GMX

What is GMX (GMX)?

GMX is a decentralized exchange platform, or DEX, attempting to bring about the next generation in Automated Market Making.

AMM is one of the most popular forms of DEX because it addresses some of the main limitations of the traditional order book and allows ordinary investors to earn a yield. GMX takes this AMM, a relatively new innovation, and improves the formula even more.

GMX uses Ethereum layer 2 blockchain Arbitrum, and the Avalanche blockchain. It also allows users a range of advanced benefits, including leverage and zero-price impact trades.

When Was GMX Launched?

GMX was launched soon after the Arbitrum layer 2 blockchain for Ethereum on September 1, 2021. It came into being when the XVIX and Gambit communities merged, thanks to a considerable overlap in community and contributors.

Who are the Founders of GMX?

Thanks to the way GMX as a project was formed, it doesn’t have the traditional corporate-lite structure that a lot of other projects feature. Rather, GMX exists as a decentralized autonomous organization (DAO), and its developers are pseudonymous.

How Does GMX Work?

GMX uses a multi-asset AMM model that relies on liquidity providers. These liquidity providers deposit assets into a unionized liquidity pool referred to as the GLP pool. This GLP pool lets traders trade against it when using the platform’s spot or perpetual trading options.

Uniquely, liquidity providers can contribute single assets to the pool. This is unlike most other platforms, where liquidity providers have to deposit equal amounts of a pair (or more, on services like Balancer) of assets.

When users deposit assets in the GLP pool, they receive GLP tokens that represent their stake in the pool. This minting of GLP on a particular blockchain (currently Arbitrum and Avalanche) entitles GLP holders to a percentage of the fees generated by GMX on that chain.

While GLP suffers no impermanent losses thanks to its nature, liquidity providers aren’t exempt from risk. In fact, becoming a liquidity provider on GMX means that your assets are the counterparty that leveraged traders gamble against. So when the leveraged traders win, you lose, and vice versa.

Leveraged traders are willing to take risks, and GMX’s advertisement of zero price impact is similar to that of TradFi brokers-dealers and their dark pools. More clearly, many traders who use leverage tend to be institutional trading desks, and GMX pits liquidity providers against them.

In addition to the notable absence of price impact, GMX also uses an aggregate of price fees, including Chainlink oracles, to protect positions from isolated “flash crashes.”

What Makes GMX Unique?

GMX is unique in that it manages to carry out leveraged trading on-chain, a feature that many other DeFi platforms cannot offer for one reason or another.

Generally, leveraged trading is the provenance of well-capitalized, centralized brokerages or cryptocurrency exchanges. This is because these large, centralized institutions have the capitalization required to actually pay out on those trades.

Unfortunately, when a well-capitalized trader meets a relatively small centralized broker, the system can show its cracks. Centralized entities do not always enforce liquidation procedures as they should, for fear of losing a client’s business.

Even larger lending institutions prefer to keep potentially toxic debts on the books rather than liquidate the borrower. For example, banks may even opt to forgive rather than foreclose if you’re in a deep enough hole.

However, Code tends not to consider such things. One of the reasons for the relative stability of decentralized lending platforms compared to centralized lenders in 2022 has been prompt and code-enforced liquidation.

How is the GMX Network Secured?

The GMX platform, as well as its native token, currently uses two different blockchains, Arbitrum and Avalanche. This means that they are dependent on these blockchains for security as well.

Avalanche is an established proof-of-stake blockchain that uses an “avalanche” of agreement checks between nodes for the system to reach consensus. Arbitrum, meanwhile, is a layer 2 scaling solution for Ethereum using a technique called optimistic rollups.

What is the Use of The GMX Token?

The GMX token is a utility token on the GMX platform, which also confers holders with governance rights.

One of the main reasons to hold GMX is the fact that a percentage of all protocol fees are generated by the GMX platform. In this manner, all protocol fees are given to token holders, split between GLP and GMX holders.

GMX stakers earn multiplier points that boost their yield and receive escrowed GMX tokens. These esGMX tokens can also be staked or vested for a 12-month period. This can be equated to locked staking.

Who Controls GMX?

GMX is controlled by the GMX DAO, or simply put, holders of GMX tokens. These token holders can make proposals on the GMX governance forum and vote on them.

How Much GMX is In Circulation?

The GMX token has a total supply of 13.25 million, but documentation suggests this isn’t a hard cap. According to the GMX website, minting beyond the maximum supply of 13.25 million is controlled by a 28-day timelock.

Furthermore, the website states that the option to mint more GMX will only be used if more products are launched and liquidity mining is required. A governance vote will also apparently be carried out before any changes are made. It’s also important to note that GMX exists on Ethereum, Arbitrum, and Avalanche. It is possible to bridge GMX tokens between Ethereum and Arbitrum, as well as between Arbitrium and Avalanche via Synapse.

How Do You Buy GMX?

You can buy GMX on various decentralized exchanges using the Arbitrum scaling solution, such as Uniswap V3 and SushiSwap. Alternatively, you can take your pick of DEX platforms on Avalanche.

If centralized exchanges are more your thing, a wide variety of leading exchanges currently offer GMX. This is impressive because it shows GMX’s popularity despite its relatively young age as a blockchain project.

Is It Possible to Buy GMX Instantly?

You can buy GMX instantly on most platforms, such as CEX or DEX, because you probably aren’t going to use layer 1 Ethereum. Arbitrum would be useless if it wasn’t fast, and Avalanche is an extremely high-performance blockchain that can settle transactions in under two seconds.

How Do You Store GMX?

You could store GMX on your cryptocurrency exchange account, but that seems to be a risky proposition these days, given the various CEX collapses seen in 2022. Besides, you can’t actually use your GMX tokens to vote if they’re held in an exchange account.

So, the best way to store GMX is with a cryptocurrency wallet. That way, you control your private keys and, therefore, your coins. For example, a wallet like MetaMask tends to do the job well and can connect to both Avalanche and Arbitrum.

GMX Energy Consumption

GMX is a smart contract-based decentralized application that doesn’t have its own blockchain. That said, the blockchains it does operate on use proof-of-stake, the most energy-efficient consensus architecture currently on the market.

Is GMX a Good Investment?

GMX is a popular project with many investors and DeFi enthusiasts, and its rise is remarkable given how new a project it is in relative terms.

While new and untested, GMX has the utility that suggests it will be around for a while. Traders, especially trading desks operated by institutions, always search for increased yield. When markets rise, these traders have to take on more and more risky strategies in order to beat the returns offered by the broader market.

Leveraged trading offers this opportunity in spades. It’s also extremely risky, and it’s common to read about millions in leveraged positions being liquidated on volatile days.

GMX offers a chance to trade in leverage and become the “house” and profit off these leveraged traders via the GLP token. The GMX token, meanwhile, is a way to reap the rewards from the platform as a whole.

GMX is also developing quickly and has several innovations in the pipeline. From expanding their network to more blockchains, adding synthetic derivatives, and even allowing other DeFi projects to build atop GMX, there’s plenty more to come.