Guide to GMX

Overview

In 2023, GMX stands out as the leading dApp in Arbitrum's ecosystem, holding 23% of the market with a TVL of $490 million. As interest in this low-fee decentralized exchange (DEX) grows, this guide provides a concise overview of GMX. From its role in the DEX space to the GMX token, we'll explore its functionality and the world of perpetual contracts in crypto.

What is GMX?

Originally known as Gambit Financial on the BNB Smart Chain, GMX shifted its focus to the Ethereum layer-2 blockchain, Arbitrum, in September 2021. This transition streamlined the project, merging four tokens (XVIX, GMT, XLGE, and xGMT) into GMX at a rate of 2 USD for 1 GMX.

The team behind GMX, while keeping its founders under wraps, includes notable figures like Krunal Amin, founder of UniDex, and Benjamin Simon, co-founder of Stealth Crypto. A multi-sig wallet connected to GMX is managed by individuals like X, a developer with a pseudonym on Twitter. The project boasts a governing community of 63,000 members, allowing GMX token holders to actively participate in voting on project proposals.

The roadmap for GMX, as of the last update in May 2022, charts a course for continuous improvement. Key objectives include enhancing platform security, integrating support for synthetic markets, and exploring deployment on new chains such as Coinbase's Base, an Ethereum layer-2 network.

How to Use GMX: A Step-by-Step Guide

1. Prepare Your Wallet: To start trading on GMX, ensure you have a compatible wallet and sufficient crypto collateral. As GMX primarily operates on Arbitrum but also extends to the Avalanche blockchain, you'll need an Arbitrum or Avalanche-compatible wallet. Popular choices include MetaMask or the Coinbase Wallet.

2. Access GMX's Platform:

- Visit GMX's platform and locate the “Launch App” button in the top right corner.

- Choose your preferred blockchain—Arbitrum or Avalanche—by selecting the corresponding option in the top right corner of the dApp.

3. Connect Your Wallet:

- Click “Connect Wallet” to establish a link between your chosen crypto wallet and GMX.

- Ensure your wallet is configured to the selected blockchain (Arbitrum or Avalanche).

4. Navigate the GMX Interface:

- Once connected, explore the GMX ecosystem and familiarize yourself with the available features.

5. Initiate Trades:

- On the “Trade” tab, select your desired trading pair (e.g., “ETH/USD” or “BTC/USD”) on the top left.

- Customize your trade by adjusting position size, indicating your trading preference (long or short), and choosing the desired leverage on the right side of the interface.

6. Explore Swap Options:

- Alternatively, if you wish to exchange cryptocurrencies directly instead of engaging in perpetual trading, utilize the “Swap” feature located in the top right corner.

7. Participate in Yield Opportunities:

- To start earning on the GMX exchange, navigate to the “Earn” tab at the top.

- Explore different options for earning GMX and GLP rewards.

By following these straightforward steps, you can seamlessly navigate the GMX platform, engage in cryptocurrency trading, and explore various opportunities for earning rewards within the GMX ecosystem.

Different parts of GMX and how they work

GMX operates as a decentralized exchange (DEX), providing users with the ability to trade assets on-chain by connecting their wallets. Beyond trading, users can earn rewards through liquidity provision or by staking the GMX crypto. Here's an in-depth look at the various components that form the core of the GMX exchange:

1. The Pool & Liquidity Providers:

- The GMX exchange revolves around a multi-asset pool, also known as the GLP pool, facilitating trading activities.

- This pool comprises an index of assets, including USDC, BTC, ETH, LINK, FRAX, DAI, and USDT, forming the foundation for swapping and trading perpetual contracts using leverage.

- Liquidity providers (LPs) play a crucial role by adding liquidity to the GLP pool. They lock index assets, mint GLP tokens representing their stake, and earn 70% of platform fees and rewards in the form of escrowed GMX (esGMX).

2. GMX Staking:

- Users can stake GMX tokens to earn rewards, receiving multiplier points (MPs) at a rate of 100% APR for long-term staking.

- Stakers benefit from rewards in the form of multiplier points, escrowed GMX, and platform fees in ETH or AVAX, depending on the blockchain.

- The protocol rewards stakers with 30% of platform fees generated from swapping and leverage trading.

3. Traders:

- Traders on GMX enjoy low swapping fees and minimal spreads, facilitating easy entry and exit from trade positions.

- In leverage trading, where funds are borrowed to boost trading positions, fees for opening or closing positions are 0.1% of the position size.

- Traders also incur borrowing fees calculated based on the assets borrowed relative to the total assets in the pool.

4. Floor Price Fund:

- GMX's governance token, GMX, features a floor price fund in GLP and ETH, designed to maintain liquidity in the pool and ensure a consistent flow of ether for staked GMX tokens.

- The fund accumulates money from user fees to trade the GMX/ETH pair, converting these fees to GLP and depositing them into the fund.

- Additionally, 50% of Olympus bond funds contribute to the floor price fund, as GMX collaborates with Olympus to sell GMX WETH bonds.

As of the latest data, the floor price fund's value stands at $3,320,485, underscoring its critical role in sustaining GMX's liquidity and supporting staked GMX tokens. This intricate system of components works in tandem to create a robust and dynamic ecosystem within the GMX exchange.

Conclusion

In summary, this guide offers a comprehensive understanding of GMX, the leading dApp in Arbitrum's ecosystem. From its transition to GMX, notable team members, and a step-by-step user guide, readers are equipped to confidently navigate the platform. Whether you're a trader, liquidity provider, or stakeholder, GMX provides diverse opportunities, explained through its core components like the GLP pool, GMX staking, and the floor price fund. As GMX evolves, this guide ensures users are prepared to engage with its dynamic features and capitalize on the exciting possibilities within the decentralized exchange.