<p dir="ltr">Real Yield, which DeFi refers to as "nectar of the Gods," is sometimes compared to the purest types of yield that can be found on a chain. Farmers who were searching for long-term yield found Real Yield to be an exceptionally tempting option due to the fact that it was sustainable. Real Yield protocols generate a yield from real protocol income, as opposed to depending on excessive token emissions to produce the return. Comparable to profit sharing, the majority of protocol income comes from the fees associated with trading inside the protocol.</p><p>GMX is a well-known perpetuals trading platform and is considered to be one of the industry's early pioneers in the Real Yield field. Trading liquidity is provided by GLP, which is an index of assets, including cryptocurrencies like Bitcoin and Ethereum, as well as stablecoins. 70% of the fees generated by user trades and trader losses are given as GLP stakes in either ETH or AVAX, according to the staker's preference. Being one of the top fee earners in DeFi and dispersing the majority of that revenue to stakers has resulted in a battle for the deliciously fruity yield from GLP.</p><p>Since the introduction of GMX, there has been a meteoric rise in the demand for GLP. The Total Value Locked in GMX is above $500 Million, and it has only gone higher since the beginning of the project. The GLP Wars erupted because it was only reasonable for other protocols to want a share of this yield, which led to their emergence.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ede3510a8f3cc8b50d028438497b73.jpg" alt="gmx tvl" title="gmx tvl" width="600" height="300" class="lykafe0"></p><h2>What started the GLP Wars?</h2><p>GLP is a liquidity pool that functions similarly to Uniswap's LPs in that it consists of a basket of coins shown graphically in the following picture. Due to the fact that GLP is composed of 48% stablecoins and 52% other coins, its value is susceptible to directional exposure to the volatility of crypto assets such as BTC and ETH. This makes GLP susceptible to price changes. Users are encouraged to stake GLP so that they may profit from the losses of other traders and also get yield in the form of esGMX and receive 70% of platform fees.</p><h3>GLP composition</h3><p dir="ltr">Due to the exposure, they have to the market, GLP stakers might end up losing money despite the dividend they get. The comparison of the returns from GLP to its incentives may be seen in the chart that follows. Because of its exposure to directional markets, GLP has generated a return of -13% since its inception.</p><h3>GLP returns</h3><p dir="ltr">Users need to personally collect their prizes since GLP might alternatively be paid out in ETH or AVAX. This indicates that the yield that was delivered was not auto-compounded and did not reach its maximum potential. In order to manually claim, acquire, and stake GLP, users will be required to pay the gas fee. Even while Arbitrum and Avalanche have very modest transaction costs, manually compounding numerous times would undoubtedly result in a significant increase in those fees.</p><h2>The GLP wars participants</h2><p class="prosemirror-p-center"><em><img src="https://cdn.builder.news/news/11ede3510a8f42f9b50d028438497b73.jpg" alt="glp marketshare" title="glp marketshare" width="600" height="450" class="lykafe1"></em></p><p class="prosemirror-p-center"><em>Source: AlphaDAO</em></p><p>A number of protocols took note of this priceless opportunity that was made accessible by GLP. Imagine for a moment if GLP was protected from directional risk. What if it were possible to leverage yield? What if there was a way to automatically compound yield? What if we could utilize GLP as collateral instead of other assets? These questions were the seed that eventually grew into the GLP Wars.</p><h3>PlutusDAO</h3><p>PlututsDAO is a yield aggregator that also aggregates governance in the direction of its native token, PLS. It provides liquid staking for veAssets such as the veJones index, the veDPX index, and the veSPA index. When it comes to GLP integration, they provide customers the ability to deposit GLP in exchange for plvGLP, which unlocks more features.</p><p>When using plvGLP, ETH rewards will automatically be compounded once every eight hours. Because of this, the value of plvGLP goes up over time, and the annual percentage yield (APY) goes up as well. As an additional incentive for liquidity mining, PLS tokens are also given out to plvGLP stakers. Plutus takes charge equal to 10% of the total production of GLP.</p><p>plvGLP also enables a higher degree of composability with several other protocols. The standard version of GLP cannot be staked on any other protocol than GMX and does not interact with any other protocols. plvGLP overcomes this problem by forming partnerships using a variety of protocols for asset management and borrowing and lending.</p><p>Users have the ability to lend plvGLP to borrow against it or lend against it via Lodestar Finance and Vendor Finance. Users are able to engage in more effective methods as a result of the usage of plvGLP as collateral. They have the ability to borrow BTC and ETH in order to carry out delta-neutral strategies manually, in addition to taking leveraged long or short positions.</p><p>Recent developments include a partnership between Plutus and FactorDAO to facilitate asset management. Because of this, Factor strategists are able to make use of Plutus solutions and develop new use cases. A Plutus index vault that combines all plsAssets and diversifies yield sources is one example of a possible use case for the platform.</p><p>They are investigating another potential for integration with Rodeo, Dolomite, and other platforms as well.</p><h3>Mugen Finance</h3><p>One of the early builders of GMX, Mugen Finance, was among the first. Mugen is an aggregator for cross-chain yields that was created on top of LayerZero. Users are able to farm produce from numerous networks using multiple cryptocurrencies. A comparison to Yearn Finance on LayerZero is appropriate here. At the moment, they only have one strategy that is actively trading on their platform, and that strategy is the GLP strategy.</p><p>Mugen's treasury is in charge of executing the GLP strategy in accordance with the total amount of funds that have been whitelisted for the strategy. Through the minting and staking of GLP, the Treasury is able to collect yield. The Mugen native token, MGN, will be created by users who deposit monies onto the platform. After that, Mugen, which has been staked in the form of xMugen will get ETH yield from the treasury.</p><p>Users also have the option to have their yields automatically compounded. The ETH dividend will be used toward the purchase and staking of MGN. When opposed to manual compounding, this allows for the yield to be compounded at a faster rate, which contributes to an increase in the annual percentage yield (APY).</p><p>The approach that Mugen employs is straightforward, yet it opens the door to yield diversification and auto-compounding for farmers. In the not-too-distant future, other protocols will be included, and users will be able to stake MGN in order to collect yield from numerous sources and chains simultaneously.</p><p class="prosemirror-p-center"><em><img src="https://cdn.builder.news/news/11ede3510a8f470fb50d028438497b73.jpg" alt="mugen finance mechanism" title="mugen finance mechanism" width="600" height="333" class="lykafe2"></em></p><p class="prosemirror-p-center"><em>Source: Mugen Finance</em></p><h3>Vesta Finance</h3><p>A collateralized loan platform, Vesta Finance enables customers to lock collateral and mint Vesta's stablecoin, VST. GLP is one of the forms of collateral that Vesta will take in order to make more opportunities available to consumers. Users are able to optimize their use of money by maximizing their capital efficiency by depositing GLP and taking out a loan of VST.</p><p>It is possible to stake VST in their pools in order to receive a dividend of between 10 and 40% on the stablecoin, depending on the length of the lockup period. The yield on VST will range from 6.7% all the way up to 26.7% when the collateralization ratio is 150%. Without any directional exposure, the overall GLP yield has the potential to be enhanced to around 46.7%.</p><p>Additionally, leveraged trades on GLP yield are permitted via Vesta. Users have the ability, much as with Degenbox, to deposit GLP in order to borrow VST, which they may then use to acquire further GLP. In order to achieve a more advantageous leveraged position, this procedure is done a number of times. At a collateralization ratio of 120%, it is conceivable to have a 6x leveraged position, which results in an over 120% annual percentage yield.</p><p>Nevertheless, this method comes with the directional risk of volatile assets such as Bitcoin and Ether, and as a result, there is a danger of liquidation.</p><h3>Unstoppable Finance</h3><p>Unstoppable Finance gives GLP holders access to a fully functional auto compounder with no additional cost. When opposed to other protocols, which may levy fees on yield or deposit, the auto-compounder does not have any costs associated with its use. Users who desire to accumulate more awards may cut down on their gas expenses by taking advantage of this feature. Its vaults are also constructed utilizing the ERC4626 tokenized vault standard, which makes it possible for anyone to build on top of its vaults.</p><p>Additionally, they are working on a unique mechanism known as TriGLP, which is now under development. The goal is to tokenize GLP such that it can be split into stableGLP and cryptoGLP, allowing investors to receive varying levels of income depending on how much risk they are willing to accept. They want to construct a position that is similar to a delta-neutral stablecoin and has an annual percentage rate (APR) of less than ten percent. This position will have no exposure to price volatility and will have an APR of more than thirty percent.</p><h3>GMD Protocol</h3><p>Another yield aggregator that provides extra functionality is called GMD Protocol. By providing a so-called pseudo-delta-neutral technique, GMD hopes to help mitigate the problem caused by GLP's directional exposure.</p><p>It provides single-stake vaults for BTC, ETH, and USDC, each of which has deposit restrictions that are determined by the relative ratio that GLP maintains for USDC, ETH, and BTC. These assets that are now stored in vaults are going to be used to mint GLP and generate yields. Users are able to keep their pseudo delta neutrality against the asset that they have deposited as a result of this. For instance, a user who wishes to earn a yield on their USDC without being exposed to BTC, ETH, or other coins in GLP may simply deposit their USDC into GMD's USDC vault in order to get a fraction of the GLP yield. This allows the user to avoid being exposed to any of the aforementioned cryptocurrencies.</p><p>The ratio that is based on the GLP's composition of USDC, ETH, and BTC is what the pseudo-delta-neutral method employs. To simulate the structure of GLP, the amounts that are stored in each of the three vaults on GMD will, at some point in the future, be subjected to weekly rebalancing. The GMD Protocol will have deposited 5–15% of the maximum total value of the Delta-Neutral Vaults in order to rebalance instead of rebalancing user money as part of the rebalancing process. This helps to ease any problems that may arise as a result of low reserves since there will always be liquidity from the protocol itself that can be withdrawn.</p><p>GMD provides a protocol reserve that is comprised of GLP valued between 5% and 15% of TVL. This reserve's purpose is to further mitigate the risks of volatility posed by smaller assets in GLP, such as Uniswap. This protocol reserve is financed by the Treasury, and in the event that the value of users' assets is lower than the GLP value, it will be utilized to reimburse users for the difference in value.&nbsp; GMD is under the impression that in the long term, the value of the protocol reserve will only increase as a result of the losses sustained by GMX traders.</p><p>GMD makes an effort to be delta neutral; nevertheless, it does not have any short exposure that would allow it to genuinely be delta neutral. The protocol necessitates the establishment of a reserve in order to provide a safeguard against transient destruction. since this, GMD is restricted in its potential to scale since the vaults cannot become too big without sufficient reserves that are between 5% and 15% of TVL. They are limited in their ability to grow to bigger TVL solely by the performance of the protocol reserve. Up to this point, the GLP reserve has reached breakeven, which restricts GMD's ability to extend its vaults.</p><h3>Yields Yak</h3><p>Yield Yak is an Avalanche-based auto-compounder. Users are motivated to compound benefits for everyone in the pool by pressing the reinvest button and earning AVAX rewards.</p><p>Yield Yak is able to provide enhanced returns for depositors because of Avalanche Rush, a $180M Incentive Program by Avalanche. Avalanche Rush will reward GLP strategy depositors with up to $300,000 in AVAX. Furthermore, Yield Yak bets esGMX indefinitely in order to maximize GLP payouts.</p><p>Yield Yak Swap has also been improved to optimize GLP swaps. Yak Swap assists in rebalancing GLP to the required index weights by automatically selecting the best way to swap assets to GLP. This decreases slippage for consumers while also assisting GMX in maintaining the proper asset ratio.</p><h3>Rage Trade</h3><p>Rage Trade is an Arbitrum LayerZero-enabled perpetuals trading platform. They are the first to introduce a twin vault system to reduce directional market risk. They have the Risk-Off Vault and the Risk-On Vault to limit their exposure to BTC and ETH by shorting them on Aave and Uniswap.</p><p>Users deposit sGLP or USDC into the Risk-On Vault, which then accepts a Balancer flash loan of BTC and ETH to sell for USDC on Uniswap. This USDC from the Uniswap transaction, along with some USDC from the Risk-Off Vault, is then transferred into AAVE in order to borrow BTC and ETH to repay the Balancer flash loan. As the Risk-On Vault has now borrowed BTC and ETH, this essentially generates a short position on AAVE.</p><p>Another key function of the Risk-Off Vault is to offer collateral to the Risk-On Vault in order to keep the AAVE borrows at a 1.5 health factor. This position is reopened every 12 hours to harvest fees, rebalance PnL between shorts on AAVE and GLP collateral, and adjust the hedge depending on the composition of GLP deposits.</p><p>In terms of performance, the Risk-On Vault potentially delivers a profit of roughly 25% compared to GLP's -13%.</p><p>However, the Risk-On Vault now has a -1.2% return, owing to the high expenses of hedging against directional exposure and trader victories, which result in a loss of GLP value. Rage Trade will be able to considerably lower its hedging expenses after completing its second audit and raising its deposit ceiling. Rage Trade will provide the opportunity to partly or completely hedge against traders' PnL. These will take the shape of separate vaults into which users may put funds if they so want.</p><h3>Jones DAO</h3><p>Jones DAO is a yield, strategy, and liquidity protocol that improves capital efficiency. They depend on a twin vault technique to provide consumers with leveraged yield. Their jGLP vault accepts deposits of GLP and any asset included inside GLP. USDC deposits are accepted in the jUSDC vault.</p><p>USDC from the jUSDC vault is used to coin more GLP and gain a leveraged position in GLP. GLP rewards are then divided among jGLP and jUSDC depositors, who receive 33% and 11.3% APY, respectively. To avoid liquidations, the jGLP vault will automatically balance its leverage. Autocompounding is also an option for users.</p><p>Jones DAO's cost structure is as follows. Their one-of-a-kind structure is designed for long-term development since users who are still staked get payments from those who unstake, enticing users to continue staking in Jones DAO.</p><p dir="ltr"></p><p class="prosemirror-p-center"><em><img src="https://cdn.builder.news/news/11ede3510a8f4b92b50d028438497b73.jpg" alt="jones dao fee structure" title="jones dao fee structure" width="600" height="236" class="lykafe3"></em></p><p class="prosemirror-p-center"><em>Source: Jones DAO</em></p><p>The more USDC that is transferred into the jUSDC vault, the more GLP may be acquired, resulting in increased leverage. The figure below depicts jUSDC APY vs. vault usage, where at 35% GLP yield, jUSDC yield may climb to almost 20% owing to higher leverage.</p><p>In terms of performance, jGLP does not hedge against market risk but rather magnifies it. This implies that the real performance of the jGLP vault is determined by market circumstances. jGLP surpasses ETH in backtesting against 0% GLP yield and 80% utilization.</p><h3>Steadefi</h3><p>Steadefi is an automated leveraged yield strategy tool. They now have a vault that provides a 3x leveraged position on GLP.</p><p>To mint GLP, for every $1 deposited into the vault, $2 is borrowed from lending pools. This basically produces a 3x leveraged position that is automatically compounded and rebalanced as needed over time.</p><p>Steadefi's vaults surpass GLP in terms of performance, with 89.8% PnL vs 12.3% PnL for GLP, a 7x higher yield.</p><h2>Upcoming competitors</h2><h3>Unami Finance</h3><p>Umami Finance plans to introduce version 2 of their GLP vault. They want to provide an algorithmic hedging technique. They are currently backtesting and optimizing their vaults, which have an APY of 26.7% as of the recent report.</p><h3>Yama Finance</h3><p>Yama Finance is developing an omnichain stablecoin with the goal of maximizing capital efficiency, speed, and security. They have yet to start their leveraged GLP yield on Arbitrum.</p><p>Yama may provide up to 101x leverage, giving for higher-yielding farming prospects. They have reduced it to 17x for GLP, increasing the APY to 333% (assuming a 19.6% GLP return). They have yet to explain how their leveraged GLP yield farming works. However, it is possible that borrowers would use GLP collateral to borrow YAMA and establish a leveraged position in order to achieve a higher rate.</p><p><strong>Some bottom lines</strong></p><p>There is a clear need as well as a supply for goods that are based on GLP, with an infinite number of protocols built on top of GLP and millions of TVL included in each of these protocols. Because of its modular design, DeFi may be put to a number of different uses, such as auto compounding, leveraged yield, and borrowing and lending. As GMX continues to grow, it is anticipated that further protocols will include GLP in the procedures of their own protocols. However, there is a possibility that GLP may be fully depleted as a consequence of traders closing deals and withdrawing assets from GLP. This might happen if traders continue to win deals. In order to reduce potential dangers, future processes should probably make an effort to hedge against trader profit and loss.</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

It only made sense for other protocols to desire a piece of this yield, which resulted in their creation, which caused the GLP Wars to break out.

A deep dive into GLP Wars