Overview:
Decentralized (DEX) exchange GMX specializes in perpetual futures. The platform currently supports trades with no price impact and low swap fees on both the Arbitrum and Avalanche blockchains. On well-known cryptocurrencies like Bitcoin, Ethereum, Chainlink, Uniswap, and Avalanche, users can leverage up to 30x. Previously known as Gambit, the protocol was built on the Binance Smart Chain (BSC) blockchain. Then, in September 2021, it launched on Arbitrum, and at the start of 2022, it expanded to Avalanche.
Decentralized spot trading is another service provided by GMX, enabling users to easily swap and exchange various crypto assets using their wallets. The protocol’s decentralized trading platform for perpetual contracts, however, is its most well-known feature.
The protocol makes use of a special multi-asset liquidity pool that earns rewards from trading commissions, leverages trading commissions like spreads, funding commissions, and liquidations, as well as asset rebalancing to support trades. It’s noteworthy that these rewards go back to the liquidity providers.
What’s unique about GMX?
In contrast to other DEXs, GMX uses a token model that aims to reduce the impermanent loss for liquidity providers.
The catch with the GMX model is that liquidity providers assume the risk of capital loss rather than temporary loss if GMX traders are profitable. Fees are paid to liquidity providers for taking the other side of the trade when traders lose money or are liquidated. In contrast, liquidity providers bear the loss if traders are profitable.
The incentive program allows partner protocols to develop new kinds of products on top of the revenue model used by GMX while offsetting some of the risk involved in providing liquidity on the exchange.
Stats:
Since its launch, GMX has seen an average daily volume of about $100M and a total cumulative volume of about $67B. However, because of the current high volatility, the volume has increased to between $300 and $500 million per day and, on occasion, even more than $1 billion per day.
There was a sudden spike during the FTX’s fiasco week of November. Also, There was a spike in fees and revenue too. Users who swap on the platform, get liquidated or engage in margin trading pay fees to GMX. Fees are also generated by the later-mentioned burning and minting of GLP. The GMX system has two main tokens: GMX, which is the native governance token, and GLP (the GMX liquidity token). The GMX token is a standard governance token that can be staked to get 30% of protocol fees. GLP is a pretty unique token that lets users act as the other side of GMX trades. GLP is a token that can be traded on GMX. It is backed by a basket of other tokens. GLP is made up of 33% ETH, 20% WBTC, 45% Stables like USDC, USDT, DAI, FRAX, and 1% each of UNI and LINK.
OI surged and has been on a constant rise for the last few days even days after FTX’s bankruptcy.
There was a sudden spike during the FTX’s fiasco week of November. Also, There was a spike in fees and revenue too. Users who swap on the platform, get liquidated or engage in margin trading pay fees to GMX. Fees are also generated by the later-mentioned burning and minting of GLP. The GMX system has two main tokens: GMX, which is the native governance token, and GLP (the GMX liquidity token). The GMX token is a standard governance token that can be staked to get 30% of protocol fees. GLP is a pretty unique token that lets users act as the other side of GMX trades. GLP is a token that can be traded on GMX. It is backed by a basket of other tokens. GLP is made up of 33% ETH, 20% WBTC, 45% Stables like USDC, USDT, DAI, FRAX, and 1% each of UNI and LINK.
OI surged and has been on a constant rise for the last few days even days after FTX’s bankruptcy.
The unique users along with new users/existing users have been on a rise too. There was no significant drop in existing users even after days of FTX’s fiasco.
Trading is a hard business to get into, and most people who try it out lose money. In the business world, there is an unspoken rule called the “90-90-90 rule.” It means that 90% of traders lose 90% of their money in the first 90 days after opening an account. That’s a surprising fact that shows just how hard trading is. When it comes to their GLP tokens, the GMX team is betting on this. GLP owners act as a counterparty for traders on GMX. This indicates that GLP owners have open bets placed against traders. The current token supply and the PnL of GMX traders both affect the price of GLP. Trading has historically resulted in net losses for traders, which causes GLP to increase relative to these trader losses. But it’s crucial to remember that GLP will suffer if traders start to make a lot of money.
Since GMX started, the traders have lost more than $40 million, as shown in the chart above.
Revenue Acquisition via Fees and Other Means:
The GMX protocol makes money by charging fees when trades are opened and closed, and also by taking out a “borrow fee” every hour that a leveraged position is open. When you open or close a position, you have to pay a trading fee of 0.1% of the size of your position. The borrowing fee is the fee you pay to the other side of your trade (the GLP pool) at the beginning of every hour. All of the fees made by the exchange are given back to the people who own GMX and GLP. 70% of these platform fees will go to people who own GLP, and 30% will go to people who own staked GMX. Staked GMX owners get 30% of the fees made by both the Arbitrum exchange and the Avalanche exchange.
In spite of the bear market, GMX generates yield at a faster rate. GMX has generated millions in fees over the last five days or an average of $500k per day over the last seven days.
It is on the spot 3rd after Ethereum and Uniswap if we compare the fee generated across all the blockchains(L1/L2).
However, if we compare the fee generation on the Arbitrum ecosystem only then it’s on the 1st spot.
