What is GMX? Learn about the decentralized derivatives trading platform GMX

• What is GMX?
• GMX . Products
• What is GMX Token?
• What is GLP Token?
• Why GMX?
• What makes GMX so special?
• Trading on GMX
• Tokenomics
• summary

What is GMX?

GMX is a decentralized spot and perpetual contract trading platform that allows users to swap tokens with low fees. This protocol first appeared on Arbitrum in September 2021 before launching on Avalanche in early 2022.

GMX provides a single multi-asset liquidity pool, making transactions smoother. Besides, GMX also allows users to provide liquidity in the pool, to earn an additional profit as part of the swap fee on the protocol. In addition, users can trade leverage (spread, funding fees, liquidation) and rebalance assets transferred back to liquidity providers.

The GMX platform is a combination of decentralized finance and a cryptocurrency exchange. The project is a decentralized derivatives exchange currently deployed on the Arbitrum scaling solution and the Avalanche blockchain. The protocol provides spot trading for several cryptocurrencies, namely ETH, WBTC, LINK, UNI, DAI, USDC, USDT and FRAX.

GMX's perpetual swap market allows traders to buy or sell tokens with up to 30x leverage. Instead of being done through the OrderBook, the transaction will be done through a shared liquidity mechanism called GLP. The price of the token on GMX will be secured by Chainlink – a leading Oracle project in the market.

GMX's Tokenomics model consists of two tokens with distinct functions:

• GMX is a governance token
• GLP is a trading liquidity token 

GMX has a total TVL value of more than $260 million, leading the entire Arbitrum ecosystem.

GMX . Products

Swap (Swap)

• Token swaps on GMX are done at market prices supported by the Chainlink project.
• Transaction fees range from 0.2% to 0.8% depending on the asset composition of GLP.
• Use GLP shared liquidity mechanism.

Perpetual Trading

• Traders can buy or sell on their preferred trading pair.
• Leverage ranges from 1.1x to 30.5x.
• Market, limit, take profit and stop loss orders are available.
• Position opening/closing fee is 0.1%
• Only assets in the GLP pool are tradable because the project uses a shared liquidity mechanism through GLP.

GLP

GLP is a liquidity provider (LP) token that can be minted or burned to redeem index component assets. The GLP swap fee value is not fixed and the index component assets are designed to bring the actual component weights back to the target weights.

Example : If the GLP contains ETH and ETH is higher/lower than the target weight of that pool, then transactions that can decrease/increase ETH in the pool will be incentivized with lower fees.

GLP holders act as the sole counterparty of all traders, thus incurring more P&L than traders' net positions. GLP producers will accumulate 70% of the platform fees as LP rewards.

Rewards are paid out in margin GMX (esGMX) and ETH – for staking on Arbitrum, or Avalanche (AVAX) – for staking on Avalanche.

Governance Staking

GMX is the exchange's governance token, which can be staking to receive 30% of the platform fee and paid with:

• esGMX
• Multiplier Points
• ETH (for investors on Arbitrum)
• AVAX (for players on Avalanche)

In there:

• esGMX can be used for staking and receiving rewards, just like GMX.
• Multiplier Points can be used to increase ETH or AVAX rewards and come with many bonus benefits in the future.

What is GMX Token?

GMX is the platform's governance and utility token that allows investors to receive 30% of the trading fees collected from the entire platform. GMX is available on Arbitrum and Avalanche, which can be transferred via the Synapse Protocol bridge.

Users can staking their GMX on Arbitrum or Avalanche and earn 3 different types of rewards:

• Escrowed GMX (esGMX)
• Multiplier Points
• ETH (staking on Arbitrum) and AVAX (staking on Avalanche)

What is GLP Token?

GLP is the native liquidity provider token of the GMX protocol. Basically, GLP is an index of large cap assets backed by the GMX protocol, including ETH, BTC, LINK, UNI, USDC, USDT, DAI, MIM and FRAX, it automatically rebalances every row. week.

This asset serves as an index of assets that exist in the multi-asset pool system on GMX. It can also be staking to earn esGMX and ETH rewards over time. Notably, GLP manufacturers receive 70% of GMX's cumulative fees.

Why GMX?

A perpetual swap is like a futures contract with no expiration date. GMX offers unattended perpetual swaps with a user-friendly and easy-to-use UX design. On GMX, traders can Long/Short quickly with low swap and transaction fees. In addition, liquidity providers (LPs) can make money by providing assets to the GMX protocol's multi-asset system to facilitate smooth swaps and leveraged transactions.

What makes GMX so special?

GMX is positioning itself as a leading project in the field of providing derivative products with two main points:

• Powerful accumulation of value for GMX token holders and liquidity providers, denominated in ETH.

• Inflationless Token Model: The GMX Liquidity Model (GLP) does not claim to incentivize an inflationary token.

Trading on GMX

Trading on GMX is backed by a multi-asset GLP team worth over $254 million. Unlike many other leveraged trading services, GMX users will borrow funds from a liquidity pool containing BTC, ETH, USDC, DAI, USDT, FRAX, UNI, and LINK, instead of a single entity.

Users can switch to Long/Short or simply swap tokens on the GMX exchange. Users can choose a minimum leverage of 1.1x and a maximum of 30x for perpetual trades.

Token price data on GMX is provided by Chainlink . As we can see, GMX uses aggregated price feeds from top volume exchanges to minimize the risk of liquidation due to real-time price misinformation. Liquidation occurs when the user's collateral is not enough to sustain the trade, then the platform forces the position to be closed and funds are deposited to cover the loss.

When a user opens a transaction or deposits collateral, GMX takes a snapshot of the asset's value. Therefore, the value of the collateral does not change during the transaction even if the price of the underlying asset changes.

The transaction fee to open or close a position is 0.1% and the swap fee is 0.33%. Variable borrowing fees are also deducted from the hourly deposit. GMX claims it can execute large trades exactly at tick prices depending on the depth of liquidity in its trading pool.

When users want long-term use, they can provide collateral with the token they are staking. Any profits they receive are paid in the same asset. For short trades, collateral is limited to GMX-backed stablecoins USDC, USDT, DAI or FRAX. Profits on short positions will be paid in stablecoins that users use as collateral.

Tokenomics

GMX is the utility and governance token of the protocol. GMX has a forecasted maximum supply of 13.25 million tokens, which could increase with more product launches in the future. However, if GMX wants to issue more tokens, it must be approved by the management board.  

GMX will distribute 13.25 million tokens as follows:

• 6 million GMX from XVIX and Gambit migrations
• 2 million GMX paired with ETH for liquidity on Uniswap
• 2 million GMX reserved for registration from deposit GMX bonus
• 2 million GMX will be managed by floor price fund
• 1 million GMX is dedicated to marketing, partnerships and community developers
• 250,000 GMX was distributed linearly to the development team within 2 years

The largest portion of the tokens (45.3%) was allocated for token conversion from XVIX and GMT (Gambit) token holders. This process involves swapping the original asset (XVIX, XLGE and GMT) for GMX at a price of 1 GMX = 2 USD.

In the design of GMX, there is the appearance of "floor price fund". This fund stores ETH and GLP, it is developed in two ways:

• GMX provides and owns the GMX/ETH pool, the fees from this trading pair will be converted to GLP and deposited into the floor price fund.
• 50% of the money received through Olympus bonds is deposited into the floor price fund, the remaining 50% is used for marketing.

The floor fund helps ensure liquidity in GLP and provides reliable ETH rewards for those who staking GMX.

When the floor price fund increases, it can be used to buy back and burn GMX if “GMX floor price/Total supply” is less than the market price of GMX. At that time, the minimum floor price of GMX will be calculated according to ETH and GLP.

summary

GMX is a derivatives exchange with a user-friendly interface designed using Chainlink's reputable price data feed. Besides, GMX also provides a trading platform with fast transaction processing speed because it has an abundant source of liquidity and extremely comfortable fees. However, the downside of GMX is the lack of diversity in supporting the trading pairs currently available on the platform. In the future, if GMX can support more trading pairs, it could become the leading derivatives exchange in the DeFi space . 

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