I. What is GMX?
GMX is a Spot and Perpetual exchange developed on Arbitrum and Avalanche from September 2021. The special feature of GMX is that traders can trade with quite low fees, 0 slippage, 0 funding rate using the unique model GLP Pool.
Since its launch, the innovative innovations from this exchange have attracted many investors, competing with big players such as Perpetual, dYdX. In addition, tokenomics is also very unique, bringing exponential benefits to long-term holders.
In this article, we will learn about the special features of GMX that help this project attract such a large number of users.
II. History of GMX
The original GMX could be Gambit Financial, a Spot and Perpetual exchange on BSC, then renamed and expanded on Arbitrum. At that time, most of GMX’s Spot trading volume was on BSC, however after successfully developing Perpetual product on Arbitrum, GMX stopped working on BSC. Currently, GMX exchange operates on 2 chains Arbitrum and Avalanche.
As one of the first Perp exchanges on Arbitrum, GMX attracted a lot of attention at the time of launch, revenue increasing steadily during the first 3 months of operation.
GMX revenue in the first 3 months of launch
Booming strongly in the first year, GMX still retains that growth rate, now the number of new users has decreased, but the trading volume on GMX is still quite stable, even increasing during the downtrend period in last January and February.
Trading volume on GMX over time
Meanwhile, the trading volume on other Perpetual exchanges such as dYdX, Perpetual, MCDEX, etc which have all decreased sharply in recent times. This motivates users to dig deeper into this GMX Protocol.
III. Striking Features of GMX
GMX’s operating model is based on 3 special concepts: Liquidity Pool with 0 slippage; Index tokens; Rebalance Portfolio.
Liquidity Pool on GMX
GMX is an exchange with a rather special operating model, the project does not apply an order-book model like dYdX, nor does it use AMM pools like Perpetual. GMX has its own liquidity pools and the price will be traded based on the Oracle price.
For example, a user wants to swap ETH to DAI on GMX, the way it works will be as follows:
(1) First, the user’s ETH will be transferred to ETH Pools.
(2) After confirming ETH has arrived, GMX will transfer DAI from DAI pools to the user’s account.
(3) Prices will be calculated based on Oracle powered by Chainlink, using TWAPs from major DEXs.
Same with Margin and Perpetual feature:
(1) At GMX, users can use maximum leverage of x30. To use leverage, the user must have collateral, GMX accepts any asset traded on GMX as collateral.
(2) For instance, if you want to use x5 leverage to buy ETH, a user can simply open a Long/Short position at Oracle’s price, the project will implicitly understand that the user is borrowing USDC and buying ETH.
(3) When Long/Short on GMX, users will also bear some fees such as: Transaction Fees: Initial transaction fee to open a position; Lending Fees: Borrowing fees to increase leverage; Spread: The small fee paid to the exchange (middle party). As a result, users are not subject to funding rate fees because the price on GMX is always equal to the actual price (using oracle).
Pros:
Generally, with this quite special liquidity pool model, GMX brings many benefits to Traders, the first is no funding fees, cheaper. In addition, GMX is a 2-session exchange on Arbitrum and Avax which are both platforms with low transaction fees; therefore, trading on GMX has a smoother experience and less costs.
Besides, because of the transaction at Oracle price, users can trade in large volumes, possibly up to millions of USD without fear of slippage. In this regard, the GMX model is similar to the Synthetix (SNX) model.
Trading on GMX is zero-slippage, similar to that on Synthetix.
On the exchange side, GMX can provide large liquidity without the high TVL like AMMs. GMX exchange also has some features like Stoploss, Trigger, Partial Liquidation,etc. These are convenient tools for Traders. In short, GMX has most of the features and advantages that please traders
Cons:
First, the number of trading pairs of GMX is quite small, in addition to stablecoins, only 4 tokens are traded which are BTC, ETH, UNI, LINK. Compared to other Perpetual DEXs, it is much less: dYdX has nearly 20 pairs, Drift Protocol has more than 10 pairs, etc.
Second, when using the liquidity pool model, the trading volume on GMX is limited by the liquidity in the pool itself. This means that users cannot trade with higher volumes. However, GMX has somewhat solved this problem when it successfully attracted more than $163 M of liquidity.
Liquidity Provider
Providing liquidity on GMX will work as follows:
(1) Users who want to provide liquidity on GMX, can provide with many tokens (ETH, BTC, LINK, UNI, USDC,…).
(2) In return, users will receive GLP tokens. Conversely, when users do not want to provide liquidity anymore, they can sell GLP tokens to receive assets in the pool.
GLP is the token that represents all liquidity pools on GMX. GLP can be understood as an index representing a basket of assets used to provide liquidity on GMX.
That means that when providing liquidity on GMX, users are providing liquidity for the entire asset on it, not just a single token.
Meaning, users are investing in 1 index with the following ratio: 37% USDC: 26.7% ETH: 13.5% BTC: 10.6% DAI:etc
Therefore, when the assets in the asset basket increase, the price of the GLP token will increase, and vice versa, when the value of the basket of assets decreases, the price of the GLP token will decrease.
Rebalance in Liquidity Pools
The ratio of assets in the Pool will not be fixed and decided by GMX. As an exchange, GMX must ensure good liquidity for trading activities, each asset will have a limit rate. For example, the optimal ETH ratio calculated by GMX is 25%, BTC is 15%, USDC is 30%, etc
But according to the current image, the ratio of ETH is 26.7%, USDC is 37%, which is higher than optimal. Therefore, to lower the ratio of ETH, USDC in the pool, GMX will reduce the transaction fee when traders using other tokens buy ETH in the pool or use GLP. Conversely, if Trader wants to sell ETH, increase the amount of ETH in GMX’s Liquidity Pool, they will incur higher fees. Currently, the transaction fee on GMX fluctuates at 0.2% – 0.4%.
Liquidation
Liquidation rate on GMX ranges from 60 – 70%.
Liquidation is important for every exchange, at GMX, with liquidity pools, the liquidity provider (GLP holder) is also the one who will liquidate the “liquidated” orders.
At the same time, with profit orders from investors, the liquidity provider is also the party that settles and pays the interest. The liquidity provider acts as a Clearing-House.
Simply put, at GMX, traders do not trade with each other, but with the liquidity provider itself. If the trader makes a profit, the liquidity provider will lose and vice versa.
Risks and benefits of GMX holders
Providing liquidity troubles from taking on too much risk:
– Must provide liquidity for a basket of assets instead of a separate token.
– The market is less volatile, traders have few transactions, and the fees are low.
– Great risk when assets depreciate.
– Risk of loss when traders profit too much.
Therefore, to compensate for the above risks, the value received by GLP is also very high. However, the risks can be considered as controllable risks.
Regarding the asset basket, investors can look at the current asset portfolio and ratio, to make investment decisions. Regarding the profit/loss of traders, according to profit/loss statistics on GMX exchange, traders tend to lose more than profit over the past 4 months, the loss value is about 20% larger than the profit value.
Although there may be a profit or a loss depending on the market situation (value of the asset basket and the ability of the user to trade), GLP holders are nonetheless taking on additional risks to themselves. GMX also understands the difficulties that LP on GMX has to endure, GLP token will receive additional benefits as follows
Get 70% of all fees on GMX platform, fees will be paid in ETH or AVAX: As I said above, current GMX fees include:
- Lending fee.
- Transaction fee (swap).
- Spreads.
That’s all about the business model of the GMX exchange. Next we will learn about the part you are more interested in, which is the value of the GMX token.
According to Token Terminal, GMX’s daily revenue ranges from about $100,000 – $200,000, which is also quite a large number. At the same time, revenue is also in an uptrend and quite stable, compared to other Perp exchanges such as dYdX, Perp, MCDEX (revenue is decreasing steadily), GMX’s revenue is having a good “performance”.
IV. What is GMX Token?
1. Detailed Information about GMX Token
GMX will have 2 types of tokens: GMX token and EsGMX token. In which, GMX is the native token and EsGM is the reward token for staking users.
2. Use Cases of (Project Token)
Benefits of GMX token
First, GMX is the native token of the GMX exchange, so GMX holders have voting rights for GMX governance activities.
Next, from the above revenue, GMX will be divided among 2 contributors to the project, namely GLP holder (LP) and GMX holder (owner).
GLP holders have received 70% of the revenue, so the remaining 30% will go to GMX holders, in addition, GMX will also receive incentives from the GMX project including esGMX and Multiplier Points (more on that later).
In particular, the revenue shared for GMX holders will be divided in the form of ETH/AVAX, instead of GLP like other projects, which helps limit the selling force of GLP in the market.
Benefits of esGMX:
Staking and getting rewards similar to GMX staking. (1 esGMX staking receives a reward equivalent to 1 GMX staking).
Linear vesting within 1 year to receive GMX tokens: 100 esGMX vesting within 1 year you will receive 100 veGMX. While waiting for vesting, esGMX will not receive rewards.
In this way, GMX directs users to use the product longer, and at the same time, the GMX token is also subject to less selling force from this Incentives program.
Multiplier Point
esGMX is a GMX Staking reward, and to encourage users to staking GMX long and not vesting esGMX, GMX has developed Multiplier Points. This is a very good model and strong growth in the long term.
Multiplier Points (MP) is a cumulative reward when you staking GMX and esGMX a lot over time, with a fixed APR of 100%, ie if you staking 1000 GMX in 1 year, users will receive 1,000 Multiplier Points.
With Multiplier Point, you can also staking (by pressing the Compound button) similar to esGMX, and receive the same reward as when staking 1 GMX.
V. How to earn & own (Project Token)?
- Guidelines to earn & own (Project Token)
VI. (Project Token) Recent Developments
The GMX exchange is a project that follows the roadmap very carefully, what is written in the two most recent roadmaps Q3/2021 and Q4/2021 have been done right: Launching GMX on Avalanche, developing a bridge from Avalanche and opposite,etc.
With such a dedicated and visionary team, GMX can be a bright name in the Derivatives market in the near future, especially in the period when Derivatives puzzle pieces are being preferred by more people than our services. CEX floor.
GMX is currently the No.1 Perpetual exchange on Arbitrum and Avalanche platforms, both of which are very potential. Arbitrum is Layer-2 with the highest TVL number one today, while Avalanche is one of the three most impressive blockchains in 2021 along with Solana and Terra, the potential for these two blockchains to continue to explode in the near future is complete. maybe, and when it does, GMX will certainly benefit.
Regarding products, GMX can develop further in some points such as:
- Add swap, perp pairs by adding other tokens to the GLP pool.
- Increase leverage ratio, current leverage is x30, can be raised to x50, x100 to facilitate Traders.
- Develop GMX on other Blockchains.
VII. Teams, Funds & Partners of (Project Token)
1. Team
2. Investment Funds
3. Partners
VIII. FAQs about (Project)
- Providing FAQs about (Project) (commonly 4 Q&A)
Conclusion
Above is the entire operating model of GMX – a unique project in the market. We think this is a potential project and it is difficult to have a clear direction in the future. What do you guys think about this project? Please leave a comment below to exchange and discuss.
