Due to their unique value proposition, GMX is positioning itself to be a leader in this derivatives product offering space because of two main points:
As the protocol itself serves as the counterparty, there’s minimal price impact when entering and exiting trades. GMX claims it can execute large trades exactly at mark price depending on the depth of the liquidity in its trading pool.
The decentralized exchange ecosystem is based on two tokens: GLP and GMX. The first token serves to supply liquidity.
GMX.io is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. It has around 90K total users. This article will give us a complete understanding of the GMX.io platform.
Because of this interdependent relationship between liquidity providers and traders, there needs to be an incentive for users to provide liquidity.
Order book models thrive on multitudinous buyers and sellers present in the market. However, there are tons of flaws in this model, especially for copyright. They are costly to run and also require market makers, who must be incentivized in some way.
GLP can be minted by users who wish to provide liquidity on GMX by using any of the tokens in the pool. To maintain the composition of the pool, liquidity providers are incentivized to mint GLP with assets that are currently underweighted in the pool based on its current composition.
Through an AMM, there will always be a willing counterparty at a given price as long as there is enough liquidity in the pool.
GMX users can “long” or “short” up to 30 times the size of their collateral by borrowing funds from a large liquidity pool.
Image Credit: @crypto_noodles A study by Twitter user @crypto_noodles found that retail traders accounted for 31.5% of ETH perpetual volume on the protocol — the highest of all DeFi perpetual copyright gmx.io protocols analyzed likely due to the concentrated liquidity.
The fallout and subsequent fear of insolvency in other centralized exchanges (CEXs) resulted in copyright users flocking in masses to decentralized exchanges (DEXs) for increased transparency and control over their funds.
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This allows users to leverage up to 50x on their trades and tap into a multi-asset GLP pool worth more than $603 million.
The GMX protocol meets the needs of both liquidity providers and traders through GLP liquidity pools and GLP tokens. The GLP liquidity pool is a multi-asset liquidity pool consisting of many different cryptocurrencies.