What Is GMX V2?
GMX V2 has introduced a lot of improvements for traders and liquidity providers: more assets, faster execution, isolated pools, lower trading fees, and increased swap incentives. This March, to celebrate the launch of GMX’s new Trading Leaderboard and EIP-4844 (which vastly reduced gas fees for Layer 2s like Arbitrum) GMX is holding the GMX #EIP4844 Trading Competition. A prize pot of 280,000 ARB tokens is available for the winners, and all trades on GMX V2 on Arbitrum automatically qualify for the competition.
Key Takeaways
-
GMX is the largest protocol by TVL on the Arbitrum Layer 2 network. The on-chain exchange is also available on Avalanche.
-
GMX is a decentralized derivatives trading platform that enables users to trade perpetual contracts with up to 50X leverage for listed assets, and offers spot swaps as well.
-
GMX V2 offers improvements like reduced trading fees, rapid 1-click trading, as well as isolated pools for better risk management.
-
To celebrate the launch of its leaderboard and the Dencun upgrade on the Ethereum network, GMX is launching a trading competition with over $500,000 worth of ARB tokens in prizes for participants.
This article is sponsored by GMX.
GMX is Arbitrum’s largest protocol by TVL, with over $600 million in crypto assets locked in the protocol based on DefiLlama data. GMX is a non-custodial decentralized derivative trading platform that allows users to trade perpetual contracts of assets like BTC, ETH, and SOL with up to 50X leverage. It uses smart contracts to manage the core aspects of the platform, including asset custody, arrangement of leverage loans for leveraged positions, and an algorithm that oversees the liquidation and emission of earnings to traders and liquidity providers.
According to Dune analytics reports, GMX’s total volume is over $186 billion, with over 550,000 users. GMX claims to bring leverage trading closer to cryptocurrency investors by allowing them to obtain its services without giving up custody of their assets or personal information. In October 2023, GMX V2 went live on the Arbitrum mainnet.
Here’s more about GMX V2:
GMX V2 Improvements
GMX V2 is an upgrade on the first version (V1) of the GMX protocol. The V2 upgrade claims to offer significant improvements to key areas of the platform with a focus on enhancing the user experience.
For traders, the V2 upgrade offers lower fees, with trading fees slashed to 0.05% - 0.07% of the traded volume. Traders will also enjoy low slippage due to V2’s deep liquidity, and faster execution speed thanks to a new oracle system developed with Chainlink, which ensures orders are carried out at the closest execution price possible.
For liquidity providers, the V2 upgrade offers adaptive funding fees that help balance open interest, plus increased swap incentives. The swap incentive is also meant to maintain a balance between the tokens in the pool. For instance, when the ratio of longs versus shorts increases, incentives are offered to traders to sell the longed tokens for short tokens to rebalance the pool. With optimized incentives as part of the V2 upgrade, GMX hopes to operate more balanced pools.
There is also the addition of the isolated pool mode, where each pool operates independently and liquidity providers can customize their exposure to specific tokens. This separates the V2 pools from the multi-asset pool GLP model that was popularised by GMX V1. In addition, GMX has also added new assets (Aave, OP, BNB) and added markets for synthetic assets, which can be used to trade tokens like Near, Doge and Atom – for which sufficient liquidity does not exist on the two blockchains GMX is live on, Arbitrum and Avalanche.
Perpetual trading is growing in demand amongst cryptocurrency investors, as they allow traders to speculate on price movements without owning the underlying asset and access leverage, increasing their market exposure.
What Are Perpetual Futures?
Perpetual futures are a form of futures contracts, where the major difference between perpetual contracts and normal futures contracts is contract expiration design. The traditional form of futures contracts has a stated expiry date, after which the contracts can no longer be traded. In contrast, perpetual contracts have no expiry period, thus, a trader’s position is valid for as long as they leave it open and maintain it.
The profit or loss will continue to accrue until the trader decides to close the trade or the exchange liquidates the trader’s account in cases of unmaintained losing trades.
When trading perpetuals, never invest more than you can afford to lose. The cryptocurrency market is extremely volatile with price swings, and can lead to substantial losses if not managed carefully.
GMX #EIP4844 Trading Competition
Arbitrum is the largest Layer 2 rollup on Ethereum, and the recent launch of EIP-4844, which is part of the Dencun upgrade, is expected to improve user experience on L2 networks with a decrease on gas fees. As a dApp deployed on Arbitrum, GMX will benefit from the EIP-4844 upgrade to offer users a more cost-effective perpetual trading platform to users.
On March 11 2024, GMX announced the GMX #EIP4844 Trading Competition to commemorate the implementation of the EIP-4844 improvement upgrade on the Ethereum blockchain and also the launch of the GMX leaderboard.
According to the announcement, GMX is dedicating 280,000 ARB (about $500,000) to the competition’s prize pool. The trading competition started on March 13 2024, and will consist of two phases, each lasting for a week.
The first trading competition will commence on March 13, and end on March 20. The second trading competition will commence on March 20, and end on March 27. During this period, users who trade on the platform are eligible for a share of the competition’s prize pool.
The contest is divided into two categories.
-
Top PnL ($)
The Top PnL ($) prizes are awarded to the 1-18 highest notional PnL ($), based on the total realized and unrealized profit and loss for the competition period, including fees and price impact.
-
Top PnL (%)
The Top PnL (%) prizes are awarded to the 1-18 highest PnL according to percentage gains. In this case, PnL (%) is defined as [PnL / Capital Used].
Every trader on the platform is eligible for both prize categories, and the prize breakdown is as follows.
Prizes for Top PnL ($) Category
-
1st Highest Notional PnL: 50,000 ARB
-
2nd Highest Notional PnL: 25,000 ARB
-
3rd Highest Notional PnL: 10,000 ARB
-
4-18th Highest Notional PnL: 1,000 ARB
TOTAL: 100,000 * 2 weeks = 200,000 ARB (~$400,000)
Prizes for Top PnL (%) Category
-
1st Highest PnL (%): 10,000 ARB
-
2nd Highest PnL (%): 7,000 ARB
-
3rd Highest PnL (%): 5,000 ARB
-
4th-18th Highest PnL (%): 1,200 ARB
TOTAL: 40,000 * 2 weeks = 80,000 ARB (~$160,000)
The leaderboard statistics can be accessed on the GMX trading platform.
For more information on the #EIP4844 trading competition, including participation criteria and rules, please refer the official announcement.
Ready to compete? Here’s a quick primer on how to use GMX V2.
How to Trade on GMX V2
GMX offers direct asset swaps, perpetual trading, and arbitraging. You can switch between direct swaps and perpetuals on GMX.
To Perform Direct Swaps on GMX
-
Launch the GMX dApp and click Connect Wallet from the top right corner to connect your wallet to the platform.
-
Click Trade from the right corner of your screen to enter the trading application.
-
Check the version button indicated above to ensure that you are using GMX V2.
-
From the operation menu on the right side of your screen, click Swap to navigate to the direct swap application.
-
Select the assets you wish to swap and enter the amount.
-
Check the box next to Acknowledge Price Impact to proceed with your swap.
-
Click Swap [selected asset] to proceed.
-
On the dialog that pops up, verify the details of your trade and click Swap to continue.
-
Confirm the transaction from your wallet to complete.
How to Trade Perpetual Contracts on GMX
-
As in the case of direct swaps, connect your wallet to the platform and navigate to the trading platform.
-
Ensure that you are still on GMX V2.
-
To switch to the perpetual trading tab, click on your preferred position.
That is, click Long if you intend to take a leveraged long position on an asset and vice versa.
-
Set the parameters of your trade; the asset to be used as your collateral, the amount you wish to pay, and the asset you are taking a position on.
-
Drag the slider to set your leverage.
-
Check your entry price, liquidation price, and entry fee. If satisfactory, confirm your position.
Once you confirm your position, it appears on the position tab. You can manage your positions from the Positions tab.
-
Click Positions to view active trades and manage your trades.
-
Click Close to close your position or set a stop-loss or take-profit order.
-
To set a stop-loss or take-profit order, click Trigger and set a price at which your trade closes automatically.
Arbitraging on GMX
GMX offers users to earn on arbitrage opportunities. Arbitraging is available for direct swap pairs and perpetual pairs.
On the swap platform, positive price impact can be arbitraged. Traders can receive more assets than they should normally receive when they purchase an asset whose USD value is higher than the USD value of the paired currency. For instance, for a pair like BTC-USDT, traders will receive more BTC if they swap USDT to BTC when the USD value of BTC is higher than the USD value of USDT in the pool.
For perpetual traders, traders will receive funding if they take and maintain the minority position in an unbalanced perpetual trading pool. That is, if there are more long positions than short positions for a selected asset, traders will receive funding if they take a short position on the asset. The funding tends to taper off as the positions balance. This incentivizes traders to close their long or short positions or take the opposite position to rebalance the pool.
Final Thoughts
From March 13, 2024, to March 27, 2024, interactions with the GMX V2 protocol qualify you to compete for a share of the 280,000 ARB tokens dedicated to the trading competition. The EIP4844 upgrade is a significant one for the Ethereum network as a whole but especially for Layer 2 networks like Arbitrum and applications built on them, like the GMX trading platform.
With the upgrade, traders on GMX will enjoy cheaper prices for fees paid for on-chain validation in addition to the reduced trading fees as part of the GMX V2 upgrade. With these, GMX hopes to lower the barrier to participating in decentralized derivatives trading. With the incentivized trading competition, traders could be compelled to trade more on the platform and experience the cost-efficiency of the Arbitrum network and GMX trading platform.
This article includes a brief guide on how to get started on GMX. However, note that it is not exhaustive of the operations you can perform on the platform. It is also important to understand how the protocol works in general and how it affects you as a user, and ensure that you only invest what you can afford to lose, as the crypto market is extremely volatile. This article is only meant to provide information and should not be taken as investment advice.
CoinGecko's editorial team comprises writers, editors, research analysts and cryptocurrency industry experts. We produce and update our articles regularly to provide the most complete, accurate and helpful information on all things cryptocurrencies. Follow the author on Twitter @coingecko
Or check it out in the app stores
