A brief introduction to GROWTH Tokens (gTokens)

What are gTokens?

gTokens are a core part of GROWTH’s ecosystem, they offer a unique value proposition since it combines the potential profits of the underlying protocol, some arbitrage profits from the minting & burning fees and profit-sharing ownership in locked LPs. In short, gTokens offer a higher yielding way of accumulating more of the token it’s backed by.

Layer 1: Choosing a good underlying protocol

gTokens take an existing great product and enhance it further, choosing a good underlying protocol is essential since it will be the backbone of that specific gToken, let’s examine how profits are generated through some existing protocols and how they would be integrated into a gToken:

AAVE

It is a money market protocol, in this case we are interested in aTokens which are interest bearing tokens, the profits in this protocol come from lending and additional profits may be gathered with the upcoming implementation of credit delegation.

COMPOUND

COMPOUND is the other top money market protocol, the difference with AAVE is that there are no plans for credit delegation at the time this article was written and it offers COMP farming for holding cTokens.

CURVE

CURVE is different from AAVE & COMPOUND, in this case profits are made through trading fees (0.04% fee in every trade), this pools are made of tokens pegged to a value but due to the volatility nature of the market they have small fluctuations compared to its pegged value, this causes arbitrage volume to use CURVE pools. There are two types of pools available in CURVE, those from stablecoins (pegged to the $) and those pegged to BTC (renBTC and WBTC).

BALANCER

Balancer introduced an innovative concept, portfolio management with negative management fees! The way it works is by implementing the AMM model to custom % pools, this means that a pool can hold 40% BTC 40% ETH and 20% USDT, arbitragers will reallocate the portfolio accordingly when it is profitable and by doing so LP fees are accumulated too.

YEARN.FINANCE

Yearn Finance has a wide variety of high-yielding products to choose from which makes it perfect to implement with gTokens, one of the most interesting options offered are its delegated vaults which optimize the borrowing and yield farming process.

MOONISWAP

Mooniswap also offers 1inch farming and it comes with its own setup for AMM fees, read more in Mooniswap’s whitepaper.

Layer 2: gToken Minting and Burning fees

Having a minting & burning fee on gTokens might seem unnecessary but it is actually important because it:

  • Builds up locked liquidity for that gToken
  • Rewards a longer term mindset

Layer 3: gToken locked LPs

A portion of the minting and burning fees are used to build up a locked liquidity position in GRO/gToken pairs, most existing DeFi products will eventually be out of fashion after it reaches its peak of FOMO, since the overall returns of the protocol depend on its TVL (Total Value Locked).

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