Background
GammaSwap is the modular DeFi scaling layer enabling traders to borrow liquidity from AMMs like Uniswap, Sushiswap, Balancer, etc. Essentially we provide higher risk adjusted yields to LPs (they earn borrow fees from those longing gamma) while enabling traders leveraged exposure to any token and the ability to hedge any LP pool. The LPs in GammaSwap will always earn a higher yield than the vanilla LP position excluding token incentives.
If the model works, it should enable LPs to remain passive and expect to be positive EV. If you look at TradFi, IV has overstated HV 83% of the days since 1990. That means 83% of the days the edge has been to volatility sellers. Given crypto is even more volatile, we believe this model will help retail LPs come out ahead on average.
Why is this important? Well the current AMM model is broken. LPs are selling volatility and being compensated in volume. Most LP pools are not profitable to provide liquidity into and rely on highly inflationary token emissions to attract liquidity. This is not sustainable. GammaSwap is building a two sided volatility marketplace to make LPing more profitable.
Motivation:
Although LSDs are picking up steam especially as centralized staking services in the U.S. are shutting down, there needs to be sufficient liquidity to enable users to buy frxETH with minimal slippage. The opportunity cost of LPing frxETH is high as one can earn significant yield staking frxETH.
Due to this there is only a few million in liquidity across multiple AMMs with a small portion being in the FRXETH/FRAX pair. Since this pair is volatile, the yield should be significantly higher in GammaSwap than a normal AMM due to the demand for volatility, unlike a more correlated pair FRXETH/WETH for example. We can provide a significantly higher APY and a way to hedge which should increase liquidity for FRXETH by a significant order of magnitude.
Contingencies:
Pending the successful audit of the core smart contracts by Halborn
Voting:
For: Add new Sushi FRXETH/FRAX wrapped pool in GammaSwap to gauge controller
Against: Do nothing.
Unifying liquidity amongst the best of defi protocols is a most necessary step to take against fragmentation and Frax is in a great position to lead the charge by adding the LP in GammaSwap! I support this proposal. I think this effort will be mutually beneficial for both parties in the long-term!
Gamma is great professional promising project. The project was executed in a very manner and had a clear development plan. Without a doubt, this is one of the best projects out there, success always.
I 100% support this proposal. The FraxETH/FRX liquidity would increase the liquidity of FraxETH, and by partnering with GammaSwap, liquidity providers would be able to manage their IL risks while earning additional FXS rewards. This not only expands the utility of FraxETH but also provides an opportunity for individuals that want to speculate on ETH (or FraxETH) price volatility.
This proposal would provide mutual benefits for both protocols and I would love to see it come to fruition!
We’re not integrated with FraxSwap yet – technically it shouldn’t be that complex as its similar to UniV2 but we’d have to think through the implementation more. A TWAMM is unique and we have to make sure that doesn’t pose any risk to borrowers. We’re looking into it as we speak
Main problem:
This should AT LEAST be a fraxswap pool (although currently protocol fees are turned off on fraxswap, but would strengthen the arguement if this was turned on for this pool). I see that its being looked into but should just wait for that result. A concentrated liquidity option like frxeth/fraxbp curve v2 pool would also be prefered as it would have a lot of advantages (more efficient liquidity, more fraxbp liquidity)
Other problems:
Some blantant misinformation? “only a few million in liquidity” is just out right wrong. doesnt matter if its not a direct pair, liquidity is liquidity and there is a healthy amount of it for frxeth currently.
Message seems to be about ** increasing ** liquidity. But it wants to direct incentives to a less efficient pool so this doesnt align with the messaging. What this proposal actually seems to be doing is giving up liquidity in exchange for utility.
general lack of information for the project. no whitepaper or detailed documentation on how it exactly works as well as any other pertinent information regarding the platform (is it trustless? permissionless? whats are fees? are there tokenomics? What roles do the team/msig have in the project? a just big ol black hole of information). Seems like just a few scattered blog posts with no direct explanation.
“significant order of magnitude” is a stretch by any means and such over zealous statements doesn’t look good for the proposal. ( Things like “We can provide a significantly higher APY” is also an unknown, but portrayed as a factual statement. Proposal literally states “if the model works” in the second paragraph. )
