GMX Protocol app review

GMX Protocol

GMX Protocol app review

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Open Dapp

Basic info

  • Token GMX
  • Audited yes
  • DAO yes
  • Yield farming yes
  • Team private
  • Hacks no

Audits

Auditors:

ABDK Consulting

ABDK Consulting

Token profile

Price Market cap.

Yolanta Chomag

Last updated: Nov 23, 2022

What is GMX

GMX is a decentralized spot and perpetual futures trading platform deployed on Arbitrum and Avalanche. Trading on the platform is supported by a multi-asset pool that earns liquidity providers fees from market making, swap fees, and leverage trading.

Dynamic pricing on the exchange is supported by the decentralized oracle network Chainlink along with TWAP (time-weighted average pricing) from DEXs with the greatest volume, such as Uniswap, PancakeSwap, SpookySwap, etc.

GMX is an improvement and rebrand from Gambit, which was running on Binance Smart Chain. Gambit, in turn, was a replacement for the $XVIX project. The new GMX platform was launched on Arbitrum in September 2021. 

How does GMX Protocol work

GMX provides spot and derivatives trading with market and limit orders and up to 30x leverage. Since there is no order book, trades are priced based on the current values provided by Chainlink.

The trading is done through a shared liquidity mechanism, where GMX liquidity token (GLP) serves as a pool of all tradable assets on the platform. 

GLP is an index of the large-cap assets supported by the GMX protocol that auto-rebalances every week. Currently, GLP consists of ETH, BTC, MIM, USDC.e, and USDC. 

The up-to-date token composition and weights can be traced on the Dashboard.  

How to use GMX Protocol

GLP tokens can be minted using any of its index assets and burnt to redeem any index asset. GMX Protocol fees for buying/minting/swapping GLP will be lower for tokens that the GLP has less of compared to its target weight. For example, if ETH is above its target weight, actions that further increase the amount of ETH will have a high fee while actions that reduce the amount of ETH will have a low fee. 

Token weights on the GMX Protocol app are adjusted to help hedge GLP holders based on the open positions of traders. For example, if a lot of traders are long ETH, then ETH would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins. If token prices are increasing, then the price of GLP will increase as well.

GLP holders act as liquidity providers and are the counterparty to traders on the platform. By providing liquidity for GLP, users are collecting fees and losses from traders. If a trader loses their position and goes through liquidation, the GLP fund accrues those funds. At the same time, if a trader earns a lot of money from a trade,  it is paid out from the GLP fund.

The GMX Protocol wallet support includes apps like MetaMask and hardware wallets such as Ledger Nano as well as all other wallets that can integrate the Arbitrum or Avalanche networks depending on where users want to trade.

The GMX token

After the Gambit and XVIX migration, XVIX, XLGE, GMT, and xGMT tokens were merged into a single GMX token. GMX is the platform’s utility and governance token.

The token holders receive various benefits for GMX staking, such as Escrowed GMX (esGMX) and Multiplier points, a gamified system that rewards users’ points for staying staked for longer and burning the points when they unstake. Escrowed GMX can be further used for staking or converted (“vested”) into GMX. Multiplier points can be staked for fee rewards by pressing the "Compound" button on the Earn page; each multiplier point will earn the same amount of ETH rewards as a regular GMX token.

The max supply of GMX is 13.25 million most of the initial circulation amount, or namely 6 million GMX, were migrated from XVIX and Gambit (pre-GMX projects). The initial supply of GMX at launch was 6 million GMX tokens which migrated from XVIX and Gambit.  Another 1 million GMX was paired with ETH for liquidity on Uniswap. Other tokens will be distributed as follows:

More tokens could be minted through governance if liquidity mining is required for new projects.

Is GMX Protocol safe

The GMX Protocol team is completely anonymous, it is only known that they have also created the projects which preceded GMX —  XVIX and Gambit.

Partners

No announced partnerships yet.

What’s next

The latest proposal regarding the future of the protocol was published on its blog page and includes the creation of an AMM which gives liquidity pools’ creators control over its functions. This is meant to allow them to specify any kind of custom behaviour regarding adding and removing liquidity, as well as buying and selling. The so-called X4 is planned to have dynamic fees, as well as access to more tokens as some require custom behaviour which limits the possible markets for them. 

The GMX Protocol team acknowledges bootstrapping the initial liquidity as the main challenge of launching the new AMM. To provide for it, X4 is envisioned to function as an aggregator and route trades through GMX swap and other AMMs.

Links

https://gmxio.gitbook.io/gmx/

https://gov.gmx.io/

 

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