GMX V2

Derivatives

GMX V2 is a decentralized perpetual trading platform with innovative features like isolated pools, which allow traders to select their preferred assets and control risk exposure.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
GMX V2 enhances hedging and risk management for liquidity providers (LPs), while also enabling the listing of new assets beyond BTC/ETH.
What we like less
The team is anonymous and still has control over GMX core contracts, though a solid 4/6 multisig consisting of community members and advisors can take control if any malicious actions are detected.
What it means for you
GMX V2 offers LPs more customization, risk control and yield opportunities, while traders get lower fees and the ability to open larger positions.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: GMX
  • Tags: Derivatives
Key Metrics
  • TVL: $330.5M (Rank #40)
  • TVL Ranking by Derivatives: #2
  • Blockchain: Arbitrum, Avalanche
  • Chain TVL
    • Arbitrum: $317.04M
    • Avalanche: $13.41M
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by several experienced auditors including ABDK, Dedaub, and Sherlock
  • Anonymous team reduces transparency
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over six months reduces technical risk as smart contracts are moderately battle-tested
  • Top 5% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of at least 4 signers, which means the protocol is less susceptible to centralization risks
  • Timelock is less than 48hrs, which provides users with less time to exit if any malicious upgrades are approved
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • This protocol is susceptible to risks related to decentralized derivatives, such as LPs serving as the counterparty for all platform traders
Things to know about GMX V2

How GMX V2 works

GMX V2 is a significant evolution of the GLP liquidity system deployed on Arbitrum. Initially, GLP brought innovation to the market by providing a multi-asset pool for perpetual trading on-chain without external market makers. This democratized liquidity provision, enabling users to easily provide trading liquidity and facilitating seamless perpetual trading. GLP also presented an attractive yield opportunity, giving exposure to BTC and ETH and attracting significant liquidity. However, over time, GLP faced limitations. The unpredictable hedging of trader PnL introduced excessive risk exposure for liquidity providers, and it constrained GMX from listing additional non-BTC/ETH markets. GMX V2 introduces several key advantages for traders and liquidity providers over V1. Traders benefit from lower fees, the ability to open larger positions, and improvements to open interest mechanics that allow entering big trades without slippage or limitations. Furthermore, GMX V2 extends its support to prominent Layer 1 tokens, including SOL, XRP, LTC, DOGE, and ARB. This expansion opens new doors for traders, making GMX V2 a versatile and attractive choice for a broader audience. Expanding markets to improve the on-chain experience was a longstanding goal for the team. Finally, V2 increases composability through auto-compounding rewards.

How GMX V2 manages risk

GMX V2 introduces several new risk management strategies to ensure the safety and security of the platform. One of the critical aspects of risk management is the introduction of isolated GM pools. These pools offer liquidity for specific market positions, allowing liquidity providers to choose their preferred market and level of risk exposure. The isolated pools per trading pair enhance stability and safety by containing risks within pairs, ensuring issues do not propagate across markets. These improvements make liquidity provision safer and more effective on GMX. In addition to isolated pools, GMX V2 employs a dynamic fee structure to balance long and short positions. It features a funding rate mechanism, where the dominant side pays the funding rate to the weaker side. This funding rate adjusts in segments, incentivizing traders to restore balance when the dominant side's position becomes too skewed. This mechanism not only prevents systemic risks during intense market fluctuations but also encourages arbitrage funds to enter, promoting equilibrium. GMX V2 also addresses the issue of infinite liquidity occupation by maintaining borrowing costs and introducing a Price Impact Fee. The Price Impact Fee mimics the dynamic nature of order book trading markets, where larger positions have a more substantial impact on prices. This design discourages price manipulation attacks, maintains balanced positions, and optimizes liquidity while mitigating risks.

How GMX V2 makes money

GMX V2 employs a new fee model that has been significantly revamped to align with its risk management strategies and enhanced capital efficiency. The fee structure in GMX V2 includes opening/closing fees, borrowing expenses, and the introduction of the Price Impact Fee. Opening/closing fees have been reduced from 0.1% to 0.05% or 0.07%, depending on their impact on long and short positions. The dynamic funding rate ensures that the dominant side pays the funding rate to the weaker side, further enhancing fee efficiency. The Price Impact Fee is a key component of GMX V2's revenue model. It imposes higher fees on larger positions and those that deviate significantly from the balance between long and short. This fee structure discourages price manipulation attacks, maintains balanced positions, and optimizes liquidity.

GMX V2 Pools
GMX BTC-USD Market Making
19.2%
Yield
$112M
TVL
Risk
C
Protocol
GMX V2
Chain
Arbitrum
GMX ETH-USD Market Making
22.2%
Yield
$88M
TVL
Risk
C
Protocol
GMX V2
Chain
Arbitrum
GMX SOL-USD Market Making
57.8%
Yield
$18M
TVL
Risk
D
Protocol
GMX V2
Chain
Arbitrum
GMX ARB-USD Market Making
18.4%
Yield
$8M
TVL
Risk
C
Protocol
GMX V2
Chain
Arbitrum
GMX LINK-USD Market Making
37.3%
Yield
$5M
TVL
Risk
C
Protocol
GMX V2
Chain
Arbitrum
GMX UNI-USD Market Making
34.3%
Yield
$1M
TVL
Risk
C
Protocol
GMX V2
Chain
Arbitrum