Can GMX Bring Sustainable Real Yield? Our Thoughts | TKX Research

9 min readOct 19, 2022

by @Guaaronnnn
editor @FriedWagyuu

Part I. GMX

As the bubble in the bear market starts fading, the narrative switched to protocols with real yield. “Real yield” means fees distributed in assets with “real value” like USDC and ETH, rather than based on inflationary native tokens. GMX is the hottest real yield protocol recently and the native token is one of the best-performing crypto assets in the bear market.

GMX in Simple Words

GMX is an on-chain decentralised spot and perpetual exchange currently deployed on Arbitrum and Avalanche. With low fees and zero price impact, users can trade assets on-chain without KYC and restrictions.

GMX launched in Sep 2021 and evolved from two previous projects XVIX and Gambit. The above projects’ tokens and liquidity were migrated to GMX to retain community support. As a DAO, the developers have been consistently delivering new updates and regularly addressing community concerns.

The Protocol

The most important part of GMX is GLP—a multi-asset pool that provides liquidity for margin trading, users can long/short & perform swaps via minting & burning GLP tokens. This pool earns LP fees from swap and leverage trading which are distributed back to both GMX and GLP holders.

The multi-asset pool is a floating basket of assets with target weights of ETH, BTC, LINK, UNI and stablecoins. To do leverage trading, traders have to deposit assets into the GLP as collateral. The leverage is up to 30x.

From GMX Research

Target Weight

The target weight of tokens is adjusted dynamically depending on the net open interests among perp traders. If a lot of traders are long ETH on Arbitrum, the GLP pool will set a higher ETH target weight, and vice versa with stablecoins if a large proportion is short.

Target weight could be easily achieved via DEX aggregators. When one of the index assets is underweight, the fees for depositing/swapping ETH are lower. With cheaper fees and zero slippage, GMX can offer the best possible price to facilitate more transactions routed to GMX which helps rebalance asset weighting in the GLP pool.


In GMX, GLP & GLP holders are counterparties to the perp and spot traders. Traders’ loss is GLP’s gain and vice versa.

By holding GLP, you are:

  • Providing liquidity: In GLP, the impermanent loss won’t occur because there is no price discovery. GMX pull prices from CEXs through Chainlink oracle. Hence, no slippage as well.
  • Earning 70% of platform fees (borrow fee, swap fee, fees to open/close a position) which was paid in ETH or AVAX. That is part of the reason why GMX is called the “real yield” protocol.
  • Being a counter-party to traders is like being the House of a casino, not only earning platform fees from traders but also profiting from traders’ losses.
  • Earning esGMX rewards.
  • Holding diversified crypto assets. GLP price is tied to the overall valuation of the basket of GLP assets.


GMX is not an AMM, the price feed is from Chainlink oracles using an aggregate price including CEXes like Binance and FTX to reduce the risk of liquidation from temporary wicks. Since GLP’s price feed is from oracles, there is no slippage/price impact and impermanent loss. However, GLP holders bear the gain/loss, similar to Synthetix. To prevent front runs, there is a fast price feed feature to limit arbitrage bots taking advantage of lagged oracle price feeds.


30% of the total fee collected goes to GMX holders and 70% goes to GLP holders. The current APR for GMX and GLP is 13% and 19% respectively.

Staked GMX receives three types of rewards:

  1. Escrowed GMX (esGMX)
  • esGMX can be staked for rewards similar to GMX or vested to become GMX over a year. For vesting, the average number of GMX or GLP tokens that were used to earn the esGMX rewards must be reserved in the contract.

2. Multiplier Points

  • Used to reward people who staked GMX. Each point will earn the same amount of ETH / AVAX as a regular GMX token.
  • When GMX or esGMX tokens are unstacked, a proportional amount of MPs is burnt.
  • Long-term holders can be rewarded without inflating GMX supply

3. ETH / AVAX Rewards

  • 30% of fees are converted to ETH / AVAX and distributed to staked GMX.
From GMX Research


GMX has a total supply of 13.25 million of which 8.1 million are circulating (60%). 83% of the circulating supply is currently staked. 4% is in the liquidity pool.

  • 6m from the XVIX and Gambit migration. (45%)
  • 2m paired with ETH for liquidity on Uniswap. (15%)
  • 2m reserved for vesting from Escrowed GMX rewards. (15%)
  • 2m to be managed by the floor price fund. (15%)
  • 1m reserved for marketing, partnerships and community developers. (8%)
  • 250k for team allocation, unlocked linearly over 2 years. (2%)


GMX ecosystem has been growing. Lending protocols like Vesta Finance and Moremoney; insurance protocols like Nexus Mutual and Degis; and trading platform Rage Trade are building with GMX.

We can further observe more possibilities in the GMX ecosystem. For example, protocols can build a delta-neutral strategy which enjoys GLP’s high APR while hedging the down side of GLP’s non-stablecoins assets.

Competitive Advantages

Innovative Model: GMX is using a shared liquidity model which is different from other perpetual futures protocols like dYdX (order book) and Perpetual (vAMM).


  • Can handle large volumes
  • No slippage
  • No liquidation wicks


  • Risk of completely relying on oracle
  • Front running and arbitrage

Strong Community:

  • A community kick-start project
  • Fair launch: no VC involved

Well-designed Tokenomic:

  • All incentives are aligned
  • Protocol revenue is shared by GMX and GLP holders
  • Value accrual back to token holders.
  • Low selling pressure
  • Multiplier boost doesn’t inflate GMX
  • esGMX takes a year to convert to GMX

Future Potential:

  • Synthetic assets trading
  • PvP AMM enables any assets to be traded on GMX
  • Stronger demand for decentralised perps
  • A strong shift from CEX to DeFi
  • More and more DeFi protocols building upon GMX


Oracle Attack: When traders exploit the oracle vulnerability, GLP holders may suffer a huge loss on their money which makes GLP no longer attractive for LPs and results in a decrease in TVL. In recent price manipulation on AVAX, the attacker made half a million.

Long-tail Asset Risks: Liquidity is always a critical issue in crypto as the market is still relatively small compared to the equity market. GMX oracle system works fine with liquid assets like ETH, but not for less liquid assets (AVAX recently faced price manipulation). This is a potential risk to GMX as GLP has fewer liquid assets LINK, UNI, and AVAX.

Team Walks Away: As an anonymous team, although GMX has demonstrated an incredible record by consistently hitting milestones, there is no cost for them to walk away.

Final Thoughts

There are very few crypto projects that can self-sustain to attract liquidity in a bear market, GMX is one of the very few that reached the top 5 in 7-day avg. fees.

GMX has very strong fundamentals: great tokenomics, a strong community, and a fantastic team, which makes GMX on the way to taking down its strongest competitor dYdX in just one year.

As one of the major representatives of the “real yield” protocol, part of the “real yield” comes from traders’ loss: normally, DeFi protocols’ revenue purely comes from platform fees such as swap fees and trading fees. GMX leverages people’s fear and greed like a casino.

Traders are more likely to lose (GMX Dashboard)

Although GMX has strong fundamentals, what GMX offers to attract users and liquidity is also key to the game. GMX differentiates itself in the perpetual market area through the following:

  • From traders’ perspective, tradings on GMX have zero slippage, no price impact, and no shakeout or sudden wicks to trigger massive liquidation. It solves many commonly criticized issues that many CEX and perpetual DeFi protocols have.
  • From the liquidity providers’ perspective, providing liquidity in GMX does not incur an impermanent loss. With a high APR in ETH/AVAX rather than high inflationary naive tokens supported by high trading volume, the protocol’s revenue is fully shared with GMX & GLP holders as the house of the casino.

Those are strong product edges to attract traders and LPs to GMX. The flywheel effect is built by: traders coming to trade due to no slippage and no sudden wicks -> driving high trading volume and revenue to protocol -> all revenue is distributed back to the GMX holder and LPs -> more LPs would like to provide liquidity due to strong financial incentives -> more liquidity for traders to generate revenue.

As of 15 Oct, GMX TVL on Arbitrum is close to $400M, ranking 1st on Arbitrum with Uniswap ranking the 2nd. GMX dominance is currently 40%.

GMX TVL (DefiLlama)

There is a high possibility that GMX will take down dYdX and become the leader in perpetual or even derivatives. GMX team has been consistently shipping new developments in progress. TVL and users are still growing and more importantly, the GMX ecosystem is growing as many DeFi protocols start building upon GMX, which can become a moat to other competitors.

TVL: dYdX (grey) vs GMX (blue) (DefiLlama)

Part II. Market Updates

Huobi will be acquired by Hong Kong-based About Capital Management
Asian crypto exchange Huobi announced it will sell a majority stake to Hong Kong-based About Capital Management. Financial terms of the deal were not disclosed.

Google selects Coinbase to take cloud payments with cryptocurrencies and will use its custody tool
Google said it will rely on Coinbase to start letting some customers pay for cloud services with cryptocurrencies early in 2023, while Coinbase said it would draw on Google’s cloud infrastructure.

Mango Markets attacker puts forward proposal that would pay them $70 million bounty
An exploiter who stole roughly $116 million from Mango Markets on Oct. 11 put forward a governance proposal that, if it passes, would give them roughly $70 million in the form of a bounty reward.

Microsoft and Meta partnership brings Office 365 apps to the Metaverse
Meta Platforms has partnered with technology giant Microsoft to bring a range of Microsoft Office 365 products into Meta’s virtual reality (VR) platform, aiming to entice companies into working in virtual environments.

BAYC creator Yuga Labs faces SEC probe
Yuga Labs, creators of Bored Ape Yacht Club NFTs, is reportedly facing a probe by the U.S. Securities and Exchange Commission. The regulator is looking into whether certain assets could be treated more like stocks and therefore should follow the same rules.

Part III. Fundraising News

Nxyz — Blockchain indexer
Raised $40M in a series A funding round led by Paradigm. Other investors include Coinbase Ventures, Sequoia Capital, Greylock Partners and others.

Rye — E-Commerce Platform
Raised $14M in a seed funding round led by a16z with the support of its Cultural Leadership Fund. Other investors include Solana Ventures, GOAT Capital, L Catterton, Electric Ant and Electric Feel Ventures.

Arch — DeFi startup
Raised $5M in a seed funding round led by Digital Currency Group and Upload Ventures. Other investors include GBV Capital, Techstars and Ripio Ventures.

Blackbird — Web3 hospitality platform
Raised $11 million in a seed round, co-led by Union Square Ventures, Shine Capital and Multicoin Capital. Other investors include Variant, Circle Ventures and IAC.

Magic Square — Crypto app store
Raised $1M more to their seed round. Investors include Huobi Global, Gate and Crypto.Com.

Reference (TG)

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Note: TKX Capital do not offer any financial advice for retail investors and we have no affiliation with projects in this research.




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