GMX: everything you need to know about GMX

What is GMX?

GMX is a decentralized exchange (DEX) where users can trade perpetuals, or ongoing contracts that let you bet on price movements without owning the underlying crypto. The platform focuses mainly on popular markets such as Bitcoin and Ethereum and enables leveraged trading.

GMX was launched in 2021 on Arbitrum, a fast Ethereum Layer-2, and later expanded to Avalanche. The combination of low costs, fast transactions and a simple trading model has made GMX one of the best-known derivatives platforms in DeFi, with high trading volume and a broad user base.

How does GMX work?

On GMX, you trade directly from your own wallet. So you don’t have to deposit any funds with a central party. This is called self-custody: you always retain control over your crypto.

Instead of a traditional order book, GMX uses liquidity pools. These pools contain capital deposited by users and serve as the counterparty for trades. This allows anyone to trade without the need for a central market party.

At GMX V2, this works with so-called isolated liquidity pools per market. This means that liquidity for, for example, BTC and ETH is managed separately. Users can add liquidity to these pools and are rewarded for it, while risks remain better spread.

To determine prices, GMX uses external price feeds via Chainlink Data Streams. These fetch real-time market prices from major exchanges. This ensures that trades are executed quickly, accurately and transparently, without GMX having to set prices itself.

The GMX token

GMX is the platform’s native token. The total supply will ultimately amount to a maximum of 13.25 million tokens, of which just over 10 million are already in circulation.

The token is used for:

• Governance: holders can participate in decision-making about future updates
• Staking: users can lock GMX and earn part of the platform fees
• Incentives: rewards for active traders, liquidity providers and community members who contribute to the use and growth of the platform.

A portion of the GMX tokens is used for liquidity provision, community initiatives, and as a reserve to support the protocol in exceptional market conditions.

The technology behind GMX

Built on multiple blockchains

GMX runs on Arbitrum and Avalanche. Users can choose which network to trade on based on their preference for speed or cost. Arbitrum processes transactions quickly and cheaply by using Ethereum rollups. Avalanche uses its own consensus mechanism, making transactions virtually instantly final.

Liquidity pools instead of order books

Instead of a classic order book, GMX uses liquidity pools to enable trades. This means that users trade against capital that has been deposited into the protocol, rather than against other individual traders.

With GMX V2, this is done via so-called GM pools. These pools are linked to specific markets, such as BTC or ETH, and provide liquidity per individual asset.

With GMX V1, GLP is used, a joint pool with multiple assets, including BTC, ETH and USDC. This pool acts as the counterparty to trades and supports both spot and perpetual trading.

Users who add liquidity to these pools receive rewards but also take on risk when traders make profits. This creates a balance between traders and liquidity providers.

The GMX ecosystem

The GMX ecosystem consists of multiple components that together form the platform:

• Perpetual trading: opening long and short positions with up to 100x leverage
• Spot trading: directly trading crypto without using leverage
• Staking: GMX holders can lock their tokens and earn a portion of the platform fees
• Liquidity provision: users can provide liquidity through GM or GLP pools and receive rewards for it
• Multi-chain availability: GMX is active on Arbitrum and Avalanche

Advantages of GMX

• Low fees and fast transactions thanks to Arbitrum and Avalanche
• Both spot and perpetual trading available
• Flexible liquidity pools where everyone can participate
• Strong trading volume and established reputation within DeFi

Disadvantages of GMX

• High leverage carries significant risks
• More complex than regular crypto exchanges
• Less suitable for absolute beginners

Who are the founders of GMX?

The founders of GMX are anonymous, as is often the case in the DeFi world. The presumed lead developer is known under the name xdev_10 on Twitter. Despite the anonymity, GMX has built a strong reputation, thanks in part to transparent documentation, audits, and an active community.