In the crypto bear market, most decentralized spot and perpetual exchanges’ volumes have declined. However, GMX, one of the on-chain exchanges, has seen its TVL grow and almost touch US$400 million. We will analyze GMX by evaluating its strengths, token design, mechanisms, and risks, to find the reasons for its success.

GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. Different from other DEXs, GMX designates a multi-asset pool to be the liquidity provider. Because the liquidity providers risk losses, they can earn fees from market making, swap fees, and leverage trading.

GMX provides leverage trading with up to 30x leverage and spot trading with zero price impact on Arbitrum and Avalanche. Users should transfer their money on their Arbitrum or Avalanche wallets first and connect the wallet to GMX.

Trading Information:

Users can open long or short positions of BTC, ETH, LINK, and UNI.

Users can use one of the ETH, WETH, BTC, LINK, UNI, USDC, USDT, DAI, and FRAX to be their margin.

The entry price, exit price, and liquidation price are shown below. Users can refer to them, and open new positions.

Trading fee: Users should pay 0.1% of the position size when they open and close positions.

Borrow fee: Users should pay the borrowing fee per hour. The fee per hour will vary based on utilization, it is calculated as (assets borrowed) / (total assets in the pool) * 0.01%. The “Borrow Fee” for longing or shorting is shown below the swap box.

Although there are no price impacts for trades, there can be slippage due to price movements between when your trade transaction is submitted and when it is confirmed on the blockchain. Slippage is the difference between the expected price of the trade and the execution price, this can be customized by clicking on the “…” icon next to your address at the top right of the page.

Staked GMX receives three types of rewards: Escrowed GMX， Multiplier Points， ETH / AVAX Rewards.

30% of fees generated from swaps and leverage trading are converted to ETH / AVAX and distributed to staked GMX tokens. If you are staking on Arbitrum you would receive ETH, if you are staking on Avalanche then you would receive AVAX. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees. esGMX needs to be staked for one year to be fully unlocked as GMX, during which time users also need to stake GMX/esGMX or hold GLP. esGMX can also be used for staking and can earn the same benefits as GMX.

For now, staking GMX or esGMX can get around 13.45% APR on Arbitrum and 13.41% on Avalanche.

GLP consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. The price for minting and redemption is calculated based on (the total worth of assets in the index including profits and losses of open positions) / (GLP supply).

For Arbitrum, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in ETH. For Avalanche, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in AVAX. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.

For now, GLP staking rewards are around 23.15% APR on Avalanche and 29.41% on Arbitrum.

As GLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa. However, In the history data, the leverage traders keep losing money, so the GLP holders can also get profit from their losses. The long bear market is one of the reasons.

As a new perpetual protocol, the mechanism of GMX is totally different from other perpetual DEXes. It sets a pool for the liquidity providers with a zero price impact. It uses oracle to get prices from many main exchanges to reduce the impact of large transactions on market prices.

For leverage traders, it is a good perpetual protocol, because it provides max 30x leverage trading, 0% price impact, and fair market price.

For people who want to get rewards from staking, it is also a good protocol. GMX staking users can get rewards from a 30% swap and leverage trading fees with a high APR. GLP holders can get a 70% swap and leverage trading fees with a high APR to incentivize users to provide liquidity.

Because of GMX’s mechanisms, it has risks. Because GMX provides liquidity from pools, not from users, the long and short positions are not the same. If there is a significant mismatch between the long positions and short positions, the pools will be borrowed out. When extreme market conditions occur and the overall market falls rapidly, the liquidity pool will continue to reduce its value. If a very big position gets a very large profit by leverage trading, the pool may not pay for the profit.

Users should take into account the capital status and incentive measures of the GMX protocol, and also analyze the current market environment to decide how to use GMX to gain benefits and avoid risks.

Written by: Lucio Lyu

Twitter: @imLucio_eth

In the crypto bear market, most decentralized spot and perpetual exchanges’ volumes have declined. However, GMX, one of the on-chain exchanges, has seen its TVL grow and almost touch US$400 million. We will analyze GMX by evaluating its strengths, token design, mechanisms, and risks, to find the reasons for its success.

GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. Different from other DEXs, GMX designates a multi-asset pool to be the liquidity provider. Because the liquidity providers risk losses, they can earn fees from market making, swap fees, and leverage trading.

GMX provides leverage trading with up to 30x leverage and spot trading with zero price impact on Arbitrum and Avalanche. Users should transfer their money on their Arbitrum or Avalanche wallets first and connect the wallet to GMX.

Trading Information:

Users can open long or short positions of BTC, ETH, LINK, and UNI.

Users can use one of the ETH, WETH, BTC, LINK, UNI, USDC, USDT, DAI, and FRAX to be their margin.

The entry price, exit price, and liquidation price are shown below. Users can refer to them, and open new positions.

Trading fee: Users should pay 0.1% of the position size when they open and close positions.

Borrow fee: Users should pay the borrowing fee per hour. The fee per hour will vary based on utilization, it is calculated as (assets borrowed) / (total assets in the pool) * 0.01%. The “Borrow Fee” for longing or shorting is shown below the swap box.

Although there are no price impacts for trades, there can be slippage due to price movements between when your trade transaction is submitted and when it is confirmed on the blockchain. Slippage is the difference between the expected price of the trade and the execution price, this can be customized by clicking on the “…” icon next to your address at the top right of the page.

Staked GMX receives three types of rewards: Escrowed GMX， Multiplier Points， ETH / AVAX Rewards.

30% of fees generated from swaps and leverage trading are converted to ETH / AVAX and distributed to staked GMX tokens. If you are staking on Arbitrum you would receive ETH, if you are staking on Avalanche then you would receive AVAX. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees. esGMX needs to be staked for one year to be fully unlocked as GMX, during which time users also need to stake GMX/esGMX or hold GLP. esGMX can also be used for staking and can earn the same benefits as GMX.

For now, staking GMX or esGMX can get around 13.45% APR on Arbitrum and 13.41% on Avalanche.

GLP consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. The price for minting and redemption is calculated based on (the total worth of assets in the index including profits and losses of open positions) / (GLP supply).

For Arbitrum, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in ETH. For Avalanche, holders of the GLP token earn Escrowed GMX rewards and 70% of platform fees distributed in AVAX. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.

For now, GLP staking rewards are around 23.15% APR on Avalanche and 29.41% on Arbitrum.

As GLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa. However, In the history data, the leverage traders keep losing money, so the GLP holders can also get profit from their losses. The long bear market is one of the reasons.

As a new perpetual protocol, the mechanism of GMX is totally different from other perpetual DEXes. It sets a pool for the liquidity providers with a zero price impact. It uses oracle to get prices from many main exchanges to reduce the impact of large transactions on market prices.

For leverage traders, it is a good perpetual protocol, because it provides max 30x leverage trading, 0% price impact, and fair market price.

For people who want to get rewards from staking, it is also a good protocol. GMX staking users can get rewards from a 30% swap and leverage trading fees with a high APR. GLP holders can get a 70% swap and leverage trading fees with a high APR to incentivize users to provide liquidity.

Because of GMX’s mechanisms, it has risks. Because GMX provides liquidity from pools, not from users, the long and short positions are not the same. If there is a significant mismatch between the long positions and short positions, the pools will be borrowed out. When extreme market conditions occur and the overall market falls rapidly, the liquidity pool will continue to reduce its value. If a very big position gets a very large profit by leverage trading, the pool may not pay for the profit.

Users should take into account the capital status and incentive measures of the GMX protocol, and also analyze the current market environment to decide how to use GMX to gain benefits and avoid risks.

Written by: Lucio Lyu

Twitter: @imLucio_eth