Many decentralized exchange aggregation protocols also favor the zero transaction spread of the GMX protocol. Yield YAK, a revenue aggregation protocol on the Avalanche blockchain network, has more than 35% of its trading volume done through the GLP liquidity pool.
In that case, suddenly, a large number of users in the market using USDC stablecoins to buy LINK tokens in stock, the number of LINK tokens in the GLP liquidity pool will decrease dramatically, and the increased utilization of funds will prompt the contract to go long. The funding rate of LINK will rise rapidly. In other words, the price impact of large transactions on the liquidity pool is still there, but the cost is passed on to traders as funding rates.
GMX launched its first version, V1, on Arbitrum in September 2021. V1 employed a unique exchange model that allowed users to trade without the need to provide liquidity.
Moreover, GMX has its own utility and governance token, which accrues 30% of the platform’s generated fees. By utilizing Chainlink Oracles to aggregate price feeds from high-volume exchanges, GMX ensures accurate and reliable pricing information.
DEXs allow users to trade as if they were on a traditional CEX, but with their funds safely in the custody of their personal copyright wallet. Many DEXs also permit trading without requiring users to complete the Know Your Customer (KYC) process, which attracts many traders looking to preserve their anonymity.
The most apparent drawback for traders is the small selection of assets in the GLP liquidity pool, as they can only trade with a few cryptocurrencies. There is a potential additional risk of sudden spikes in funding rates, which dynamically adjust to asset utilization in the GLP liquidity pool. For example, suppose you choose to go long on LINK tokens in the contract market of the GMX platform, and soon after, you open a position.
Traders opening positions on GMX trade against the pool, with GLP functioning as the counterparty to traders on the platform. While this poses a risk to liquidity providers in GLP, historically, traders have lost more than they have profited, which results in a net increase in GLP value.
While Jupiter offers up to 100x leverage, Drift stands out by providing more diverse trading opportunities with maximum leverage of 20x.
GMX launched its first version, V1, on Arbitrum in September 2021. V1 employed a unique exchange model that allowed users to trade without the need to provide liquidity.
GLP liquidity pools employ Chainlink’s dynamic aggregation prediction machine to receive pricing information from copyright, FTX, and copyright exchanges and filter out extreme values that lack actual liquidity.
By delving into GMX tokenomics, traders and DeFi enthusiasts can gain a better understanding of the dual-token ecosystem that powers this innovative derivatives trading platform.
Although the GMX protocol demonstrates strong potential and a positive development outlook, the market is always uncertain. Therefore, users must conduct comprehensive analysis and risk assessment before making investment decisions.
Because the GMX protocol improves the traditional liquidity pool model, users of the GMX exchange may benefit or be at risk depending on what decentralized financial services they use and what role they play in the GMX exchange.
Regarding protocol development, the GMX exchange has also issued GMX tokens. GMX tokens can be used for the protocol’s governance and staking, to adjust the rate structure and the weight of different website copyright assets that affect the GLP liquidity pool, and to receive 30% of the transaction fees, funding rates, and clearing fees in the GLP liquidity pool. The proceeds are directly converted to ETH or AVAX.