Introduction
GMX is a decentralized exchange protocol that deployed on two EVM chains, Arbitrum and Avalanche. The utiitty and governance token for its Arbitrum ecosystem is GMX, which generates 13% APR for the users. GMX is also a decentralized trading platform that offers both spot and perpetual exchange functionalities. Unlike centralized exchanges where you need to deposit your assets into the exchange’s custody, GMX lets you trade popular cryptocurrencies like BTC and ETH right from your own crypto wallet. In this article we’ll talk about all there is to know about GMX.
Project Overview
The GMX ecosystem is steadily expanding. With its deep liquidity, the protocol functions as a base layer for DeFi on the Arbitrum and Avalanche blockchains. GMX is the largest decentralized perpetual trading platform in DeFi, offering exposure to cryptocurrencies with up to 50x leverage, no registration, and unique benefits for traders and liquidity providers.
The problem GMX solves:
On every centralized exchange, liquidity is achieved from a traditional order book model which is reliant on market makers. An order book lists the quantities of the asset being bid on or offered at each price point, or market depth.
This is not just limited to centralized exchanges. In fact, some decentralized exchanges (dYdX) use the same exact model.
Here’s an example: Suppose that you wanted to buy $BTC at USD $10,000. In order for this to happen, someone must be willing to sell their $BTC at that price on that platform. If there is no willing seller, your buy order would not go through. Order book models thrive on multitudinous buyers and sellers present in the market. However, there are tons of flaws in this model, especially for crypto. They are costly to run and also require market makers, who must be incentivized in some way.
Background
GMX was brought to life by a group of anonymous developers, breaking traditional norms where projects typically introduce the faces behind them. The platform is the brainchild of a collaboration between two earlier protocols, XVIX and Gambit. These two platforms merged and converted their native tokens into GMX. Having an anonymous team adds an interesting dynamic: it provides a layer of protection against regulatory actions and unnecessary legal issues.
The token has caught the eye of several individual and corporate investors. A notable name on the list of top individual holders is Arthur Hayes, co-founder of the prominent cryptocurrency exchange BitMEX. Hayes holds an impressive stash of over 200,000 GMX tokens, with a current value exceeding $15 million. He acquired these tokens through a series of purchases, spending approximately 3,386 ETH or around $5.72 million at the time between March and September of 2022.
Tokenomics
The maximum supply of GMX stands at 13.25 million tokens, but more can be minted through a governance vote with a 28-day time lock. The current GMX circulating supply is around 8 million (as of Sept. 2022), which can vary depending on the number of tokens that are vested.
GMX is distributed as follows:
7.5% to prep sale participants
45.3% for absorption by token holders who decide to migrate to GMX following GMX’s rebranding from Gambit and the XVIV token merge
15.1% for the Floor Price Fund
30.2% divided equally for liquidity and reserve
1.9% for marketing and partnerships
GLP is the liquidity provider token for GMX and in addition to the GLP token, which is non tradable, there is the GMX token, which acts as the governance token for the GMX platform. GMX can be staked to receive rewards:
– 30% of all protocol fees are distributed to GMX stakers ( 70% of fees go to LPs). The fees are paid in ETH on Arbitrum and AVAX on Avalanche.
– GMX stakers earn esGMX, which can be further staked for rewards or vested. If vested for 12 months, esGMX is converted into GMX. Thus, esGMX is a mechanism to prevent inflation and encourage GMX holding.
Where to Purchase GMX:
The top cryptocurrency exchanges for trading in GMX stock are currently Binance, OKX, Bybit, DigiFinex, and Bitrue.
Use of GMX Defi:
It enables users to trade BTC, ETH and other popular cryptocurrencies directly from their crypto wallets.
How to Store GMX:
Since GMX is deployed on the Arbitrum and Avalanche blockchains, you can store GMX tokens in wallets compatible with them, such as Metamask and Trust Wallet. You can also safely store GMX in hardware wallets such as Ledger Nano X.
Total Supply and Distribution:
It has circulating supply volume of 9,210,534 GMX coins and a max. supply volume of 9,210,534 alongside $21,627,587 24h trading volume.
Features and Functionality
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Spot trading: You can use GMX as a DEX and swap the supported tokens for fees that range between 0.2% to 0.8%.
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Perpetual trading: This is a more popular use case because it gives traders the opportunity to use up to 50x leverage. Traders can go long or short on any offered pair, paying a 0.1% fee for opening or closing a position. Market, limit, take-profit, and stop-loss orders are available to customize the trading experience.
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Staking: Staking GMX can generate rewards that can be compounded and boosted with Multiplier Points.
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Liquidity provision: You can become an LP by locking tokens in the GLP pool to mint GLP tokens and earn rewards.
Advantages:
- You can trade with upto 50x Leverage
- GMX offers Zero price Impact
- Easy to use Interface
- GMX offers Passive Income Opportunities through Liquidity Provision and Staking.
Risks and Challenges
- Oracle Manipulation is Possible.
- Trading with Leverage Implies Increased Risk
- Limited trading pairs and chains supported
Conclusion
In a market flooded with trading platforms, GMX sets itself apart with its community centric approach and innovative features. With a focus on decentralization and user empowerment, GMX offers traders an alternative to centralized platforms without compromising on trading options and leverage. Its unique GLP token and community owned liquidity pool provide further incentives for user participation.
However, like any trading platform, GMX is not without its risks, and prospective users should conduct their own due diligence. Whether you are new to the world of crypto trading or a seasoned veteran, GMX offers a range of features designed to enhance your trading experience in a secure and decentralized environment.
Sources:
https://www.bybit.com/en/coin-price/gmx/
https://www.cryptoeq.io/corereports/gmx
https://www.tastycrypto.com/defi/gmx-platform-explained/#:~:text=GMX%20is%20the%20largest%20decentralized,for%20traders%20and%20liquidity%20providers
