Holding GPL and GMX tokens helps unlock rewards on the GMX platform
The DeFi derivative space is a dynamic innovation hub, fueling advanced trading opportunities like perpetual crypto contracts. Among these platforms, GMX has emerged as a prominent player, garnering popularity with the rise of DeFi and thriving in tandem with Layer-2 innovations. In this article, we will delve into the features of GMX, unraveling the reasons behind its success.
- What is GMX?
- Why is GMX so popular?
- How to use GMX?
- The GMX token
- The governance of GMX
- Keep up with what’s hot in DeFi
What is GMX?
GMX is an innovative decentralized perpetual contract and spot exchange operating on the Arbitrum and Avalanche blockchains.
GMX, launched in September 2021, is the first iteration of the Gambit protocol, created by a team with a successful track record in blockchain through projects like XVIX and Gambit on Ethereum and BNB Smart Chain.
The platform enables users to engage in perpetual trading, allowing them to profit from the price movements of various digital assets without an expiration date. Additionally, the spot exchange provides users with the ability to buy, sell, and trade multiple cryptocurrencies with ease.
Why is GMX so popular?
For a considerable period, experienced traders on centralized crypto exchanges have embraced perpetual contract trading. However, events such as the FTX bankruptcy, have underscored the criticality of decentralization. In this context, GMX emerges as a trailblazer in the realm of DeFi perpetual trading, offering not only fund sovereignty but also aligning with the future of blockchain technology advancement.
Over the past year, GMX has maintained a relatively stable Total Value Locked (TVL) with a daily average of $526 million, reaching its peak at $607 million.
Furthermore, GMX boasts various unique features that appeal to traders seeking a more innovative trading experience.
Ensured decentralization
Decentralization lies at the core of GMX, as its unique multi-asset pool allows liquidity providers to earn fees from market making, swap fees, and leverage trading. This decentralized model empowers users and promotes a fair and efficient trading environment.
Dynamic pricing system
Unlike Uniswap’s automated market maker (AMM) pricing mechanism, which relies on a constant formula and may result in slippage and price divergence, GMX adopts a dynamic pricing model.
Its pricing model is supported by Chainlink Oracles and price aggregation from leading volume exchanges. This approach ensures zero slippage and keeps the pricing closely aligned with the market, making it an attractive option for traders, especially whales. Moreover, GMX offers up to 50x leverage, enhancing the potential for amplified gains.
Unparalleled efficiency
GMX has experienced a surge in popularity with the rise of Layer-2 (L2) solutions, particularly Arbitrum. Leveraging the benefits of L2 technology, it provides fast and cost-effective trading experiences.
As one of the most popular DeFi dapps on Arbitrum, GMX’s current TVL sits at $463 million, cementing its position among the top choices in the ecosystem.
Additionally, GMX is available on the Avalanche blockchain, further expanding its accessibility and reach.
How to use GMX?
GMX offers users the ability to engage in spot trading as well as more advanced contract trading. Facilitating transactions through liquidity pools, GMX relies on liquidity providers to support these operations. In the following sections, we will delve into some user scenarios and explore the benefits that GMX brings to the table.
Trade
To trade using GMX, start by setting up a crypto wallet like Metamask. GMX supports both swaps and leverage trading. For swaps, navigate to the “Swap” tab on the right of the GMX website for token swaps with zero price impact.
For leverage trading, choose either a “Long” or “Short” position based on your price prediction. A long position yields profits when the token’s price increases but incurs losses if the price goes down. Conversely, a short position generates profits when the token’s price decreases but results in losses if the price rises.
Provide liquidity
Users can become liquidity providers on GMX through the GLP token. GLP serves as the platform’s liquidity provider token and offers several advantages.
GLP supports the swap and leverage trading of an index of assets, including ETH, BTC, UNI, LINK, USDT, USDC, DAI, and more. You can buy GLP using any index asset and sell it to redeem any index asset. After buying GLP, they will automatically be staked, and you will start earning rewards.
By holding GLP on the Arbitrum network, you earn a portion of platform fees distributed in ETH, while on Avalanche, you earn a portion of platform fees distributed in AVAX.
The GMX token
GMX is the utility and governance token of the GMX platform. Its tokenomics structure not only supports the platform’s sustainability but also incentivizes participation.
By staking GMX tokens, holders can receive rewards in the form of Escrowed GMX (esGMX), Multiplier Points, and ETH/AVAX rewards. These rewards are distributed based on the fees generated from swaps and leverage trading, with 30% of the fees converted to ETH/AVAX and distributed to staked GMX tokens.
So even if you’re not an active trader, you can still benefit from the platform’s revenue by staking GMX tokens, passively earning the rewards generated by the platform.
The governance of GMX
GMX embraces a community-driven governance model, where GMX token holders have the power to shape the platform’s future. These members play a vital role in decision-making processes related to new features, fee allocation, and other important matters.
One recent proposal that has been put forward is the implementation of low-latency Chainlink feeds for GMX V2. This new integration would enhance the platform’s functionality and give users access to reliable and real-time data.
This democratic approach ensures that GMX’s governance remains transparent and allows token holders to have a say in the platform’s development and evolution.
Keep up with what’s hot in DeFi
Perpetual trading in DeFi has gained a lot of popularity among experienced traders. Apart from GMX, there are established platforms like dXdY, along with newer entrants like QuickPerps by QuickSwap, catering to the growing demand for this feature.
These platforms provide users with the opportunity to engage in profitable trading strategies. However, it’s crucial for users to exercise caution and implement proper risk management techniques when participating in perpetual trading.
Staying informed, aware of market dynamics, and making well-informed decisions are essential for navigating this evolving landscape.
DappRadar helps you understand and follow the latest Web3 market trends and innovations. Check out our Top DeFi Dapps Ranking to discover new projects that may change the future of finance.
Useful links
- Top DeFi Dapps to Watch Out for in 2023
- DappRadar DeFi Ranking
- DappRadar’s Ultimate Guide on DeFi
- Token Explorer
- Portfolio Tracker
- Read popular DeFi articles on DappRadar
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