GMX is a decentralized perpetual exchange, basically leveraged crypto trading directly from your wallet instead of a centralized exchange like Binance. This means, no KYC, no spreads, it is cheaper and you can trade up to 30x leverage.
GMX has recorded impressive strength. While most cryptos are still down since October 2021, GMX is up 100%. This performance can be attributed to strong utility, great tokenomics, and a good community.
GMX is available on Arbitrum and Avalanche. However, the platform indicated on its roadmap that it will deploy to more chains.
Does GMX Have Money For Expansion?
In May 2022, GMX wrote that they have 1.8 million held in USDC and a burn rate of 100k per month for development. This is expected to see them through to March 2024.
Also, they will be proposing a way to send a small percentage of the fees to the treasury updates which should extend their runway.
GMX is one of the many successful products where the VC backed out. VCs are free to buy a token post-release and some have built big bags. GMX funded itself through public raises.
GMX Tokenomics
The supply in circulation is 8 million tokens and the predicted max supply is 13.25 million. Minting beyond the max supply will only happen if more products are launched and liquidity mining is required. A governance vote is required to change this.
To understand tokenomics, you first need to understand how staking works on GMX. The GMX ecosystem is made up of two tokens, $GMX, and $GLP.
The APR differs depending on the chain you stake on but it’s currently at 13% on GMX and 19% on GLP. These numbers fluctuate.
Staked GMX receives three types of rewards including; Escrowed GMX, ETH, AVAX Rewards, and multiplier points.
1. Escrowed GMX
The high APR incentivizes staking and holding but high APR leads to stakers selling tokens they earn as they earn them. However, this does not happen since staking rewards are paid in escrowed GMX (eGMX).
eGMX can either be re-staked or vested. If you vest it, it is converted back into GMX in a year. This prevents people from immediately selling all the GMX they earn causing sell pressure. It also prevents inflation. It’s kinda similar to locked staking but better.
2. ETH/ AVAX Rewards
These are acquired from the fees charged to leverage and spot traders for using the GMX platform. GMX charges a fee of 0.1% of the position size for the opening trade and another 0.1% for closing. There is also an additional 0.0015% per hour for holding a position.
GMX stakers get 30% of fees from all chains paid as the native token of the chain they are staking on. GLP stakers get 70% of the fees from the chain on which they’re staking paid out as that chain's native token.
This yield comes from the GLP Pool which is made up of an index of assets. The GLP pool is a liquidity pool used for swaps and leverage trading. You mint GLP by contributing any of the index assets to the pool and redeem by burning GLP for any of the index assets.
3. Multiplier Points
These are rewarded to long-term holders by boosting the amount of ETH/ AVAX rewards they earn. This is good because it doesn’t create inflation as rewards are in ETH or AVAX and not GMX.
Now that we’ve understood how staking works, it is clear that GMX’s staking mechanism is brilliantly designed to keep GMX locked to avoid inflation. GMX and GLP are a masterwork of value accrual.
As long as people are using the platform, they are paying fees and presumable taking losses which feed in the GLP pool and pay stakers.
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