GMX: Decentralized Perpetuals Exchange
💡 Premia Blue x GMX
GMX is the blue-chip decentralized perpetuals protocol on Arbitrum. In this article, you will learn about GMX, GLP, and the new GM liquidity pools.
Introduction to GMX
GMX represents a stepping stone for DeFi derivatives with a battle-tested platform for trading perpetual contracts.
With a unique approach to liquidity and trading combined with the benefits of a decentralized architecture, GMX is positioned as a leader in the rapidly innovating DeFi derivatives space.
At its core, GMX is a decentralized derivatives exchange that allows users to trade perpetual contracts. These contracts enable traders to speculate on the future price movements of cryptocurrencies without actually holding the underlying asset.
This approach aligns with the broader goals of DeFi, by providing a more accessible and less restrictive environment for financial trading.
GLP Framework for Deep Liquidity
One of GMX's standout features is its unique liquidity provider (LP) system, utilizing the GLP token.
This system allows all DeFi users to contribute to the liquidity pool, earning rewards while supporting the platform's overall liquidity. It amounts to the democratization of liquidity provision. This model contrasts with traditional centralized exchanges, offering a more participatory and potentially rewarding experience for users.
GLP: A novel liquidity provision system that allows anyone to contribute to liquidity on the platform.
GMX v2 – What’s New?
GMX v2 brings forth isolated markets, allowing liquidity providers to choose which assets they want to provide liquidity for. They are able to completely customize their exposure.
- Price impact and funding fees have been implemented to balance shorts and longs, and prevent the risk of price manipulation.
- To increase efficiency and execution speed and mitigate front-running, Chainlink’s low-latency oracles (Data Streams) have been integrated.
- Stop Loss and Take Profit orders no longer require an open position to be set and thanks to Chainlink’s pull-based low-latency oracles, execution at the set price is much more likely.
- Normal swap fees have been reduced to 0.05% or 0.07%. If the trade increases the balance of tokens in the pool then the fee would be 0.05%, otherwise the fee would be 0.07%.
Advanced GM Liquidity Pools
GMX v2 also introduces advanced liquidity pools known as GM pools.
These pair-based pools consist of a long and a short token, supported by an index price feed that determines the opening and closing of positions.
For instance, in an ETH/USD market, ETH tokens back long positions while USDC tokens back short positions. This structure ensures that each market on GMX is backed by a robust and responsive liquidity system, catering to both long and short-trading strategies.
In summary, GMX v2's GM liquidity pools offer a dynamic and intricate system for liquidity provision, catering to a range of trading strategies in tandem with GMX v1’s GLP pools.
Benefits of Trading on GMX
Trading on GMX comes with several key benefits:
- Permissionless: Users can trade directly from their wallets without needing intermediaries, ensuring greater privacy and control.
- Direct Wallet Trading: This feature allows for safer and more seamless transactions, reducing the friction typically associated with moving assets in and out of exchanges.
- Deep Liquidity: GMX ensures deep liquidity via GLP and GM pools, a critical factor for minimizing slippage and ensuring competitive pricing.
- Operational on Arbitrum: GMX operates on the Arbitrum and Avalanche blockchain networks, which offer fast and low-cost transactions, further enhancing the trading experience.
What feature differentiates GMX's liquidity provider system from traditional centralized exchanges?
It exclusively supports fiat currencies.
It uses a unique combination of the GLP and GM systems allowing anyone to contribute to the liquidity pool.
It restricts user participation to accredited investors only.