GMX is a combination of a DEX and a PERP exchange (similar to $DYDX or $PERP) that invented their own form of liquidity providing called GLP.
GLP is an index tracking the combined price of different crypto assets. Currently it consists of $BTC, $ETH, $LINK, $UNI, $USDC, and $USDT. Users are able to trade the underlying assets in both spot or leveraged markets facilitated by Chainlink oracles. Since capital is used more efficiently in $GLP than in normal liquidity pools, GMX is able to offer better rates while distributing fees to the LP’s of $GLP.
On top of $GLP, holders of the native governance token $GMX receive 30% of the fees generated by the protocol. The protocol is currently on Arbitrum, and will be expanding to Avalanche soon.
Key Statistics
First off, let’s take a look at the current perpetual volume on both centralized exchanges as well as decentralized ones.
Centralized Perp Volume
Decentralized Perp Volume
Currently, perp volume on CEX’s for BTC and ETH are 10x greater than spot volume, $2T/month vs $200B/month.
However, decentralized perp volumes are only $100B a month still, roughly 5% of total perp volume. That leaves quite a lot of potential for capital to flow over to the DeFi perp space. Additionally, GMX metrics are currently at all time highs. Volume, fee’s collected, open interest, and GLP liquidity all can be found here.
There are many catalysts that will bring more trading activity onto DeFi and more specifically onto Arbitrum:
1. Regulatory concerns scale towards CEX activities such as Binance and Huobi.
2. ETH scaling (Arbitrum, Optimism, Starkware) is here.
3. Perpetuals are proven market fit, and still has a plenty of room to grow in the DeFi world.
4. Arbitrum being supported by centralized exchanges such as Coinbase and Crypto.com in the near future.
On layer one of Ethereum, these sort of perpetual protocols were unusable due to high gas costs. With a big push to support L2 infrastructure, Arbitrum (and noteworthy protocols such as GMX) are well positioned to gain significant volume and traction in the coming months.
