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GM Compound - Aged Vodka 2

GM Compound has features of:

  1. 1.
    Reinvesting the ARB rewards payouts from the ARB Short Term Incentive Program of GMX
  2. 2.
    Reducing gas cost for users to claim and compound rewards manually

ARB Short Term Incentive Program for GMX

In November 2023, the Arbitrum DAO voted the commencement of the ARB Short Term Incentive Program. GMX emerged as the primary contender to potentially receive up to $12 million worth of $ARB tokens to stimulate the expansion of its ecosystem. Throughout this period, $ARB rewards will be allocated to depositors in the GM pool, aiming to foster increased engagement on GMX V2. Users engaging with Vaultka's GM-related vaults will qualify for 75% of the leveraged ARB rewards. Furthermore, the GM Compound vault facilitates the automatic compounding of these ARB rewards, nurturing the growth of users' investments.

What is Auto-Compounding and What are the Benefits?

Auto-compounding refers to the automatic reinvestment of earnings into the original investment without any manual intervention from the investor, where in this case, Vaultka will be reinvesting the ARB payouts from GMX into GM (the GM pool that the user deposited - either [WBTC-USDC] or [ETH-USDC]) to grow users' investments.
With auto-compounding, rewards will be accumulated and generating higher yield with more accumulative underlying investment. Rewards can be illustrated in APY (Annual Percentage Yield), rather than APR (Annual Percentage Rate), providing a more accurate measure on the actual achievable rewards for user's deposit.
To illustrate how auto-compounding works, let's say you invest 100 ETH in GMX GM pool and earn a 20% payout per year. If you reinvest your payouts manually, your earnings will look like this:
Without Auto-Compounding in APR: 100 ETH + 20% payout = 120 ETH
Auto-Compounding in APY: 100 ETH + 22.1% reinvested = 122.1 ETH

Aged Vodka

The GM Compounding vault is referred to as the Aged Vodka because it, like the Aged Vodka, exhibits the trait of improving results as time passes. Unlike a fixed APR, reinvestments trigger a compounding effect on rewards, resulting in exponential yield growth over time instead of a linear increase.

Approach

The GM Auto-Compounding Vault will only accept deposits by the corresponding GM token. Users can buy GM tokens from the GMX page in order to deposit into the Aged Vodka V2 Vault. The Vault will then automatically claims the ARB reward every week when GMX distributes the reward.

Workflows

  1. 1.
    User deposits their GM tokens into the Aged Vodka V2Vault. The vault will only be supporting [WBTC-USDC] and [ETH-USDC] GM token. a. User can buy GM tokens from GMX with BTC, ETH or USDC
  2. 2.
    ARB rewards will be released on GMX every week in a time-weighted average basis
  3. 3.
    Vaultka Smart Contract triggers the claim and compounding function every week, and reinvest the ARB payouts to buy more GM tokens
  4. 4.
    The repurchased GM will be staked, thus growing the initial investment