What is GMX Exchange?
GMX Exchange is a decentralized perpetual exchange designed for Avalanche and Arbitrum traders. If you’re unfamiliar with how an exchange like GMX works, don’t worry, we’ll be going over all the details, starting with just what the heck a perpetual even is.
A perpetual is simply a Smart Contract with special instructions written for futures trading. One of these instructions is that the contract has no expiration date. Trading futures enables anyone to bet on a yet-to-be-discovered future price of an asset. This commonly falls into the degen side of the crypto space, due to the extremely high risk and high rewards offered by such a product. By using GMX Exchange, you can freely trade these perpetuals, as the exchange allows anyone to bet for or against Ethereum, Wrapped Bitcoin, Chainlink, and Uniswap. Users can deposit Ethereum, Wrapped Ethereum, Wrapped Bitcoin, Chainlink, Uniswap, USDC, USDT, DAI, and Frax Tokens to fund the account and begin leverage trading. This form of trading is difficult for even the most seasoned market makers. It’s highly recommended that you have a deep understanding of futures trading before attempting to long or short any cryptocurrency, ever.
For those who don’t want to participate in the crypto casino. Other opportunities exist on GMX in the form of staking rewards.
By simply buying the GMX token and staking it on the platform, you can earn rewards in the form of collected fees.
These fees are collected from everyone who uses GMX Exchange.
Every time a futures contract is taken out, a small fee is paid to issue the contract along with the required gas to update the blockchain.
Fees collected through this and other various user interactions are split and divided among anyone staking tokens on GMX. This means that even if you never participate in a single perpetual, you still have the opportunity to earn money from those who do.
How does GMX Work?
We’ll get more into those perpetual contracts and staking a bit later. For now, let’s discuss another equally important part of the GMX Exchange. That is, how it works.
In a centralized perpetuals environment like ByBit. Those operating the exchange decide on crucial elements that shape how the exchange functions, such as withdrawing funds, calling contracts, liquidation models, use of fees, and other important variables. Variables that a central agency can and do change whenever it’s in its best interest. A common example of this is when the price of Bitcoin is rising or falling at an accelerated rate within a short timeframe. To avoid what’s called a “run on the bank”, these centralized exchanges will suddenly have “website issues” making it impossible for users to log in to their accounts and avoid liquidation. With your hands tied and no recourse, all you can do is helplessly watch as you lose everything in your account.
With GMX you use your own wallet to navigate perpetuals and spot trade a handful of currencies. While granted a vastly smaller availability of contracts exists on GMX compared to a centralized exchange, this is a positive thing, as it helps lower the risk of the underlying protocol. For this reason, Ethereum, Wrapped Bitcoin, Chainlink, and Uniswap are the only accepted currencies for swaps and perpetuals. Because you are in control of your funds…
Head of Research Jesse is a passionate seeker of truth who enjoys educating others about Bitcoin. As a free thinker and 2nd amendment advocate, Jesse believes each individual has the right to monetary freedom. “The swarm is headed towards us” -Satoshi Nakamoto
