Introducing the GMX Auto-Compounding Vault: A Safe and Innovative Way to Supply and Borrow GMX Tokens

GMX users now have the opportunity to earn rewards while safely collateralizing their GMX tokens through the newly launched GMX Auto-Compounding Vault. This product is designed to create a safe and convenient way for users to supply and borrow the GMX token, while earning yield from borrowers and auto compounding rewards from fees generated through the GMX trading platform. This is the only product like this on the market currently offered for the GMX token.

How it Works

The auto compounding feature is one of the key aspects of the GMX Auto-Compounding Vault. When a user deposits GMX tokens, the tokens are staked into the GMX staking pool on https://app.gmx.io/earn. The rewards earned by these GMX tokens being staked into the GMX platform include ETH, esGMX, and bonus multiplier points, and these rewards are auto compounded for the depositors multiple times per day. This saves users gas fees and time required to do so. The ETH rewards are claimed and swapped into more GMX tokens, which are automatically deposited back into the market on behalf of the user which creates constant buy pressure for the GMX token. The esTND earned is not claimable by the user, but it is staked on behalf of the vault and will increase the yield generated by the vault for depositors over time. The bonus multiplier points are also constantly compounded, earning the vault more ETH rewards over time.

When someone borrows the GMX token, those tokens will be unstaked from the GMX protocol and sent to the borrower. This means that the vault will no longer earn the fees from having these tokens staked directly. However, borrowers will pay the interest that would have been earned from having these tokens staked on the GMX platform on top of a borrow fee paid for borrowing the tokens. This is why staking APYs for the GMX token can be higher than what borrowers are paying in interest.

The process for depositing and borrowing GMX tokens through the GMX Autocompounding Vault is simple. Users just need to deposit their tokens and let the protocol do the work for them while their GMX token count increases daily.

Risks and Fees

One risk associated with this market is liquidation risk. If you are borrowing against your GMX tokens, make sure to have proper risk management strategies in place to account for GMX token price fluctuations. The current collateral ratio is 50% meaning you can borrow up to 50% of the value of your tokens and a liquidation threshold of 60% which means that liquidation will occur when your loan has increased to be over 60% of the value of your collateral. This information can be found here: https://app.tender.fi/markets/GMX

The fees associated with the GMX Auto-Compounding Vault are a performance fee, meaning the protocol takes a small percentage of the ETH earned from the GMX side, as well as a reserve factor that is collected from borrowers. In addition, there is a small withdrawal fee added to anyone who wants to withdraw their GMX tokens in order to protect against someone trying to attack the bonus multiplier points earned by this vault.

Future Plans

In the future, TND token holders will be able to vote on interest rates, withdraw fees, performance fees, collateral ratios, and liquidation thresholds for this market. Additionally, the team plans to add specific vault strategies that users can use to automatically implement their GMX tokens into leverage strategies or delta neutral looping strategies.

Conclusion

The GMX Auto-Compounding Vault is a safe and innovative way for users to supply and borrow GMX tokens while earning yield and auto compounding rewards. This is the first market of its kind and offers GMX users a new use case for the token.