DeFi Backed by bitcoin
When most people think about Tokenomics, they generally think about the supply, distribution, circulating and inflation or deflation mechanics. We have covered this information in our first Medium article, “Introducing Gravity Finance”.
When we think about tokenomics regarding GFI, we think about the fundamentals and long-term value, as well as the reason behind the value of the token.
The video below gives a good overview of the Gravity Finance platform and touches on various products and admin fees. The written article below dives deeper into some specific information, for those who would like to develop a deeper understanding of the overall project, such as how our Admin Fees differ from other defi platforms and how we distribute admin fees to users, the BTC backing of GFI tokens, and the fact that users are not restricted in how they use GFI on the Gravity platform.
Admin Fees — Overview
All Gravity Finance products produce “Admin Fees” (or Platform Fees).
These Admin Fees are automatically collected from the different products through each products smart contract, for example the Gravity Swap Exchange charges a small percentage admin-fee on each swap made on the exchange.
Some products generate fees in other ways, e.g. the auto-compounding vaults charge a small percentage of the claimed reward as a fee, the IDO Launchpad has adjustable fees that will be charged as a commission on the funds raised for projects on the Launchpad.
Some admin fees are handled in different ways, which we explain in detail below.
Admin Fees — General
The graphic below is a simple overview of how Admin Fees at Gravity Finance are distributed.
Most Admin Fees are converted into Wrapped ETH (wETH) and Wrapped BTC (wBTC) at a rate of 50% each as per the image above.
The wETH is distributed to GFI Token Holders to claim (various methods exist depending where the GFI Tokens are actually being held or used, see distribution info in the next section).
The wBTC is sent to the GFI Governance Contract where they accumulate and act as tangible BTC backing for the GFI token, ready to be claimed by GFI holders at any time, in exchange for irreversibly burning a corresponding amount of GFI Tokens.
Admin Fees are distributed based on the total supply of GFI, therefore as GFI is burned and the total supply is reduced, the future admin fees are distributed between fewer tokens. Burning GFI has a direct positive impact on the value of the remaining supply.
Admin Fee Distribution
As mentioned above, some admin fees are treated in different ways depending on the product. For example the Swap Exchange admin fees are converted to wETH and wBTC and distributed to GFI holders, but the fees collected by the Vaults (i.e. Performance Fees), are handled in a slightly different way;
If a vault reward token is GFI, the performance fee is collected as GFI and is burned.
If the vault reward token is not GFI, then the reward token is collected and converted to GFI through the swap-engine, and then the purchased GFI is burned.
Both of these methods help to reduce the remaining supply of GFI tokens from the total supply and either reduce the sell-pressure on GFI on the market, or increases buy-pressure on GFI on the market.
We note above that the wETH portion of the Admin Fees are distributed to GFI holders, but it should be noted that not all GFI holders are actual users who have the ability to claim the earnings, some GFI holders are smart contracts, farms, liquidity pools etc.
GFI Users/Owners can use their GFI tokens in a number of ways on the Gravity Platform without losing their earning potential, we detail below information about admin-fee distribution to GFI holders, based on where the GFI tokens are actually being held/used.
GFI Liquidity Pools;
A user who is providing liquidity on the Gravity Swap exchange, where part of the liquidity pool is a GFI token, has their wETH admin fees automatically processed for them.
Example: Assume you hold GFI-USDC in a Gravity Liquidity Pool (GLP);
When the wETH Admin Fees are distributed, the Liquidity Pool “claims” the wETH earnings (since the “pool” currently has possession of the GFI tokens). After claiming, the wETH is swapped on the Gravity engine into GFI and USDC tokens (at a rate of 50% each). The new GFI and USDC are then added to the Liquidity Pool and increase the users liquidity position.
The user’s admin-fees are automatically claimed, converted into the pairs in the liquidity pool and then added for the user with no need for the user to actually do anything.
The GFI Single-Asset-Staking (SAS) Pool is designed to “burn GFI”. Users who are staking GFI in the GFI SAS Pool are benefiting the whole GFI userbase. When wETH admin fees are distributed, the GFI SAS farm claims the wETH earnings, buys GFI tokens from the open market and then burns the GFI tokens that were purchased. The users do not directly receive the wETH earnings but the total GFI supply is reduced making the remaining supply have an increased value. The GFI SAS farm is unique, in as much as there is no risk of impermanent loss on the farm and the rewards issued as GFI tokens to the pool currently outweigh the loss of wETH earnings.
It should be noted, and as mentioned above, when wETH earnings are distributed, ALL GFI Holders receive a claim to the wETH earnings that were distributed. This means the farms that currently hold GFI tokens as a reward to issue to farmers also claim wETH earnings, these wETH earnings are used in the same manner as the GFI SAS farm, i.e. the earnings are used to purchase GFI from the open market and burn the purchased GFI tokens.
A user who holds GFI tokens in their wallet can directly claim wETH earnings from the Governance Smart Contract (or by using the portal on the Governance Page on the website). When wETH earnings are distributed, a user who holds GFI in their wallet at the time of distribution will have an increased wETH claim available to them based on the amount of GFI tokens that are held in the wallet at the time the admin-fees were processed.
In summary, and as detailed above, a GFI token holder can use their GFI tokens in a number of ways on the Gravity Platform without losing their earning potential, users are not restricted to simply “stake in this specific contract to earn platform fees” but are able to use the tokens to provide liquidity on the platform, yield farm, hold in their wallet or stake in a farm, all without losing the benefit of being a GFI token holder!
We are currently working on a number of new and exciting products that we will bring to market, these include lending and borrowing (Loans), Derivatives trading, personalised investment strategies and more. All products will generate “Admin Fees”. Gravity Finance aims to become a hub of activity on the Polygon network, allowing users to trade, lend, borrow, join exciting IDO’s and set up complex or simple automated tasks in the defi space.
We are always on the look out to work with the brightest minds in the space. If you have a unique project you think would be a good fit at Gravity Finance, get in touch with us (on Discord or Tweet @ us).