GMX pioneered the pool-based perpetuals model, where traders take positions against a shared liquidity pool (GLP) rather than an order book. This model became highly influential, spawning dozens of forks and variants across DeFi chains. GMX v2, launched in 2023, refined the model with isolated markets, reduced LP risk, and improved fee structures.
GLP: The Liquidity Pool Model
In GMX v1, GLP (the GMX Liquidity Pool) is a basket of assets (ETH, WBTC, LINK, UNI, USDC, USDT, DAI, FRAX) that functions as the counterparty to all trades. When a trader goes long ETH with 10× leverage, they borrow ETH from GLP. When they close at a profit, GLP pays the profit from its reserves. When the trader is liquidated, GLP keeps the margin.
GLP holders earn 70% of all protocol fees (borrowing fees, liquidation fees, swap fees) in ETH/AVAX. This yield — typically 10–30% APY depending on trading volume — makes GLP one of DeFi's most popular yield sources.
GMX v2: Synthetic Markets
GMX v2 introduced isolated markets with synthetic assets, separating each market's risk into its own pool. Long traders provide collateral in the longed asset (e.g., ETH for ETH-USD longs), and shorts are collateralized in stablecoins. This reduces correlation risk for LPs compared to v1's shared GLP.
GMX v2 also introduced: - Funding rates (longs pay shorts when long open interest dominates, and vice versa) - Price impact fees for large positions - Reduced position fees (0.05–0.07% vs v1's 0.1%)
GMX Token
GMX holders who stake earn 30% of protocol fees (in ETH/AVAX) plus esGMX (escrowed GMX) rewards that vest over 1 year. Multiplier points boost yields for long-term stakers. GMX has no inflation beyond its initial supply, making it effectively deflationary as buy-and-burn mechanisms have occasionally been discussed in governance.
LP Risk and Arbitrage
GLP's performance depends on trader profitability. When traders win consistently, GLP loses. Historically, GLP has been profitable on net due to trader losses and borrowing fees. The delta exposure in GLP (holding ETH, BTC) creates its own market risk — GLP effectively has directional crypto exposure that can be hedged using short positions on CEXes.