Changes to GMX how works succes a bear mareket
Today we will tell you about the changes that are coming to the GMX project. It is the DEX (mostly) on Arbitrum
which is one of the winners of the current bear market. Trader
are when they can make swaps without price volatility.
And GMX token holders and liquidity providers earn a fee from these traders.
One of the unique features that GMX offers is the ability to trade without affecting the price.
GMX trades are always based on the current market price. Which is taken from the oracle.
This is especially useful for larger transactions. Because they can cause a price deviation not only on DEXs, but also on less liquid CEXs.
So, it will be more profitable to carry out such a transaction on a platform where the transaction does not affect the price.
GMX is one such solution (Synthetix is another popular project that actually pioneered this type of trading)
For this solution, GMX also offers the possibility of using leverage. On the other side, we have liquidity providers. Liquidity is provided in the form of a tokenized basket of assets - GLP.
This basket contains several popular coins and stablecoins. The community determines the target proportions between them
. By providing liquidity, we profit from part of the commissions from traders, from their losing leveraged positions (but we can lose on their profitable ones)
and the distribution of the GMX token. Speaking of the GMX token, its holders also participate in the fees paid by traders. This solution also has disadvantages. Such as a relatively limited number of assets available for trading
(only those that are in the GLP basket). On the other hand, liquidity providers must be exposed to all tokens in the GLP
basket (although this can also be a plus). We also have the ability to manipulate the price from the oracle and derive the value from the liquidity providers.
What happened some time ago on the AVAX GMX version trading on the Avalanche network.
Probably for these reasons, the team decided that changes needed to be made. Let's look at them now.
Changes to GMX The biggest change is the departure from the GLP liquidity basket model and the creation of liquidity separately for individual markets.
Does this mean that GLP will cease to exist? From what I've read, not necessarily. Most likely, both solutions (new and old) will work simultaneously.
Do GLP owners have anything to worry about, if this solution were to stop working with the start of the new version?
No, because we will be able to take out the proportion of assets in the basket corresponding to our tokens for GLP.
Unless we don't know about something and there are no assets in the basket. But the chance that we do not know is negligible
because everything is monitored onchain by many entities.
As soon as CT knew about something suspicious in the AVAX market, it probably would have tracked down other irregularities.
It is said that since we can provide liquidity for only one asset, if we do it for both of them at the same value,
we will have a delta-neutral position (independent of the current price of the asset). But this delta neutrality was promised by many,
but in practice everything turned out not to be true. So, at the beginning of the changes, I recommend either figuring it out on your own for a small amount of money, or just watching how others do it and what they get out of it. Index token is a source of information about the external market price.
On the basis of the difference between the current price of the stock in GMX (so yes, we say goodbye to transactions without price impact)
and the market price, the so-called funding is calculated. If we have the advantage of shorts, they will regularly pay the owners of open positions.
And vice versa. So we see that in addition to the spot market, the new solution will also offer leveraged perpetuals contracts. Finally, let's look at what benefits the new solution will offer traders. As mentioned earlier, they will lose the ability to trade without affecting the price.
Instead, there are a number of benefits. Firstly, a significantly wider range of supported assets.
And the ability to add more in an open way, accessible to everyone. Secondly, the introduction of limit, stop loss or take profit orders.
With a performance guarantee.
Summary The upcoming changes are not just cosmetics and optimization.
This is a change in the basic paradigms of how the protocol works.
The idea is to increase the number of supported assets and increase volumes.
And mitigation of the risk of price manipulation from the oracle.
The threat is the risk of losing the unique value (trading without affecting the price).
We will come back to the topic practically when the new version lands on the mainne
Thanks for reading!
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