Defi (decentralized finance) is an infrastructure indispensable to the crypto world. Be it the top traditional financial institutions on Wall Street such as Morgan Goldman Sachs, or the giants in the circle, DeFi is a must for them. They are exerting lots of energy to deploy this track. If following the logic of traditional finance, derivatives will go far beyond spot products in volume. However, the present decentralized derivatives are still in their early development stage and have shown great growth potential.

In the development of decentralized contract exchanges, Gains Network is a latecomer, ranking second, only to DYDX and GMX in terms of derivatives trading volume on DeFi Llama. Previously, Gains Network was trapped in the Luna incident and almost collapsed. But recent months have witnessed that Gains Network’s daily trading volume surpassed GMX many times, making it remarkable. So in what ways does it outdo others and attain its status?

gTrade: leveraged trading and a wide variety of assets

Allowing for leveraged trading and a wide variety of assets to choose from, Gains Network’s gTrade is a highly liquid, powerful, and user-friendly decentralized leveraged trading platform. It offers low transaction costs and supports a wide range of leverage and targets. There are over 40 cryptocurrencies with up to 150x leverage, more than 20 foreign exchanges with up to 1000x leverage, and 30+ tokenized stocks with up to 100x leverage. It supports the highest leverage ratio among all DEXs.

(Source: gTrade Official Website)

The platform is easy to use, with the transaction executed on the chain and complete features including special ones such as take-profit and stop-loss. The UI works smoothly, offering a good trading experience. In order to quote more accurately and in a timely manner, gTrade has set up a mixed architecture, using a custom real-time Chainlink node operator network (DON) to obtain the median value for each transaction. By doing so, it protects the rights and interests of users and avoids problems with a single node which can trigger price pins to cause unnecessary losses.

The protocol’s governance tokens GNS and GNS NFT are designed to be incentives within the utilities on the platform and allow users to get ownership of the protocol by holding and using these tokens in governance.

GNS holders collect platform fees through Single Sided Staking, and use platform revenue to burn GNS, while NFT holders get lower spreads and higher rewards, and NFT robots execute limit orders and liquidation.

How to use gTrade?

Similar to centralized exchanges, the UI of gTrade operates very smoothly. Before using it, it is necessary to create a wallet that can connect to Polygon and Arbtrum. Then, you can proceed with the subsequent operations via the official website.

(Source: gTrade White Paper)

Here are the steps for operating perpetual trading through gTrade:

1. Connect to gTrade’s Web3 wallet, such as metamask.

2. Deposit DAI into the wallet, and hold some ETH or MATIC (depending on the chosen network) in the wallet for transaction fee payment.

3. If this is the first transaction, the contract needs to be approved to spend the DAI you want. Click “Approve” and submit the transaction to Polygon or Arbitrum.

4. Set trading parameters, and select a trading type, such as market price, limit price stop limit, leverage trading, take-profit, stop-loss, etc.

5. After confirming the options, you can start trading and view the open positions held.

How does the Gains Network operate?

Presently, gTrade only supports DAI as collateral for open positions. The leverage is synthetic, with DAI Vault, GNS/DAI liquidity pool, and GNS staking pool as the main modules. To some extent, the trading of gTrade works similarly to that of GMX because it also uses the liquidity pool as the counterparty to bet against traders. However, GMX allows for multiple currencies to provide liquidity for GLP, while GNS only allows the use of DAI. The use of counterparty trading can achieve low slippage and avoid impermanent losses caused by liquidity providers. Please read this article: What is GMX? to learn more about how GAX works.

DAI Vault

The major responsibility of DAI Vault is to keep the system stable. Stakers who stake DAI into the vault can enjoy benefits such as handling fees and liquidation fees, and use DAI as a counterparty for leveraged traders. If the traders lose money, the stakers can make profits, and vice versa. Before using leverage, it is also necessary for them to deposit DAI in the vault as collateral to enjoy the service.

As of now, the DAI Vault has been able to achieve stable profits, and no DAI staker has left with a loss. The core principle shows it has a long timeline and most traders generally lose money.

Based on the high leverage and high volatility of cryptocurrencies, gTrade amplifies the profit of this theory even more. DAI pledgers enter the market as dealers and wait for other traders to open positions. In the long run, the pledgers win steadily. There are also extreme cases that hardly take place, in which extremely shrewd traders gain all the funds in the staking pool. As a result, the project continues to make profits.

(Source: gTrade White Paper)

GNS Staking Pool

Additionally, the GNS staking pool allows users to stake GNS to earn platform fees in DAI, that is, 40% of market order fees and 15% of limit order fees. Since 70% of transactions in gTrade are market orders, 32.5% of the transaction fees on average will be rewarded to the GNS staking pool.

GNS/DAI Liquidity Pool

Among the three pools, the staking rate of DAI in the DAI Vault is directly pertinent to the issuance of GNS. If the staking rate is greater than 130%, the vault will purchase and burn GNS from the GNS/DAI pool to achieve token deflation. When the staking rate is lower than 100%, additional tokens will be issued and exchanged into DAI in the GNS/DAI liquidity pool to supplement the vault’s reserve. However, if the tokens inflate, leading to an extreme situation in which the DAI stakings are redeemed on a large scale, causing insufficient staking, a large number of GNS tokens will be issued until it reaches the upper limit of 100 million in total. Thus, the project aims to maintain the stable operation of the product and protect the staking users in the DAI Vault. However, Gains Network has set a rule for the DAI Vault that only 1/4 of the maximum staking amount can be withdrawn every 24 hours, which will alleviate extreme situations to a certain extent.

Project Development

The project was created two or three years ago by a team who keeps itself anonymous. It was originally called gains.farm. On New Year’s Day 2021, after a bug bounty order was issued by the project team, some hackers pointed out the bug and launched an attack. The team solved the problem quickly by releasing the gains.farm V2 version a few days later.

The Gains Network we see today is continuously iterated based on the gains.farm V2. The original token issued is GFARM, allowing users to use it as collateral for transactions. At this time, the core service of gains.farm is leveraged trading, and there is also the NFT exchange + GFARM2 staking service. However, all these services are created around GFARM tokens, rather than GFARM tokens serving these businesses. After V2 went live, a trading competition was launched, but it didn’t produce a good effect, gaining only 160+ transactions within 3 days of its launch, with just $600,000 in market value. Thus, the Gains team quickly started the iterative plan at least once every two weeks.

Afterward, the team solved the problem of GFARM token manipulation through the introduction of oracles, and finally abandoned GFARM but used DAI as a deposit. At the same time, the team continued to launch new currencies and targets, adjusted the front-end design, and cooperated with KOLs in marketing. Then, V5 came out, when the project began to rise in the field, registering a daily transaction volume of over $20 million. In October 2021, it was officially rebranded to Gains Network. The original GFARM token was split 1000 times and renamed as GNS (Gains Token).

(Source: dune)

The figure above shows the rapid growth of the transaction volume and user data after the project was released.

The official roadmap plans to deploy zk-rollup and create more decentralized governance and Metaverse ecology in the future.

Comparison with Competitive Products

Source: tokenterminal (2022.3.8)

The above table shows that Dydx currently occupies the highest market share, while Gains Network is second only to DYDX and GMX and has far surpassed the old derivatives exchange Perp. Gains Network still has growth potential in trading volume and lock-up volume and its follow-up performance is promising.

Conclusion

Overall, the Gains Network’s gTrade is good in design and iterated in a fast way. With a supportive community, the platform has remarkable data in the sustainable decentralized space. It is a rare platform among products that supports ultra-high leverage. With the major feature of the custom real-time Chainlink node operator network (DON), the project can almost launch targets without restriction by virtue of synthetic assets. Moreover, Arbitrum launched in recent months has brought more users and traffic to the project, enriched the user experience, and improved the ecological layout. The future development of gTrade is promising.

Despite all of these, the GNS token economy has a certain risk of over-issuing, which requires attention to the staking rate data of the DAI Vault. Besides, the operation mechanism of the project is far more complicated than what we introduced in this article. It can be said that gTrade’s risk control mechanism on the LP side and transaction side is the most complicated of current DeFi projects. What we explained in this article is only basic information, and it is necessary to study further if you’re interested in it.