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GMX Explained: Pros & Cons

GMX Explained: Pros & Cons

GMX is the #1 perpetual DEX and has a TVL of $448M.

Vineet Karhail
October 13, 2023

GM 👋

Smoothie is a review platform for web3 products.

Our users write reviews for web3 products.

Now it’s our turn.

Today, we’re going to review GMX, a decentralized spot and perpetual exchange.

If you have any thoughts on GMX, you can write a review here.

Matt & Vineet

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What is GMX?

GMX launched on Arbitrum in June 2021, after a rebranding and move from BSC Chain. It has launched on Avalanche since then.

It’s a decentralized spot and perpetual exchange that allows you to trade crypto without any KYC or geographical restrictions.

Usually in crypto, everything is peer-to-peer.

GMX created a GLP pool that serves as a counterparty for all the traders.

All the traders are trading with the GLP pool, which consists of ETH, WBTC, UNI, LINK, and stables like USDC, USDT, DAI, and FRAX. Users can long or short any of the tokens in the pool, with up to 30x leverage or swap tokens.

Users can deposit any tokens into the pool and mint GLP tokens.

Source

This pool earns liquidity provider fees from market making, swap fees and leverage trading fees.

To get the price of an asset, GMX uses a combination of GLP pool and Oracle price feeds from Chainlink. If you’re interested in How Liquidity Pools work, watch this video.

So even if the liquidity in the pool is low, there is zero slippage, and assets are traded at true price.

There is no impermanent loss similar to the traditional AMM model.

GLP holders also earn 70% of the protocol revenue.

Thanks to this model, GMX is one of the highest earning protocols.

There have been many forks/clones trying to replicate GMX but none has been able to replicate its success.

But the fee structure also makes it more expensive to trade, especially if you are trading with a bigger size.

If you’re trading with higher volume, dYdX and Synthetix might be better options for you.

Currently, GMX is the #1 perp DEX and has a TVL of $448M, according to Defillama.

Pros and cons of GMX:

Pros

Zero slippage/ No impermanent loss
GLP is composable
Other protocols building on top of GLP like Abracabra, Jones DAO, PlutusDAO, Yield Yak, etc.
Team record is impeccable
GMX v2 will introduce synthetic assets and isolated LP collaterals (instead of 1 GLP pool)

Cons

Smaller asset pool (compared to dYdX which has 35+ assets)
High fees that make it not suitable for bigger players
Pseudonymous team (which isn’t really a con as the team has been performing well, but that’s always a risk.)