Summary
GMX is a decentralized and permissionless perpetual swap and spot exchange. Traders can use it to trade cryptocurrencies on-chain by simply connecting their wallet. GMX has a native token called GMX that serves as a governance, utility, and value pool token for the GMX protocol. Users can stake GMX tokens and earn a share of GMX protocol fees plus benefit from other incentives. GMX currently supports Arbitrum and Avalanche networks.
Introduction
Blockchain and its application to finance, namely cryptocurrencies, have enabled the development of decentralized finance (DeFi). DeFi became widely known in 2020 through a phenomenon called “DeFi summer”. Now, GMX proves that decentralized leveraged perpetual trading and spot swaps are possible. This trading experience is similar to centralized functionality, but is done directly from a personal cryptocurrency wallet.
What is GMX?
GMX is a decentralized spot and perpetual exchange that allows users to trade BTC, ETH, and other popular cryptocurrencies directly from their crypto wallets. GMX users can spot swap and trade perpetual futures with up to 50x leverage, just like on centralized exchanges. However, unlike using a centralized exchange, GMX stores their assets using a cryptocurrency wallet.
GMX aims to provide a better trading experience with low swap fees and trades that do not impact prices. Trading takes place through its native multi-asset pool, namely GLP, which earns fees for liquidity providers. Additionally, GMX uses Chainlink Oracle for dynamic pricing to aggregate prices from other high-volume exchanges.
GMX was first launched on the Arbitrum One blockchain when the network went live in September 2021. Arbitrum is an Ethereum layer 2 rollup, a solution designed to increase the speed and scalability of Ethereum smart contracts. Then, in January 2022, GMX implementation continued on Avalanche which is also a high-speed blockchain compatible with EVM.
How Does GMX Work?
Trading on GMX is facilitated by a multi-asset pool called GLP. The composition of this pool is 50-55% stablecoins, 25% ETH, 20% BTC, and 5-10% other altcoins, such as Chainlink and Uniswap.
Liquidity is added when users mint GMX Liquidity Provider (GLP) tokens. In exchange for minting GLP, they get 70% of all fees earned on that blockchain. Unlike some liquidity pools, GLP does not experience impermanent losses.
Anyone can become a supplier to these liquidity pools and earn fees in return. Users who wish to trade perpetual or spot swaps can do so using the assets provided. In addition, the GLP pool is a counterparty to traders. When GLP token holders provide liquidity used for leveraged trading, they will profit when traders lose — and vice versa.
GLP tokens can be minted using any of its index assets and burned to redeem any index asset. Unlike GMX tokens, GLP is staked automatically and cannot be transferred. The prices, rewards, and composition of the GLP index are different between Arbitrum and Avalanche.
What is GMX Token?
GMX token is a utility and governance token. Token holders can use them to vote on proposals to help decide the future direction of the exchange.
Token holders who stake their GMX also get three other rewards that are used by the protocol as rewards to users. First, 30% of all protocol fees earned will be distributed to GMX stakers. These fees are collected from market making, swap fees, and leveraged trading, and are paid in the form of ETH or AVAX.
Second, stakers get escrowed GMX (esGMX) tokens. esGMX tokens can be put into staking to get rewards as well or put into vesting. These tokens are converted back into GMX over 12 months when the user vests them. In this way, esGMX emissions are a form of locked staking that prevents inflation and prevents people from immediately selling their GMX.
Lastly, stakers earn Multiplier Points which increase yields and reward long-term holders without causing token inflation. This dual incentive stimulates commitment to GMX and advances decentralized ownership of the platform.
GMX tokens have a maximum supply of 13.25 million, while 8.2 million of them are in circulation. More than 83% of the tokens in circulation are currently in staking.
What Makes GMX Unique?
Trading system
GMX allows traders to open leveraged positions through a simple swap interface that resembles a traditional trading platform. Apart from that, GMX is an independent and trustless custodian. This means anyone trades cryptocurrency directly from their private wallet.
Its dual swap model supports spot swap and perpetual swap trading with leverage. This will increase capital efficiency due to high asset utilization from the GLP pool which allows user deposits to generate additional yields and not be idle.
GMX allows entering and exiting trading positions without affecting the price. This design can help traders in getting better entry prices than some order book based exchanges that may experience slippage related issues. GMX also uses a combination of Chainlink Oracle and other price feeds to smooth out price fluctuations which can secure positions from temporary liquidation wicks.
Ecosystem
GMX emphasizes the importance of community and has worked to foster a DeFi mindset of engagement and tool building among its users.
Its community-made tools include a Telegram position bot, gmx.house leaderboard, gmxstats.com page, Dune Analytics Dashboard, and calculators that benefit traders, stakers, and liquidity providers. GMX has a growing list of collaborative projects that build DeFi functionality with composable GMX components.
This community also handles communications about the GMX ecosystem. For example, a weekly, community-based newsletter called The Blueberry Pulse highlights developments in the GMX ecosystem. Blueberry Podcast also has the same function, but in audio format.
How to use GMX
Trading
The GMX trading interface is displayed along with a price chart. To start trading with leverage, click "Long" or "Short" to set your preferences. Simple, low-cost spot swaps are also available on GMX. Click the "Swap" tab to open the interface for swapping between tokens in the GLP pool.
The first token is the collateral you provide, while the tokens below it are the assets being traded. The leverage slider shows the amount you borrow from the GLP pool. Limit orders are available, as well as take profit and stop loss orders.
Open trades will appear under "Positions". You can click “Edit” to deposit or withdraw collateral. Opening and closing leveraged trades incurs a fee of 0.1 percent of your position size. Merchants also pay an hourly loan fee that depends on utilization. For detailed instructions, visit the trading help page.
Staking
To stake your GMX tokens and earn rewards, you must connect your wallet and press the "Stake" button.
After confirming the transaction on-chain in the wallet, you will start earning 30% of all GMX protocol fees plus esGMX incentives and Multiplier Points.
You will see the three types of rewards increase clearly in “Total Rewards” in the GMX user interface. You can click the "Compound" button to stake the rewards you get and double the yield.
How to Buy GMX on Binance
You can buy GMX on cryptocurrency exchanges, such as Binance.
1. Log in to your Binance account, then go to [Trading] -> [Spot].
2. Type “GMX” in the search bar to view available trading pairs. We will use GMX/BUSD as an example.
3. Open the [Spot] box, then enter the amount of GMX you want to buy. In this example, we will use a market order. Click [Buy GMX] to confirm the order. Purchased GMX will be added to your Spot Wallet.
Next steps for GMX
GMX's decentralized autonomous organization (DAO), namely GMX DAO, plans its roadmap through an internal governance process. GMX's vision is to become an increasingly complete and user-friendly DEX for leveraged on-chain trading. The current roadmap includes:
Synthetics
Synthetics will be a new class of tokens that will be available on these exchanges. The value of Synthetics crypto assets is derived from any underlying asset, such as a stock, commodity, or digital currency. These assets are essentially digital representations of derivatives.
Better UI and UX
GMX seeks to further improve the protocol's user interface (UI) and user experience (UX) for users. For example, GMX plans to integrate TradingView charts into its platform.
X4: Protocol Controlled Exchange
GMX's long-term vision is to become an advanced automated market maker (AMM) that allows other DeFi projects to build on top of its liquidity pools and completely customize the pool's functionality. Then, projects can define any specific desired behavior on token purchases and sales as well as for liquidity additions and removals.
Network expansion
GMX also plans to launch its exchange on a third exchange network alongside Arbitrum and Avalanche.
Closing
Cryptocurrency trading has grown rapidly. GMX allows anyone with a cryptocurrency wallet to benefit from its transparent decentralized exchange services. First, traders can use both perpetual swap and spot swap platforms. Second, users can enjoy various benefits and participate in governance by owning GMX tokens. As we've learned, the GMX community determines the future of the platform. Therefore, it is still possible for new services to be added in addition to those already offered by these exchanges.
