GMX Labs Funding Proposal (2026-2027)

PROPOSAL SUMMARY GMX Labs requests DAO authorization for continued funding for 2026–2027 under a two-year framework including operating funds and contributor tokens. The plan uses floor and ceiling mechanisms to ensure operational stability, fiscal discipline, and responsible use of the strengthened treasury from the 2024–2025 mandate

Building on 2024-2025: During the previous two-year period, GMX Labs demonstrated operational efficiency by maintaining lean direct operations at $9.4M over two years supporting full protocol development and maintenance (with $19.4M total over two years including contributor tokens and other key DAO expenses), while generating $80.6M in protocol proceeds over the period (~$40M annually) and contributing $21.5M net to the DAO treasury. Additionally the bonding program successfully raised $4.2M in accumulated balance during this period, complementing the broader treasury strengthening efforts.

THIS PROPOSAL REQUESTS a) Two-year authorization to use V2 protocol fees for operations b) Two-year continuation of the contributor token grant program

LABS & DAO CONTEXT

• GMX DAO established prior to Labs
• In October 2022, DAO approved creation of GMX Labs as its service provider
• Labs is mandated to a) Develop and maintain protocol code b) Administer delegated DAO responsibilities c) Secure and manage protocol IP d) Contract with contributors and vendors

Labs operates fully under DAO oversight and direction.

FUNDING REQUESTS

1. Contributor Token Allocation

Request

• 250,000 GMX over 25 months (Dec 2025 – 2027)
• Linear distribution: ~10,000 GMX/month
• Represents ~1.9% of total supply

Rationale

• Aligns contributors with long-term protocol success
• Retains experienced contributors with institutional knowledge
• Continues a proven compensation model used since inception

Historical Context

• Years 1–4: ~3.8% of supply used for team compensation
• Proposed Years 5–6: +1.9%
• 6-year cumulative total: ~5.7% of supply
• No founder allocation, no pre-mine, community-first distribution

2. Revenue-Based Operating Funds

Source: Unallocated 10% share of V2 protocol fees accumulating in DAO treasury

Annual Floor: $7,000,000 Annual Ceiling: $9,000,000

Mechanism

Labs funded from the 10% V2 treasury allocation (currently 8.8% net after 1.2% Chainlink payment):

• If revenue < $7M → shortfall supplemented from DAO reserves
• If revenue $7M–$9M → Labs funded directly from protocol fees
• If revenue > $9M → excess remains in DAO treasury

Key Features

• Predictable funding across market cycles
• Prevents over-accumulation during bull markets
• Automatically returns surplus value to DAO governance

RATIONALE FOR FUNDING FLOOR WHY A $7M FLOOR IS REQUIRED

The floor ensures continuity of professional-grade operations in all market conditions:

• Core Team retention: Maintaining a stable, experienced team with deep institutional knowledge by ensuring competitive compensation and avoiding sudden resource reductions that could compromise development velocity across both bull and bear markets
• Security: Maintaining a proactive security approach through continuous monitoring, ongoing audits and assessments, and rapid incident response capabilities to identify and mitigate threats before they become critical.
• Infrastructure: Ensuring reliable, high-availability multi-chain infrastructure through robust oracles, keepers, RPCs, continuous monitoring, and ongoing maintenance to preserve system health, uptime, and operational resilience.
• Legal & compliance: Ensuring entity maintenance and corporate governance through coordinated administration, multi-jurisdictional regulatory compliance, and ongoing access to professional legal counsel to navigate an evolving regulatory landscape.

Without a floor, prolonged downturns could force reductions that materially increase protocol risk.

WHY A $9M CEILING IS REQUIRED

The ceiling enforces fiscal discipline

• Prevents unchecked budget growth in bull markets
• Maintains GMX’s lean operating philosophy
• Returns excess fees to DAO for: a) Ecosystem grants b) Strategic initiatives c) Treasury reserves

The $7M–$9M band supports 30–40 contributors while preserving efficiency.

AUTOMATIC 1-YEAR REVIEW MECHANISM At the 1-year anniversary, all funding components are automatically reviewed if either condition is met:

1. GMX price (30-day TWAP) is below the starting price
2. Protocol revenue fails to meet the $7M floor and treasury funds are used

Review Includes

• Treasury fee allocation
• Contributor token grants
• Bonding program (if active)

DAO may modify, continue, or terminate any component via governance vote.

TEAM COMPOSITION & SCALING

Current: ~30 contributors Planned capacity: 35–40 contributors (when justified)

Scaling remains:

• Market-dependent
• Security- and efficiency-focused
• Oriented toward experienced DeFi talent

Labs Commitments

Labs commits to:

• Smooth Transitions: Ensure orderly governance-directed handovers through comprehensive documentation and structured knowledge transfer for all critical functions, enabling continuity and minimal disruption to protocol operations.
• Transparency and Communication: Regular, clear reporting on development progress and fund utilization, with open communication channels and timely responsiveness to DAO inquiries and community concerns.
• Professional Standards: Maintaining industry-leading development, security, and operational practices with proactive communication, continuous efficiency improvements, and a commitment to high-quality execution.

INDUSTRY COMPARISON

• Many DeFi protocols allocate 15–25% of fees to foundations
• Some operate with uncapped budgets
• GMX: a) Uses only the existing 10% V2 allocation b) Enforces a hard spending ceiling c) Returns excess value to the DAO

GMX maintains one of DeFi’s most efficient and transparent funding models.

Team Token Allocations

• Minimal & Transparent: a) ~3.8% used in Years 1–4, b) ~1.9% proposed for Years 5–6; c) ~5.7% total over six years.

• Community-First by Design: No founder allocation, no pre-mine, no early investor advantage unlike many protocols.

• Strong Alignment: Token-based compensation ties team incentives to long-term protocol growth and shared community success.

Treasury Sustainability Projection (by Period)

Current State (2026): GMX is already revenue self-sufficient, generating ~$22.2M annually well above the $7–9M operational range supported by a strong DAO treasury built during 2024–2025 and lean, professional operations.

Near-Term Outlook (2026–2027): The funding floor provides continuity in extreme market downturns, while the ceiling ensures excess revenues in strong markets continue to grow the DAO treasury; diversified revenue streams reduce dependency on any single source.

Long-Term Vision (2028+): Protocol revenues are expected to remain comfortably above operational needs, enabling ongoing treasury growth, potential reduction or phasing out of token grants, and a fully mature, efficient, and sustainable operating model.

What This Proposal Enables

• Protocol Development: V2.3+ feature upgrades, improved UX, advanced risk tools, performance optimizations, and continued multi-chain expansion.

• Infrastructure & Security: Robust multi-chain infrastructure, high-availability systems, continuous audits, proactive threat monitoring, and rapid incident response.

• Team & Operations: Retention of an experienced core team, consistent development velocity, and professional legal, compliance, and governance operations.

• DAO Treasury Growth: Excess fees in strong markets accrue to the DAO, enabling community-led initiatives and long-term sustainability.

• Staker Value: Continued fee distributions to GMX stakers, with protocol growth increasing overall fee generation under a community-first model.

Proposal Implementation Utilize the existing operational multi-sig from existing bond proceeds wallet or deploy a new Operational multi-sig this wallet will be owned by the DAO but not subject to day to day Tally control. To establish the Operational Multi-Sig a one time action the DAO Treasury will seed a 2 million buffer to this multi-sig (approximately one quarter runway). Ongoing protocol fees net of Chainlink will flow to the Operational Multisig, from which Labs may draw funds as needed within the approved $7–9M annual budget.

Any protocol fees collected in excess of the $9M annual ceiling will be returned to the main DAO treasury at the end of 2027, or earlier by DAO vote. If protocol fees and the operational buffer are insufficient to support the floor funding, Labs will submit a supplemental Tally proposal for additional funding. If this authorization is not extended beyond its term, the Operational Multisig and any residual balances will remain the property of the DAO.

CONCLUSION This proposal builds on a strong 2024–2025 track record and presents a sustainable, accountable, and DAO-aligned funding framework for GMX Labs. Approval authorizes continued operations through 2026–2027 under a disciplined, revenue-backed model, supporting contributor retention, robust security, reliable infrastructure, and ongoing protocol development. This ensures GMX can scale responsibly, adapt across market cycles, and create long-term value for the DAO while preserving full community oversight and fiscal discipline.