GMX: everything you need to know about GMX

What is GMX?

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

GMX was launched in 2021 on Arbitrum, a fast Ethereum Layer-2, and was later expanded to Avalanche. Due to the combination of low costs, fast transactions and a simple trading model, GMX has grown into one of the most well-known derivatives platforms within 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 need to deposit any funds with a central party. This is called self-custody: you always retain control over your crypto.

Instead of a classic order book, GMX uses liquidity pools. These pools contain capital deposited by users and serve as the counterparty for trades. This means anyone can trade without needing a central market party.

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

GMX uses external price feeds via Chainlink Data Streams to determine prices. These fetch real-time market prices from major exchanges. This way, 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 be 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 co-decide on future updates
• Staking: users can lock GMX and earn a portion 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 provisioning, 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, depending 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 final immediately.

Liquidity pools instead of order books

Rather than using a traditional order book, GMX uses liquidity pools to enable trades. This means that users trade against capital deposited into the protocol, instead of against other individual traders.

In GMX V2 this is done through so-called GM pools. These pools are tied to specific markets, such as BTC or ETH, and provide liquidity for each individual asset.
In GMX V1, GLP is used—a combined pool with multiple assets, including BTC, ETH and USDC. This pool serves as the counterparty for 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 several components that together form the platform:

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

Benefits 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

Drawbacks 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 world of DeFi. The presumed lead developer is known by 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.