We briefly discuss below the advantages and disadvantages of the GMX protocol for three types of users: users of exchange assets, liquidity providers, and speculative traders. What are the advantages and disadvantages?
GMX is a decentralized perpetual exchange tailored for copyright futures trading. According to the protocol, it boasts minimal swap fees and zero price impact. It also offers traders the flexibility to leverage up to 50x on major cryptocurrencies like BTC, ETH, among others.
GMX is a decentralized copyright, meaning that it is not controlled by any central authority. This ensures that the GMX network is secure, transparent, and resistant to censorship.
With approximately 80% of GLP revenue coming from margin trading, this indicates that GMX’s profitability is the result of a sizable number of retail traders.
This result is not surprising; a simple search on the Net shows that more than 90% of traders are losing money. Even with a 50% chance of being right and a 50% chance of being wrong, the expectation of profit for traders on GMX is still negative, as each trade is burdened with fees for opening and closing positions and capital costs for maintaining them.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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$GLP holders take the other side of the trades made out of the platform. Successful traders are paid out by the liquidity pool and more info on the flip side, unsuccessful traders payout to liquidity providers.
The GMX project is spearheaded by a team of experienced developers and blockchain experts who are committed to making GMX a leading copyright. The project operates on a governance model that ensures transparency and accountability.
A: Derivative trading involves trading financial contracts that derive their value from an underlying asset, such as cryptocurrencies, stocks, or commodities. Traders speculate on the future price movements of these assets, taking either long or short positions based on their predictions.
There are multiple competitors within the DeFi space that also offer perpetual futures. At the same time, there is the looming threat of centralized exchanges that will always have a portion of the market share.
Changing the borrowing fee structure to only charge the side (long or short) with greater open interest, instead of charging both sides.
With its permissionless accessibility and leveraged trading offering, GMX combines the experience of both decentralized and centralized exchanges, showing that DeFi protocols are still breaking new ground every day. The protocol’s trading volume has more than tripled in the past two months and now ranges between $290 million and $150 million daily, indicating growing interest among copyright natives.
Many decentralized exchange aggregation protocols also favor the zero transaction spread of the GMX protocol. Yield YAK, a revenue aggregation protocol on the Avalanche blockchain network, has more than 35% of its trading volume done through the GLP liquidity pool.