TL;DR

GMX is a decentralized and permissionless exchange for perpetual swaps and spot trades. Traders can easily trade on-chain cryptocurrencies by simply connecting their wallets. GMX has a native token of the same name, which functions as a governance, utility, and value accumulation token for the GMX protocol. Users can stake GMX tokens and earn a portion of the protocol's fees, as well as take advantage of other incentives. GMX currently supports the Arbitrum and Avalanche networks.

Introduction

Blockchain and its application in finance and cryptocurrencies have enabled the development of the decentralized finance (DeFi) sector. The rise of DeFi began in 2020 with the so-called “DeFi summer”. Now, GMX demonstrates that it is possible to carry out leveraged spot and perpetual trades in a decentralized way. The trading experience resembles the functionalities of centralized brokers, but is done directly from a personal cryptocurrency wallet.

What is GMX?

GMX is a decentralized spot and perpetual trading exchange that allows users to trade BTC, ETH and other popular cryptocurrencies directly from their crypto wallets. GMX users can carry out spot swaps and perpetual futures trades with leverage of up to 50x, in the same way as with a centralized broker. However, instead of using a centralized exchange, they maintain custody of their assets through a cryptocurrency wallet.

GMX aims to provide a better experience with low swap and trade fees, without impacting the price of trades. Trades happen through its native multi-asset pool, GLP, which charges fees to liquidity providers. Additionally, GMX uses Chainlink oracles to obtain dynamic pricing and aggregate prices from other high-volume exchanges.

GMX was introduced on the Arbitrum One blockchain when the network launched in September 2021. Arbitrum is a Layer-2 Rollup solution designed to increase the speed and scalability of Ethereum smart contracts. Later in January 2022, GMX deployment continued on Avalanche, which is also an EVM-compatible high-speed blockchain.

How does GMX work?

Trading on GMX is facilitated by a multi-asset pool called GLP. It consists of 50-55% stablecoins, 25% ETH, 20% BTC, and 5-10% other altcoins such as Chainlink and Uniswap.

Liquidity is added when users issue GMX Liquidity Provider (GLP) tokens. As a reward for issuing LPG, they earn 70% of all fees generated on that specific blockchain. Unlike what happens in some liquidity pools, GLP tokens do not suffer impermanent loss.

Anyone can become a provider of this liquidity pool and earn fees in return. Users who wish to trade perpetual or spot swaps can do so using the provided assets. Furthermore, the LPG pool is a counterparty for traders; Because GLP token holders provide the liquidity used for leveraged trading, they profit when traders lose — and vice versa.

The GLP token can be issued using any of your index assets, and burned to redeem any index asset. Unlike the GMX token, it is automatically added to the stake and is non-transferable. The price, rewards, and index composition of GLP are different between the Arbitrum and Avalanche networks.

What is the GMX token?

The GMX token is a utility and governance token. Holders can use the token to vote on proposals that help decide on the exchange's future changes.

Token holders who stake GMX also receive three other rewards from the protocol. First, 30% of all protocol fees generated are distributed to GMX stakers. These fees are collected from market making, swap fees and leverage trading and are paid in ETH or AVAX.

Secondly, stakers earn collateralized GMX tokens (esGMX). These esGMX tokens can also be used for staking, to obtain rewards, or invested. When a user invests them, the tokens are converted back to GMX over the course of 12 months. Therefore, esGMX issuances are a form of locked staking that prevents inflation and prevents people from selling their GMX tokens outright.

Finally, stakers earn Multiplier Points that increase their income and reward long-term holders, without contributing to inflation. These dual incentives encourage commitment to GMX and further strengthen the decentralized ownership of the platform.

The GMX token has a maximum supply of 13.25 million, with 8.2 million in circulation. Currently, more than 83% of tokens in circulation are staked.

Or is it back to GMX only?

Trading System

The GMX platform allows traders to open leveraged positions through a simple swap interface, which resembles traditional trading platforms. Additionally, GMX is trustless and self-custodial, meaning anyone can trade cryptocurrencies directly from their private wallet.

Its dual broker model supports spot swaps and leveraged perpetual swaps trades. This should improve capital efficiency due to the high asset utilization of the LPG pool, which allows users' deposits to generate extra income and not sit idle.

The GMX platform allows entry and exit of trade positions without impact on the price. This model helps traders get better entry prices than some order book-based brokers, which can have issues with slippage. GMX also uses an aggregate of Chainlink oracles and other price feeds to smooth out price fluctuations, which helps keep positions protected from temporary means of liquidation.

The ecosystem

GMX emphasizes the importance of community and seeks to promote the DeFi mindset of engagement and tool development among its users.

Its community-created tools include a Telegram positions bot, the gmx.house leaderboard, the gmxstats.com page, Dune Analytics Dashboards, and calculators that benefit traders, stakers, and liquidity providers. GMX has a growing list of collaborative projects building DeFi functionality with GMX composable blocks.

The community also takes care of communication related to the GMX ecosystem. For example, the community-run weekly newsletter The Blueberry Pulse highlights developments in the GMX ecosystem. Blueberry Podcast does the same in audio format.

How to use GMX

Trading

  1. The GMX trading interface is displayed next to the price chart. To start a leveraged trade, click on “Long” or “Short” and set your preferences. At GMX, simple, low-rate spot swaps are also available. Click on the "Swap" tab to open the interface and swap between tokens in the GLP pool.

  2. The first token represents the collateral you provide and the token below is the asset being traded. The leverage control bar indicates the amount you are borrowed from the GLP pool. Limit, take-profit and stop-loss orders are available.

  3. Open trades will be displayed under "Positions". You can click “Edit” to deposit or withdraw collateral amounts. Opening and closing a leveraged trade costs a fee of 0.1% of your position size. Traders also pay an hourly loan fee that depends on usage. For detailed instructions, visit the trading help page.

Staking

To stake your GMX tokens and earn rewards, you need to connect your wallet and select “Stake”.

After confirming the on-chain transaction in your wallet, you will start earning 30% of all GMX protocol fees, as well as incentives in the form of esGMX and Multiplier Points.

In the GMX user interface, you can clearly see the increase of the three types of rewards under "Total Rewards". To stake the rewards obtained and increase your income, you can click on the "Compound" button.

How to buy GMX on Binance

You can buy GMX on cryptocurrency exchanges like Binance.

1. Log in to your Binance account and go to [Trade] -> [Spot].

2. Type “GMX” in the search bar to see available trading pairs. We will use the GMX/BUSD pair as an example.

3. In the [Spot] tab, enter the amount of GMX you want to buy. In this example, we will use a market order. Click [Buy GMX] to confirm your order. The purchased GMX tokens will be credited to your Spot wallet.

GMX plans

GMX's own decentralized autonomous organization (DAO), GMX DAO, planned its roadmap through its internal governance process. GMX's goal is to become an even more complete and easy-to-use DEX for on-chain trades with leverage. The current roadmap includes:

Synthetics

Synthetics will be a new class of tokens that will be available on the exchange. Synthetic cryptoassets derive their value from any underlying asset, such as stocks, commodities or digital currencies. They are essentially digital representations of derivatives.

Improved UI and UX

GMX strives to further improve the user interface (UI) and user experience (UX) for users of the protocol. For example, GMX plans to integrate TradingView charts into its platform.

X4: Protocol-controlled broker

GMX's long-term goal is to become an advanced Automated Market Maker (AMM) that allows other DeFi projects to build on its liquidity pools and fully customize the functions of their pools. These projects could then specify any custom behavior they wanted when buying and selling tokens and when adding and removing liquidity.

Network expansion

GMX also plans to launch the exchange on a third blockchain network alongside Arbitrum and Avalanche.

Final considerations

Cryptocurrency trading has come a long way. GMX allows anyone with a cryptocurrency wallet to benefit from its transparent decentralized exchange services. Traders can use its platform for perpetual swaps and spot trades. Furthermore, users can enjoy various benefits and participate in governance by holding GMX tokens. As we have seen, the GMX community makes decisions about the future of the platform; therefore, new services and features may still be added to those that the broker already offers.