powering the ecosystem's trading and liquidity efficiency. As a deflationary token, GNS has demonstrated a net decrease in its total supply over time.
In addition to enabling trading on gTrade, GNS supports the stability of the “gDAI Vault” by providing rewards to GNS / DAI liquidity providers, NFT bots, and affiliates. These rewards help to maintain over-collateralization in the vault, reducing the risk of drawdowns.
When the “gDAI Vault” becomes sufficiently over-collateralized, a portion of the GNS supply is burned to counteract inflation from GNS / DAI liquidity and NFT bot rewards. This burning mechanism helps to ensure that the supply of GNS remains scarce and valuable.
GNS token also serves as a backstop for successful traders on gTrade, as it can be minted to re-collateralize the “gDAI Vault”, with a maximum inflation rate of 18.25% per year. Over 20% of the GNS supply has already been burned through organic deflation generated by gTrade.
GTrade is Gains Network's flagship product, offering a diverse selection of assets to trade, including cryptocurrencies, forex, stocks, commodities, and indices. The platform boasts a high level of versatility, with traders able to use leverages ranging from 150x for cryptocurrencies to 1,000x for forex, 50x for stocks, and 35x for indices (as of February, 2023).
With 45 crypto pairs, 17 forex pairs, 23 US stock pairs, 4 US indices pairs, and 2 commodity pairs, gTrade's asset offerings are comprehensive. Trades are conducted exclusively with the stablecoin gDAI, and can be initiated directly from a MetaMask wallet on either the Arbitrum One or Polygon Network. To start trading, users require a minimum of 50 USD in gDAI and a small amount of either MATIC or ETH to cover gas fees.
Trading on gTrade occurs within a single pool called the “gDAI Vault”, which provides the liquidity needed for trades. Liquidity providers receive a share of the platform fees, with gTrade distributing 70% of these fees to providers, in a similar fashion to GMX. Regardless of the trading pair, gDAI is used as collateral, with synthetic leverage being backed by the “gDAI Vault”. When trades result in a profit, gDAI is withdrawn from the vault to pay these profits, while trades that result in a loss see gDAI added to the vault.
GTrade's One-Click Trading (1CT) feature offers a quick and efficient method of trading. By using a 1CT wallet and trade delegation, users can complete trades more rapidly without the need to interact with a wallet each time. The 1CT wallet serves as a specific wallet for submitting trading transactions, and can be established by creating a 4-digit PIN and signing a message with a personal wallet. An encrypted key pair is generated, which can be retrieved using the PIN and personal signature if required. Trade delegation, on the other hand, permits one wallet to execute trades on behalf of another. The delegated wallet only requires sufficient funds for the transaction and does not need collateral or profits, as these are connected to the personal wallet.
Gains Network NFTs
Gains Network has a selection of Non-Fungible Tokens (NFTs) that offer a unique way to increase rewards for Liquidity Providers (LPs) or Sing
le-Sided Staking (SSS) by up to 13%. These NFTs can be moved between the Polygon and Arbitrum platforms, and users who own them can utilize an NFT bot on the gTrade platform in exchange for GNS. Through GNS Single-Sided Staking, users can earn DAI rewards by staking their GNS without causing any inflation of the GNS supply. The rewards are based on trading fees redirected to this staking program, including 40% of market order fees (0.08%), 15% of limit order fees (0.08%), and 40% of trade closing fees (0.06%).
LP tokens represent a user's share of a liquidity pool and can be redeemed for the original tokens. Gains Network's NFTs provide exclusive benefits, including reduced spreads when trading. There are five types of NFTs, each with a different level of spread reduction, ranging from -15% (Bronze) to -35% (Diamond). The NFTs are limited in supply, with a total of 1,500 divided into five categories, each with a different supply, LP / SSS boost, and spread reduction. These NFTs can be purchased on OpenSea.
Gains Network offers a referral program as part of its gTrade platform, which rewards users with GNS for referring new users to the platform. Through the referral program, GNS has achieved its all-time high (ATH) price.
- The “gDAI Vault” is a tokenized yield-bearing vault that serves as the foundation of the gTrade platform. It provides liquidity for all trades on the platform, which includes over 70 different asset pairs. The current Total Value Locked (TVL) is 13,592,883 DAI on Polygon and 29,472,273 DAI on Arbitrum.
- Trading profits are paid out by the vault, while trading losses are paid into the vault. A portion of the trading fees is also paid into the vault and split among the gDAI shares, incentivizing stakers to remain in the vault.
- The health of the vault is dependent on trader PnL. As long as the fees earned are greater than the PnL payouts, stakers earn a positive return. The protocol has risk management measures in place to maintain its stability. If the overall PnL becomes negative, the vault builds a buffer with these funds to protect stakers' funds and the protocol from future PnL irregularities.
- The “gDAI Vault” uses GNS to maintain its stability and secure staker investments. If the vault lacks funds, more GNS will be created and sold to refill the vault. Conversely, if the vault holds too much money, GNS can be sold to the platform for a portion of the excess funds. This helps to balance the amount of GNS in circulation and maintain its value.
- Stakers can contribute their DAI to the vault and receive gDAI in exchange, providing liquidity to the gTrade platform. Stakers receive a percentage of the fees paid by traders on the platform, with the current rate being 18.75% of open / close fees and 2.5% of liquidation fees. The APY offered by the vault for deposits is 14% on Polygon and 15% on Arbitrum.
- Withdrawals follow an epoch system, with each epoch lasting 72 hours. Requests for withdrawals can be made during the first 48 hours of any epoch, but the actual withdrawal must occur during a specific withdrawal epoch. The length of the withdrawal epoch depends on the collateralization ratio of the vault and ranges from 1 to 3 epochs. Stakers must withdraw their assets within the first 48 hours of their assigned withdrawal epoch, or a new request must be submitted.
The new “gDAI Vault” manages the collateralization ratio through the process of minting and burning GNS tokens, which helps maintain the desired collateralization levels and keeps the token value stable.
- Over-collateralized scenario: When the vault is over-collateralized (130% or more of the required amount), it means that it has more than enough funds. In this situation, a percentage of all trading losses are directed into a pool. Users can then sell their GNS over-the-counter (OTC) to this pool. The vault proceeds to buy and burn the GNS tokens, effectively reducing their supply. As a result, the collateralization ratio is maintained within a desired range. The article does not explicitly mention a specific desired range for the collateralization ratio. The desired range could vary depending on the platform's objectives and risk tolerance. The important aspect is that the new” gDAI Vault” can adjust the minting and burning of GNS dynamically to maintain the collateralization ratio within the chosen range, ensuring stability and value for the platform and its users. The percentage of losses directed to the pool can be adjusted depending on the current collateralization ratio, ensuring the vault's collateralization increases at a suitable pace.
- Under-collateralized scenario: When the vault is under-collateralized (100%), it means that it lacks sufficient funds. To address this issue, the vault mints and sells GNS tokens OTC. This process is capped at 0.05% of the total GNS supply every 24 hours (which is equivalent to 18.25% per year). By doing this, the vault refills itself safely while protecting GNS from market sell pressure. The combination of these two mechanisms allows the new “gDAI Vault” to effectively manage the collateralization ratio. By adjusting the minting and burning of GNS based on the current collateralization levels, the vault ensures the stability and value of GNS within the platform's ecosystem.
OTC (Over the Counter)
The OTC Buy window is a feature that allows for a quick and efficient way to replenish the “gDAI Vault” in case of under-funding. Unlike exchange-based purchases, this window sets the price without any slippage or fees. Using the OTC Buy window, DAI can be exchanged for GNS with a daily limit of 0.05% of the total GNS supply. GNS token holders are compensated for the risk they assume, and as the price of GNS rises, the backstop becomes stronger. To increase the value of GNS and support its valuation, a portion of the trading fees is directed to GNS. Furthermore, when the vault is over-collateralized, any net trader losses lead to GNS being burned.
The fee structure on Gains Network is determined by the value of the trade, which is calculated by multiplying the chosen leverage by the desired trading amount. The rollover fee is the only exception, as it is based on the amount of collateral used.
Several fees apply when trading, including the governance & team fee, the ecosystem fee, the market/limit fee, and the rollover fee. Referrers receive a portion of the governance & team fee as a reward for new users they bring to the platform. During open trades, a funding fee may also be charged or earned.
Fees vary depending on the financial instrument traded. The Gains Network website provides a detailed breakdown of all fees for trading cryptocurrencies, forex, US Stocks, US Indices, and commodities.
It is worth noting that on average, 40% of market order fees and 15% of limit order fees are allocated to GNS staking. As 70% of trades are market orders, 32.5% of all order fees go towards GNS staking, which is distributed in a decentralized manner to the team, project fund, liquidity providers, GNS stakers, affiliates, and NFT holders executing limit orders and liquidations.
GTrade employs a Decentralized Oracle Network (DON) to ensure reliable and precise pricing for its leveraged trading products. Unlike other derivatives platforms, gTrade doesn't generate its own prices. Instead, it leverages a combination of Chainlink Price Feeds and its own DON to obtain the median spot price for each trading order. The DON retrieves the latest prices from 8 Chainlink nodes, which aggregate the median prices from 8 exchange APIs. The aggregator contract filters out outliers and errors, and once a minimum number of accepted prices have been received, it sends the information back to gTrade for trade execution.
This approach guarantees that gTrade's prices are current, accurate, and not subject to liquidations or trade price impact. Moreover, it offers guaranteed stop losses, a crucial feature for traders. By using the median price from 8 exchanges, the platform can prevent "scam wicks." Additionally, comparing the DON prices with Chainlink Price Feeds ensures that the prices are reliable and trustworthy.
Gains Network is accessible to anyone, without any restrictions or KYC procedures. The gTrade platform functions as a decentralized exchange (DEX) without any central authority or controller. All transactions are executed on the blockchain via smart contracts, eliminating the need for a third party to handle user funds. As a result, users can access the platform without providing any personal information, making it a completely permissionless platform.
Gains Network's gTrade platform has transformed decentralized leveraged trading by offering a diverse range of assets and leverages to maximize investment returns, while maintaining user-friendliness and efficiency. The platform's real-time Chainlink oracle Network ensures fast and accurate pricing information by collecting data from 8 decentralized exchanges. The “gDAI Vault” mechanism safeguards liquidity and promotes stability by buying and burning GNS as needed. These innovative features have led to a substantial increase in the usage of GNS, making gTrade a must-try platform for traders seeking to maximize their investment returns.
It's crucial to understand that many DeFi trading platforms depend on oracles for referencing spot and futures market prices. However, these prices frequently aren't updated with every trade, resulting in less-than-ideal fill prices. In this regard, gTrade sets itself apart by providing immediate on-chain price updates. By utilizing real spot prices for order execution, gTrade enables a more accurate distribution of funding fees and helps reduce the disparity between long and short open interests. This approach fosters both transparency and fairness in trading.
Gains Network is currently in the process of developing its own Decentralized Autonomous Organization (DAO). Once the DAO is fully operational and launches officially, GNS will have an extended role within the Gains Network ecosystem. The GNS token, which currently serves as a liquidity efficiency mechanism, will become a governance token.
With the launch of the Gains Network DAO, holders of the GNS token will have the ability to make important decisions and govern the entire protocol. This will allow the Gains Network to operate in a decentralized and democratic manner, with GNS holders having a direct say in the future direction and development of the platform.
Gains Network is working towards a future where GNS will have a multi-faceted role within the ecosystem, serving as a utility token, a store of value, and a governance token, all within a decentralized and autonomous system.
Revenue and Tokenomics
The Gains Network ecosystem revolves around GNS and the “gDAI Vault”. The “gDAI Vault” is a crucial part of the ecosystem, providing liquidity from both liquidity providers and trader losses. A portion of the fees collected by the platform is distributed among various stakeholders in a decentralized manner, including liquidity providers, NFT holders, and GNS stakers.
The GNS token is traded on 3 decentralized exchanges and 6 centralized exchanges (as of February,2023). Its deflationary mechanism adjusts its supply depending on gTrade platform activity, with GNS being minted if the DAI vault falls below 100%, and burned if it goes over 100%. This mechanism benefits GNS holders by returning value to them that would typically stay with centralized exchange owners.
In January 2023, GNS experienced a surge in value, with its market capitalization reaching 173 million USD. The token's strong performance on the Polygon Derivatives DEX led to an explosion in earnings for GNS holders. The total value locked in the ecosystem was 45.75 million USD in February 2023, which increased to 288.48 million USD in just three weeks, representing a significant growth rate of 530%.
Rise in Funds Locked in Protocol
Data from Tokenterminal reveals a significant increase in the amount of funds locked in the protocol's smart contracts, reaching an all-time high. The TVL chart showed a steep surge in funds over the past week, indicating the growing popularity and importance of the Gains Network in the DeFi space.
The Uniqueness of the Protocol
Gains Network provides leverage of up to 1000x for various assets, such as cryptocurrencies, forex, US stocks, indices, and commodities. The platform's broad range of trading pairs is attractive to global traders, as they do not need to comply with strict KYC requirements. Gains Network offers unique features, such as Guaranteed Stop Losses (GSLOs) for crypto trades and One-Click Trading (1CT) for fast and convenient trading. The platform's custom-built on-demand Decentralized Oracle Network (DON) ensures real-time pricing accuracy and security, a rare feature not found on other decentralized perpetual platforms. Furthermore, the “gDAI Vault” mechanism of Gains Network provides liquidity and eliminates volatility, making it a reliable platform for traders.
- Gains Network was founded on the Polygon Network, initially offering yield farming and leveraged trading as Gains Farm
- November - the platform underwent a rebranding to gTrade, coinciding with the launch of its custom Chainlink DON. At this time, the “DAI vault” laid the groundwork for many of the platform's current features, and the GFARM2 token experienced a 1:1,000 split, enabling 1 GFARM2 token on Ethereum to bridge to 1,000 GNS on the Polygon network. According to its history, it was first "DAI Vault" and then later became what we know today as "gDAI Vault"
- Polygon granted gTrade 250,000 USD in MATIC to finance two trading competitions. As a result, the platform optimized its website backend for swifter trades, surpassing 9 billion USD in total traded volume and drawing in 50% more unique traders. Upon reaching a 10 billion USD total trading volume milestone, gTrade pioneered on-chain stock trading as the first decentralized leveraged trading platform to offer it
- May - However, the platform encountered difficulties, such as the LUNA crash and UST de-pegging. These events prompted the implementation of new risk-management measures. Despite these challenges, gTrade maintained trading and withdrawals, fairly compensating all traders who shorted LUNA.
- by the end of 2022, Gains Network achieved an average daily trading volume of 250 million USD, 500 daily active users, 9 billion USD in total traded volume, and 10 million USD in revenue within just six months
- additionally, the platform unlocked the first portion of a 750,000 USD grant to further expand
- December - Gains Network's Arbitrum launch generated a new all-time high of over 200,000 USD in daily fees
The gTrade platform has a user-friendly interface that is highly efficient. Users value the practice mode and one-click trading, which are easily accessible due to the platform's organized layout. However, it is important to note the epoch systems in the “gDAI Vault”, which determine when stakers can withdraw their DAI. These systems have a 72-hour duration and allow withdrawals during the first 48 hours of any epoch. It is advisable that users keep this system in mind, especially when using the vault for the first time, to avoid any unexpected surprises.
Looking ahead to 2023 and beyond, Gains Network has outlined several objectives, including becoming the most widely used decentralized leveraged trading platform, with an increase in daily volume and trades. The organization also plans to transition to a DAO and transform GNS into a governance token, generating income and distributing profits through a GNS staking pool.
Additionally, Gains Network aims to develop new DeFi products, implement a referral system, and expand the platform's capabilities by adding ETH as collateral.
Other plans include exploring guaranteed orders, revamping the bot system, and ensuring the completion of the gTrade platform.
These objectives demonstrate the organization's commitment to continued growth and innovation, expanding its offerings and improving the user experience.
The Gains Network and DAI merger has resulted in a successful trading experience for users, with over 1.5 billion USD in trading volume within a month of its launch on the Arbitrum blockchain. Traders now have easier and more streamlined access to trading opportunities through the establishment of two bridges between Arbitrum and Polygon. The new “gDAI Vault” adds to the platform's functionality, providing greater flexibility and opportunities for other protocols to build upon it.
The gTrade portfolio is now trackable on DeBank, the leading Web 3.0 portfolio tracker, providing a comprehensive overview of assets, holdings, and deposits across multiple chains. The integration of gDAI with other DeFi protocols, including Qi Dao, Giddy, Trader Joe, GammaStrategies, SperaxDAO, Beefy, and others, provides more options for users to interact with gDAI and generate real yields. By using gDAI as collateral, users can lend borrowed assets in DeFi ecosystem, expanding their investment opportunities.
The Gains Network is currently led by its founder, Seb, and comprises a team of 10 anonymous individuals. Until the transition to a Decentralized Autonomous Organization (DAO) system takes place, the protocol remains under the control of its founder. The team is composed of 8 developers, 1 writer, and 1 designer.
In early 2022, the marketing team was expanded with the addition of 3 new members, including Lunaman as a growth / business development lead and Jim for the creation of visuals for content. Ross, Ishan, and Kenji from SCRIB3 were also brought on board to focus on content, growth, and marketing strategy, helping to increase the company's social media presence.
In preparation for the launch on the Arbitrum Network, Sam was hired to handle business development, partnerships, and connections. He has been instrumental in establishing Gains Network's reputation in the decentralized space. Nathan was also brought on as a full-stack developer and played a crucial role in the successful release of the “gDAI Vault”. October, 2022 was a significant month for development and staffing advancements at Gains Network.
Community and Marketing
Gains Network is a dedicated and highly motivated team of individuals who, in April 2022, achieved a significant milestone by reaching 10 billion USD in total trading volume. This event marked a turning point for the team as they redoubled their efforts to enhance their marketing initiatives and established a clear roadmap for future growth.
The team prides themselves on their ability to be adaptive and agile, responding quickly to changing market conditions. Their strong presence in the decentralized space is reflected by their sizable community, with almost 8,000 members in their Discord group, 5,000 in their Telegram, and over 30,000 followers on Twitter.
In an effort to better serve their global community, Gains Network has established international channels on Discord and Telegram in various languages, including Chinese, Japanese, Vietnamese, Portuguese, and Spanish. These channels aim to provide immediate support to community members and foster a more inclusive environment.
Investors and Partners
In January 2022, gTrade only supported cryptocurrency and forex pairs, but the Gains Network team received a positive response from the community despite being a newcomer to the market. To support its growth, the team applied for a 750,000 USD financing round from Polygon, its sole investor in grant funding, boosting its visibility and traction on the Network. Gains Network launched its first trading contest on January 7, 2022, to further increase engagement.
Gains Network has partnerships with Chainlink and DefiLlama, enhancing the overall crypto experience for users. Its collaboration with Arbitrum led to the launch of gTrade on the Arbitrum blockchain, contributing to GNS Network growth and recording over 1.5 billion USD in trading volume. In 2023, Gains Network established several partnerships to enhance offerings, including a gDAI / MAI / USDC pool with Qi Dao, a new GNS staking pool with Giddy, a GNS / ETH pool with Trader Joe, and partnerships with GammaStrategies, SperaxDAO, Beefy, InsurAce.io Protocol, Kyberswap, and OVIX.
Risks and Decentralization
Gains Network is a permissionless blockchain platform that utilizes the GNS token as its primary currency. The Network operates autonomously and securely, with all transactions and interactions recorded on the blockchain. GTrade, a decentralized exchange, operates within the Gains Network ecosystem and is powered by smart contracts, providing users with a secure, trustless, and permissionless platform for trading.
The Gains Networks team aims to make the platform uncensorable and persistent on the blockchain, evolving it into a self-governing entity that operates without the need for central authority. However, the team will continue to be involved in the development process, ensuring that all changes are approved through governance mechanisms. The transition to full governance will be a gradual process, with the team carefully considering potential risks and ensuring the security and stability of the Network. The platform does not require users to undergo Know-Your-Customer (KYC) procedures or provide personal information, thereby providing a privacy-focused trading experience.
Transparency of Gains Network
Gains Network is dedicated to promoting genuine decentralization and offering complete openness to its users. The protocol recognizes the vital significance of on-chain transparency, genuine proof of liquidity, and user custody of funds, and it is striving to meet these standards.
To ensure transparency, gTrade provides real-time "Proof of Reserves" through its “gDAI Vault” balance, which can be easily viewed on-chain and in real-time by visiting the ‘Staking’ page under ‘Earn’ on the gTrade website. This approach to proof of reserves is fully transparent and has been available since day one.
Since its inception, gTrade has placed a strong emphasis on transparency and decentralization, and the protocol operates with full on-chain transparency. The team behind Gains Network promises that its liquidity will always be visible on-chain, and that users will always have custody of their funds and be able to withdraw them.
Protocol Security and Audits
Gains Network has undergone eight comprehensive audits by CertiK, a renowned blockchain security company, with the latest audit conducted on 24 June 2022. Skynet Trust Score, a tool for measuring crypto project security, market performance, and social sentiment, has given Gains Network a security score of 88 out of 100, indicating a relatively secure and decentralized protocol.
CertiK offers updated information on the security of Gains Network, including smart contract audits, Skynet security ratings, and CertiKShield badges.
To further ensure the security of its platform, Gains Network has established a bug bounty program that offers up to 100,000 USD to security researchers who discover vulnerabilities in its smart contracts, website, and applications.
In preparation for the Arbitrum deployment, Gains Network commissioned Halborn Security to conduct a security audit, which was successful. The results of the audit are publicly available on Github.
Gains Network has also a bug bounty program with Immunefi, a highly reputable smart bug bounty platform. The program is centered around ensuring the security of the platform's smart contracts, website, and app, with a focus of mitigating potential risks, including:
- Unauthorized access to user funds, both in storage and in transit, with the exception of unclaimed yield
- The inability to access funds due to permanent freezing
- Financial insolvency
- Theft of unclaimed yield
- Permanent freezing of unclaimed yield
- Temporary freezing of funds for a minimum of one day
Gains Network has never been hacked (April, 2023).
Gains Network offers investors an attractive opportunity to earn real yields and for trading financial derivatives of various assets, including US-listed instruments, without relying on banks. The platform has been upgrading itself to provide a seamless experience for users and has been taking advantage of increased demand for real yields. However, there are still some areas for improvement, including the need for a clear Road Map for this year, more active community engagement, and greater focus on audits and security measures.
While Gains Network may be a good short and medium-term investment opportunity for those seeking real yields, long-term investors should closely monitor the platform's trajectory, including new features, competitive fees, unique benefits, and new products that address the current needs of investors. A clear Road Map for the future of the ecosystem is also important for decision making about long-term investment into this project.