TL;DR
GMX is a decentralized, permissionless perpetual swap and spot exchange. Traders can use it to easily trade cryptocurrency on-chain just by connecting their wallets. GMX has a native token called GMX, which functions as a governance, utility, and value-accrual token for the GMX protocol. Users can stake GMX tokens and earn a portion of GMX’s protocol fees, plus benefit from other incentives. GMX currently supports the Arbitrum and Avalanche networks.
Introduction
Blockchain and its application to finance, cryptocurrency, enabled the development of decentralized finance (DeFi). The mainstream recognition of DeFi started in 2020 with what is called "DeFi summer." Now, GMX demonstrates that it's possible to do leveraged perpetual and spot exchange trading in a decentralized fashion. The trading experience resembles the functionalities of centralized exchanges, but it's done directly from a personal cryptocurrency wallet.
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What is GMX?
GMX is a decentralized spot and perpetual exchange that enables users to trade BTC, ETH and other popular cryptocurrencies directly from their crypto wallets. The GMX user can do spot swaps and trade perpetual futures up to 30x leverage, similarly to how it's done on a centralized exchange. However, contrary to using a centralized exchange, they keep custody of their assets by utilizing a cryptocurrency wallet.
GMX aims to provide a better trading experience with low swap fees and zero-price impact trades. The trading happens through its native multi-asset pool, GLP, which earns fees for liquidity providers. In addition, GMX uses Chainlink Oracles for dynamic pricing to aggregate prices from other high-volume exchanges.
GMX first launched on the Arbitrum One blockchain when the network went live in September 2021. Arbitrum is an Ethereum layer-2 Rollup, a solution designed to boost the speed and scalability of Ethereum smart contracts. Later, in January 2022, the deployment of GMX continued on Avalanche, which is also a high-speed EVM-compatible blockchain.
How Does GMX Work?
The trading on GMX is facilitated by a multi-asset pool called GLP. It consists of 50-55% stablecoins, 25% ETH, 20% BTC, and 5-10% other altcoins, such as Chainlink and Uniswap.
The liquidity is added when users mint GMX Liquidity Provider Tokens (GLP). In exchange for minting GLP, they earn 70% of all fees generated on that particular blockchain. Contrary to some liquidity pools, GLP suffers no impermanent loss.
Anyone can become a supplier of this liquidity pool and, in return, earn fees. And users who want to trade perpetual swaps or spot can do it using the assets provided. Moreover, the GLP pool is a counterparty to the traders; as GLP token holders provide the liquidity used for leverage trading, they profit when traders lose — and vice versa.
The GLP token can be minted using any of its index assets and burnt to redeem any index asset. Unlike the GMX token, it is automatically staked and not transferable. GLP's price, rewards, and index composition differ between Arbitrum and Avalanche.
What is the GMX Token?
The GMX token is a utility and governance token. Token holders can use it to vote on proposals to help decide the exchange's future direction.
The token holders who stake their GMX also get three other rewards, which the protocol uses to reward users. Firstly, 30% of all generated protocol fees are distributed to GMX stakers. These fees are collected from market making, swap fees, and leverage trading, and are paid in ETH or AVAX.
Secondly, the stakers earn escrowed GMX (esGMX) tokens. These esGMX tokens can be either staked for rewards as well, or vested. The tokens get converted back into GMX over 12 months when a user vests them. Therefore, esGMX emissions are a form of locked staking that prevents inflation and people from immediately selling their GMX.
Lastly, stakers earn Multiplier Points that boost their yield and reward long-term holders without contributing to token inflation. These dual incentives stimulate commitment to GMX and further the platform's decentralized ownership.
The GMX token has a maximum supply of 13.25 million, with 8.2 million circulating. More than 83% of the circulating tokens are currently staked.
What Makes GMX Unique?
The trading system
GMX allows traders to open leveraged positions through a simple swap interface, which resembles traditional trading platforms. In addition, GMX is self-custodial and trustless, meaning anyone can trade cryptocurrency straight from their private wallet.
Its dual exchange model supports both spot swaps and leveraged trading of perpetual swaps. This should improve capital efficiency due to the high asset utilization of the GLP pool, which lets user deposits generate extra yield and not sit idle.
GMX allows entering and exiting trading positions with no price impact. This design may help traders get better entry prices than some order book-based exchanges, which might have issues with slippage. GMX also uses an aggregate of Chainlink Oracles and other price feeds to smooth out price fluctuations, which can keep positions safe from temporary liquidation wicks.
The ecosystem
GMX emphasizes the importance of community and has tried to foster the DeFi mindset of engagement and tool-building amongst its users.
Its community-built tools include a Telegram positions bot, the gmx.house leaderboard, the gmxstats.com page, Dune Analytics Dashboards, and calculators that benefit traders, stakers, and liquidity providers. GMX has a growing list of collaborative projects building DeFi functionality with GMX's composable lego blocks.
The community also takes care of communication about the GMX ecosystem. For example, the community-driven weekly newsletter The Blueberry Pulse highlights developments in the GMX ecosystem. The Blueberry Podcast does the same in audio format.
How to use GMX
Trading
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GMX's trading interface displays alongside the price chart. To start a leveraged trade, click "Long" or "Short" to set your preference. Simple, low-fee spot swaps are also available on GMX. Click on the "Swap" tab to open the interface to swap between the tokens in the GLP pool.
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The first token is the collateral you supply, while the token below is the asset you trade. The leverage slider indicates how much you borrow from the GLP pool. Limit orders, as well as take profit and stop loss orders, are available.
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Open trades will appear under "Positions." You can click on “Edit” to deposit or withdraw collateral. Opening and closing a leveraged trade costs a fee of 0.1 percent of your position size. Traders also pay a utilization-dependent hourly borrowing fee. For detailed instructions, visit their trading help page.
Staking
To stake your GMX tokens and earn rewards, you need to connect your wallet and press the "Stake" button.
Once you confirm the transaction on-chain in your wallet, you will start earning 30% of all GMX’s protocol fees, plus esGMX and Multiplier Points incentives.
You will clearly see the three types of rewards increase under "Total Rewards" in the GMX user interface. You can click the "Compound" button to stake your earned rewards and compound your yield.
How to Buy GMX on Binance
You can buy GMX on cryptocurrency exchanges like Binance.
1. Log into your Binance account and go to [Trade] -> [Spot].
2. Type “GMX” in the search bar to view the available trading pairs. We will use GMX/BUSD as an example.
3. Go to the [Spot] box and enter the amount of GMX you want to buy. In this example, we will use a market order. Click [Buy GMX] to confirm your order, and the purchased GMX will be credited to your Spot Wallet.
What’s next for GMX
GMX's own decentralized autonomous organization (DAO), GMX DAO, planned its roadmap through its internal governance process. The vision of GMX is to become an even more complete and user-friendly DEX for on-chain leverage trading. The current roadmap includes:
Synthetics
Synthetics are to be a new class of tokens that will become available on the exchange. Synthetic crypto assets derive their value from any underlying asset, such as stock, commodity, or digital currency. They are essentially digital representations of derivatives.
Better UI and UX
GMX strives to further refine the user interface (UI) and user experience (UX) of the protocol for the users. For example, it's planning to integrate TradingView charts into the platform.
X4: Protocol Controlled Exchange
The longer time-frame vision of GMX is to become an advanced automated market maker (AMM) that allows other DeFi projects to build on top of its liquidity pools, and customize the functions of their pool entirely. These projects could then specify any custom behavior they would like on buying and selling tokens and for adding and removing liquidity.
Network expansion
GMX also plans to roll out the exchange on a third blockchain network, alongside Arbitrum and Avalanche.
Closing thoughts
Cryptocurrency trading has come a long way. GMX enables anyone with a cryptocurrency wallet to benefit from its transparent decentralized exchange services. Firstly, traders can use its perpetual swap and spot exchange platform. Secondly, users can enjoy various benefits and have a say in governance by owning GMX tokens. As we have learned, the GMX community decides about the platform's future; therefore, new services may still be added on top of what the exchange already offers.
