Hey folks, so if you’ve followed my previous articles on GMX, you’ll know that I’m a big fan of the platform, and in a sea of $hit that was 2022, GMX.io was one of the clear winners:
It’s obvious that GMX is a highly lucrative platform, but what I‘ll be exploring today, is how you can liquid stake your $GLP tokens in order to try to maximize more returns via Plutus DAO
But first let’s do a recap of what the $GLP token is, and how it extracts its fees…
$GLP — built on the failed dreams of degens
GMX is both on Arbitrum and Avalanche, and it has two different native tokens, $GMX and $GLP, but for the purposes of this article I won’t get into too much detail about the $GMX token or Avalanche, and instead focus more solely on $GLP on Arbitrum.
In a nutshell, 70% of the total protocol fees go to $GLP holders, with rewards/fees distributed via escrowed GMX and in $ETH. Currently sitting at around 32% APR, $GLP primarily generates its revenue from trader liquidations. In other words, you’ll be making money from all the poor souls getting rekt on leveraged failed longs and shorts.
Token Breakdown: $GLP itself is more akin to an ETF than it is to a cryptocurrency. Essentially it’s comprised of a rebalancing basket of cryptocurrencies. At present, Arbitrum’s $GLP is primarily composed of:
In this bear market where more people are holding off on buying riskier altcoins, there’s no wonder why more capital is going into Arbitrum’s pool that has a greater makeup of BTC/ETH and stables.
Even though $GLP is a reward bearing token, one of the qualms that I have about it is that GMX.io does not allow you to auto-compound returns. In other words if you’re lazy like me, you might only be claiming your rewards once a week at most, and then if you want to convert your $ETH rewards back into $GLP, you have to do so manually every single time. This is where Plutus comes in…
Plutus DAO & $plvGLP
First of all, if you’re unfamiliar with liquid staking, I recommend you check out a previous article on liquid staking that I wrote about , but in a nutshell, has created a liquid staking solution which allows you to essentially stake your interest bearing tokens (in this case $GLP) and in turn converting them into a staked derivative $plvGLP.
The true beauty of Plutus is that they will auto-compound your $GLP rewards for you 3 times a day, which accounts for the price differential (and added rewards from staking) when you convert your $GLP to $plvGLP, :
As you can see in the graphic above, this APR breakdown is “Net of fee” — Plutus does take a 10% fee in your $ETH rewards, but that’s already accounted for in the APR breakdown. In other words, if they weren’t taking a 10% fee, your returns on your staked $plvGLP would be even greater. And because plvGLP is a liquid staked derivative, over time you should see the disparity in price slowly increase, allowing the $plvGLP holder to redeem more $GLP than the current 1:1.09 redemption.
The icing on the cake? By staking your $plvGLP directly onto Plutus’ $plvGLP farm, you are able to gain 11.97% APR in $PLS emissions. There used to be some more ways to utilize $plvGLP as collateral borrowing, but as I’ll talk about in my next section, this doesn’t come without it’s own risks.
Risks and other things of note
Smart Contract Risk: Plutus is run by smart contracts, and smart contracts have the risk of being exploited. One could argue that DeFi altogether is one big smart contract risk, but regardless, this was identified in one of the last AMA’s as being the most significant. Thankfully Plutus DAO to date has have been audited twice — once by and the most recent (September 2022) by y looking specifically at the contracts for the GLP strategy.
What made bigger news involving $plvGLP was in December after an attacker was able to conduct a smart contract exploit on the lending protocol Lodestar Finance, where the price of plvGLP was manipulated so that they could withdraw millions of dollars worth of assets undercollateralized. Despite the exploit, Plutus has maintained that “throughout the incident, plvGLP worked exactly as intended” and essentially remains unaffected. (For more details see their official final statement) I’m glad that the exploit didn’t have any contagion on Plutus, but even though this probably goes without saying — if you’re wanting to increase your yields on your $GLP, remember that the cost associated with this yield is paid for by your trust in the Plutus DAO or wherever it is you choose to park your tokens.
$PLS is an altcoin: One of the popularity drivers for $GLP is that much of the rewards is paid out in $ETH, but using Plutus’ strategy exposes you to $PLS’ price action instead, which like any altcoin, can have a significant amount of small marketcap volatility:
According to the docs, there’s a max supply of 100 million, with 12% of the supply allocated to the team, released across an 18-month vesting schedule. If you’d like to learn more about some of PLS’ metrics (i.e., totals in current circulation, current marketcap) I highly recommend checking out @defimochi’s work in Dune.
Future Growth: The exploit of Lodestar was extremely unfortunate, because a lack of trust can be a huge hinderance towards protcol/token adoption, and I imagine that this dealt a pretty big setback for the adoption and trust of plvGLP. That being said, assuming things are done well and that things are done carefully (i.e, with audits), I think that $plvGLP could join the likes of products from different liquid staking platforms like , which seem to be getting new capital use cases everyday.
Having used GMX.io for several months now, I can probably count on one hand how many times I’ve compounded/claimed my rewards. Plutus forgives sloths like me and auto-compounds my $GLP rewards, earning significantly higher returns in the process. I’ve been nothing but impressed with Plutus thus far, and my only regret is that I didn’t start using $plvGLP sooner.
If you’d like to find out more about
PlutusDAO
and what they’ve done, I recommend that you checkout their year in review, which goes into pretty good depth about what they’ve been able to accomplish thus far. I’ve noticed that the overall sentiment in their discord is that these guys like to fvcking build, and that we can expect them to continue to make Plutus more robust and applicable going forward (For this I've been told that there’s definitely stuff rolling out in Q1!).
Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates.
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you, especially when it comes to leverage. Cheers everyone!
