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 50x 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 spots 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.