In less than 15 months, DeFi protocols on Ethereum now manage over $75 billion of different assets.
Eye-popping as it is, this wasn’t always the case.
For many months before the ICO hysteria of 2017, smart contracting and Ethereum were primarily thought of as experimental.
And for good reasons.
Cryptocurrencies and minted assets were highly volatile, laws were fuzzy, and inconveniently, there wasn’t an alternative where users, especially times of high volatility and price dumps, could find refuge and retain value.
Markedly, the rise of crypto adoption and the sphere coincided with the expansion of stablecoins.
These are digital currencies designed to cushion against the effects of volatility.
Stablecoins trail the value of fiat currencies—whose valuation remains steady within a given jurisdiction–and are therefore considered a store-of-value and a unit of account.
Stablecoins are Critical for Crypto and DeFi
Most of these stablecoins are minted in Ethereum.
Crunching numbers, $80.5 billion of stablecoins were issued in April 2021.
What’s more, in 2020, the network processed over $1 trillion of stablecoins. This was more than any other bank could, highlighting the significance of the platform.
As it is, Ethereum mints over 75 percent of stablecoins, up from half as registered in 2020. It coincides with the rise of DeFi and how revolutionary it is.
This highlights just how critical stablecoins are to DeFi and crypto as a whole.
Admittedly, crypto trading as a whole could be highly volatile, tearing up and down if there wasn’t a way to store value.
Still, most stablecoins, are priming as they are, rely on some form of custody.
For instance, USDT is minted by a centralized entity, claims to be fully backed, and is collaterized by fiat.
Fiat-backed stablecoins include USDT and USDC.
DAI is native to Ethereum and is algorithmic. However, novel as the idea is, it sometimes struggles with maintaining the USD peg whenever the demand is high.
However, none is interest-bearing giving it that incentive for users to hold safely.
Introducing the Gambit Protocol
Gambit Protocol wants to change this state and add on-chain leverage to the mix through a clean, easy-to-use interface.
Minting the USDG stable-coin is effectively a 1x short position and this is especially practical because of the level of demand for on-chain leverage. The need for leveraged longs outstrips shorts causing liquidity struggles for hosting platforms.
Gambit uses the strong demand for stable coins, adds fee-earning, and uses this liquidity to supply the big demand of long leverage in crypto.
A perfect match and bringing value to multiple groups of the biggest crypto users.
Interest-Bearing Tokens: USDG
Visiting its homepage declares the protocol’s primary purpose: Gambit is an interest-bearing stablecoins with leverage trading.
Their approach towards meeting their objective is to rid the need for full backing or asset collateralization.
Instead, they implement an innovative system where a partially backed stablecoin can generate interest for the holder while improving the protocol’s liquidity through leverage trading.
Unlike the traditional way of minting stablecoins requiring some form of over-commitment as collateral against price shocks, USDG—the Gambit Protocol’s stablecoin–would be minted viz-a-viz the level of demand.
Gambit’s stablecoin, USDG, can be minted from any whitelisted asset depending on spot rates straight from the protocol’s smart liquidity pool.
For every supported asset, users can mint USDG without worrying about slippage, spread, or liquidity troubles.
Take, for instance, if the price of BNB is trading at $630, a holder can mint 630 USDG by locking it in the Gambit’s system.
Slippage Free and Zero Spread Swapping and Leverage Trading
But it doesn’t end here. The free-floating, whitelisted asset can be used to open leveraged positions within Gambit.
From leveraged LONG positions, the system can automatically support the collateral backing the system while concurrently generating interest for USDG holders from flat fees paid on LONGs.
Gambit would generate fees from minting or burning USDG and from trading activities—whenever a trader opens or closes a trader.
A small portion of these generated fees is distributed to USDG holders that make the stablecoin interest-bearing.
To keep the liquidity of Gambit high, a considerable portion would be re-injected into the Gambit ecosystem.
The more there are whitelisted assets, the more expanded the liquidity for longs would be—creating a feedback loop beneficial for the ecosystem.
Most importantly, these fees will gradually play a significant role in helping maintain the USDG peg, cushioning the stablecoin against unexpected price declines of whitelisted assets that may force liquidation.
The USDG Soft Peg
By enabling trading, the system can automatically maintain peg without the need of the end-user over-collateralizing or depositing collaterals.
The system can maintain the USDG close to parity with USD. Any fluctuation around $1 is adjusted via arbitrage.
If the price of USDG falls below $1, the system “burns” USDG for the backing collateral while also considering the number of open long positions of that collateral.
Gambit would have a 0.90 factor—capped at 0.997– to the collateral in the system versus the USDG in supply.
The ingenuity is that the system will support many whitelisted digital assets. Therefore, the redemption rate of each would vary depending on the asset.
All these forms a backstop that overly helps to maintain the USDG peg.
For every redemption, the Gambit system would also, in lockstep, increase the collateral ratio against the USDG debt.
Gambit Protocol (GMT) Tokenomics and Market
The Gambit Protocol is on the Binance Smart Chain (BSC).
The GMT token is used for governance, controlling aspects such as fees charged on minting, burning, or trading.
401,469 GMT tokens were distributed via whitelisted pre-sale where each token sold for 4.5 BUSD. XVIX token was also accepted as a means of payment.
There was a hard cap for the non-XVIX presale of 900k BUSD.
There will ever be max 401,469 GMT tokens in circulation, all of which have been fairly distributed. This means no inflation on GMT.
The GMT token was first listed on BSC’s PancakeSwap in early Mar 2021.
The listing price stood at $5 and its market cap at $2 million.
There is a variant of GMT known as the xGMT. This is the fee receiving token of the Gambit protocol.
There will be 100k xGMT tokens. Its distribution will be as follows:
- 72k distributed over nine months to liquidity providers of the GMT/USDG and xGMT/USDG in PancakeSwap.
- 23k managed by Gambit DAO
- 5k to be distributed to the founding team and vested for two years.
On the other hand, fees generated from Gambit would be distributed as follows:
- 20 percent of fees are distributed to xGMT holders
- 20 percent to USDG holders
- 50 percent plunged back to the smart liquidity pool to help maintain the USDG peg close to $1
- 10 percent to the XVIX holders (XVIX is a overarching Store of Value protocol we covered here: https://cryptogems.com/xvix-review-first-ever-rebasing-leveraged-bull-bear-tokens-on-chainlink-and-ethereum/ )
GMT is fully diluted with over 401,469 tokens in circulation with a market cap of $21 million or above 10.5X increment. The initial market cap stood at $2 million upon listing on PancakeSwap.
GMT is trading at $53 at spot rates for a near 12X ROI for holders who got in during the pre-sale.
Traders who exited at the token’s all-time high of $131 made a 26X ROI.
To trade GMT and xGMT it’s recommended to mint USDG first at https://gambit.financial/trade
Presently, GMT is only available for trading on PancakeSwap and the most liquid market trades in USDG here: https://exchange.pancakeswap.finance/#/swap?outputCurrency=0x99e92123eB77Bc8f999316f622e5222498438784&inputCurrency=0x85E76cbf4893c1fbcB34dCF1239A91CE2A4CF5a7
You can trade GMTx with the most liquid market here: https://exchange.pancakeswap.finance/#/swap?outputCurrency=0xe304ff0983922787Fd84BC9170CD21bF78B16B10&inputCurrency=0x85E76cbf4893c1fbcB34dCF1239A91CE2A4CF5a7
Short Term Catalysts
- Gambit has been live for a week now and traded more than 80 Million Volume which resulted in a first week fee distribution of $79,826.79. That’s just epic and big evidence the protocol is working as it was planned for.
- USDT and USDC the most used stablecoins give 0% APR. Swapping them with zero slippage to USDG at a stable price of $1 gives you currently 6.51% APR. This is unique and I see many make the switch to be much more capital efficient and immediately offers absolute trust unlike centralised backed stablecoins which rely on human audits and regulations.
- Viz-a-viz the general stablecoin market, USDG is minuscule. Still, it’s easy to see why GMT is grossly undervalued at spot rates because of the project’s objective.
- Project on-boarding is more accessible even for newbies. This is because the project’s team made the user interface intuitive and very clean. For instance, leverage trading works just like one would in PancakeSwap with the addition of a button to choose 2x, 3x, 5x leverage. Choose * to take up to 30X leverage.
- Gambit Protocol’s decision to launch from the BSC means cheaper transactions and a possibility of carving out a significant market share in a relatively young platform.
- The Gambit Protocol is perhaps the first DEX to offer perpetual leveraged trading on the BSC. The ability to mint USDG without over-collateralization, spread, or slippage from whitelisted assets gives the interest-bearing token utility.
- A combination of interest-bearing and leverage trading in a self-adjusting system presents a unique value proposition unique to DeFi. Further integration of Chainlink Oracles—useful for swapping—gives Gambit an edge.
- The creators of the Gambit Protocol are experienced and have created XVIX—a hugely successful DeFi project whose investors are deep in green. The lead developer is known for his hard work and unique intelligence I have rarely seen before in other projects.
- Compared to other projects in the same niche, GMT’s FDV is around $21 million, meaning there is more room for growth and profits for investors.
- As GMT’s liquidity builds up through listing at CEXes like Binance, its value will erupt.
Long Term Catalysts
- By using the GMT platform it quickly shows us how this solution works better than MKR, DAI, SNX and PERP. The Myspace-Facebook story of DeFi? Sorry bluechips :(
- Yield farmers are already flocking to earn three and four digits yields on xGMT and GMT pools.
- The promise of deeper liquidity and the absence of slippage would see more traders flocking to the protocol since they can even trade for free—BSC’s transaction fees are near negligible.
- The project plans to white list more assets and drastically improve the overall liquidity of the protocol. Whitelisted projects, unlike competing systems, are ordinary assets like wBTC, wETH, and not just stablecoins.
- As we advance, the Gambit Protocol will launch on Ethereum Layer-2, meaning GMT would find even more users, inevitably pushing its prices higher.
- GMT staking is live. Gambit Protocol team also plans to introduce advanced orders for leverage trading and also integrate with exchange aggregators.
- Gambit Protocol’s smart contracts are audited by ABDK Consulting and industry experts around the team. ABDK is the same blockchain security firm that audited Uniswap v3 smart contracts.