Conversation with GMX Core Contributors: Innovations and Market Expectations for V2
Organized & Compiled by: Deep Tide TechFlow
Despite the proliferation of decentralized exchanges, GMX still occupies a leading position. In early August, GMX V2 was launched, supporting more trading pairs and a better oracle environment.
So, what specific changes does GMX's new version have? What are the other features worth our attention?
In a recent blocmates podcast, the host invited Coinflip, a core contributor to GMX, to discuss the advantages of GMX V2 compared to V1, as well as the expectations of traders, limited partners, and investors for the release of the new product.
Here are the main points of this conversation, translated and organized by Deep Tide:
Host: Grant, blocmates podcast
Speaker: Coinflip (@coinflipcanada)
Program Attribution: blocmates podcast
Original Title: "GMX V2 Explained | Fees, LPs, Rewards, Incentives, New Tokens & More"
Link: Link
Date: August 22nd
Market Fluctuations, On-Chain Transparent Trading, and Open Ecological Collaboration
Coinflip stated that over the past 18 months, GMX has experienced multiple market fluctuations, which include not only price fluctuations but also technological development, user growth, and ecosystem expansion. Despite the market's uncertainty, GMX's products and protocols have matured and gained more attention during this time. This maturity is reflected not only in technology but also in user experience and market acceptance.
Coinflip emphasized that on the GMX platform, users can engage in various types of trading, including long-term and short-term trading, all of which are conducted on-chain. Most importantly, users can verify and audit transaction records at any time, fully understanding the asset and verifiability of the protocol when conducting transactions. This is a key advantage of GMX compared to other DeFi platforms, providing users with higher transparency and trust.
Coinflip mentioned that GMX has integrated and collaborated with many partners within the ecosystem, including not only other DeFi platforms but also oracles, risk managers, and other technology providers.
When multiple platforms and protocols collaborate, they can collectively address market changes and challenges, providing users with more stable and reliable services, and enhancing the robustness of the entire ecosystem. For example, through integration with other platforms, GMX can offer its users more trading and investment choices while also bringing more users and trading volume to its partners.
The host mentioned that many products and projects have been built on the basis of GMX or GLP products. How are these collaborations managed?
Coinflip emphasized the flat management structure of GMX, without strict hierarchical levels. Instead, community members are encouraged to participate in decision-making and project development. He also mentioned the potential of DAOs, providing a platform for the community to participate in decision-making and governance.
GMX always encourages open and permissionless protocols, where anyone can build on GMX without requiring specific licenses or approvals. This openness fosters innovation and diversity, enabling a multitude of different products and projects to quickly launch and thrive on GMX.
Differences between V2 and V1
Coinflip highlighted that the architecture of GMX V2 is well-thought-out, benefiting traders, liquidity providers, developers, and other participants from its features and services. To ensure broad support, GMX V2 adopts a modular design, allowing the platform to easily add, modify, or remove specific features or services to meet the changing needs of the ecosystem.
Coinflip introduced GMX's GLP, an algorithmically-managed liquidity product. Unlike traditional liquidity pools, GLP uses algorithms to automatically adjust its parameters to ensure market efficiency and liquidity, enabling quick creation of markets for new or small-sized assets. A key feature of GLP is its ability to create an efficient market on-chain even with limited capital.
The host asked Coinflip what they have learned from V1 and what improvements or enhancements they aim to make in V2.
Coinflip responded by going back to the original intention of GMX, which is to create on-chain markets. They aim to ensure that all transactions and assets are conducted and stored on-chain, ensuring maximum transparency and security.
Coinflip mentioned how GLP helps solve the problem of liquidity fragmentation. By using GLP, GMX ensures the creation of efficient markets even with limited capital. GLP utilizes algorithms to automatically adjust its parameters to ensure liquidity and efficiency in the market.
Note by Deep Tide: Liquidity fragmentation refers to the dispersion of liquidity across multiple different markets or platforms, which can result in increased transaction costs and decreased market efficiency.
Coinflip mentioned the collaboration with Chainlink, a renowned decentralized oracle solution that provides critical price and data feeds for many DeFi projects.
Through the collaboration with Chainlink, GMX has developed new oracles that provide GMX with more powerful and low-latency data, ensuring that transactions and contracts can be based on accurate and timely market information. This collaboration not only enhances GMX's data capabilities but also provides users with higher trust, as they know that the data used by GMX is reliable and timely.
Coinflip discussed how V2 changes liquidity provision. In V2, liquidity providers can more precisely target their liquidity. For example, they can choose to provide liquidity only for specific markets, such as the ETH and USDC markets, instead of providing liquidity for all markets.
Furthermore, liquidity providers in V2 can be better compensated for the risks they take. If a liquidity provider chooses to provide liquidity for a high-risk market, they can expect higher returns.
Coinflip compared the process of creating the GMX V2 market with other markets. Coinflip mentioned that the creation process of the GMX V2 market is more complex, which may be related to the multi-asset support, new liquidity provision strategies, or other technological innovations of V2 market.
The host asked how traders can trade in GMX V2 and what new features or advantages V2 version provides for traders.
Coinflip explained that traders can choose which of the two supported tokens they want to hold as collateral in GMX V2. This provides traders with greater flexibility, allowing them to choose the collateral asset that best suits their strategy and market views. In addition to choosing collateral assets, traders can also maintain exposure to the underlying assets. Even if they choose a token as collateral, they can still invest in or trade other assets, thereby gaining more market opportunities.
The host expressed interest in the listing process of new assets in GMX V2, asking if this process is entirely governed by the governance mechanism.
Coinflip explains that in theory, as long as an asset has a suitable oracle, it can be listed on the GMX platform without permission, as long as it meets certain technical and security requirements, any asset may be included.
Although GMX V2 allows assets to be listed without permission, they currently adopt a strategic approach based on factors such as market demand, asset security, and other considerations to determine which assets can be listed.
Coinflip discusses how funding rates in GMX V2 differ from GMX V1.
Coinflip mentions that strong funding rates are provided for traders who take positions opposite to the dominant trend. If traders choose a trading strategy that is opposite to the market's dominant trend, they may face higher funding rates.
GMX's Reward Mechanism
Coinflip mentions that GMX's goal is to create a reward mechanism for all participants.
For traders, the reward mechanism encourages them to engage in more trading on GMX, thereby increasing market liquidity and activity.
For liquidity providers, the reward mechanism encourages them to provide more capital, thereby increasing market depth.
For market makers, the reward mechanism encourages them to provide better quotes on GMX, thereby increasing market competitiveness.
Coinflip emphasizes that this reward mechanism is not just for short-term incentives, but to ensure the long-term success of GMX and the health of the ecosystem. By providing rewards for all participants, GMX hopes to attract and retain more users and ensure ongoing activity and health in the market.
The host asks if there is a mechanism that allows users to gain exposure to all GMX pools by depositing one asset, thereby simplifying the user's investment process.
Coinflip responds that they have seen many protocols collaborating with GMX to create such products. Through collaboration with other protocols, GMX may offer a simplified way for users to gain exposure to multiple pools through a single investment.
Although V2 offers more liquidity controls, allowing liquidity providers to more precisely position their liquidity, not everyone needs this level of fine control. Coinflip expects that there will be products in the ecosystem to help manage this liquidity, which may provide simplified solutions for users who do not wish or need to engage in fine liquidity management.
Liquidity providers always bear a certain level of risk, as market fluctuations can impact the value of the capital they provide. Liquidity providers can choose the markets they are most comfortable with, select which markets to provide liquidity to based on their risk tolerance, and determine where to provide liquidity based on market trading volume to ensure their capital is allocated to the most active and potentially rewarding markets.
Coinflip mentioned that GMX encourages and supports external partners to conduct audits, which aim to ensure the safety and reliability of GMX's code, protocols, and other technical implementations. In addition to audits, GMX also supports other external expenses.
Coinflip mentioned that the current market structure allows for more targeted growth, where markets can adjust and optimize based on their own needs and traders' behavior, rather than relying solely on external decisions.
In the past, adjustments to certain market parameters, particularly changes in asset weights, may have required a vote from GMX's DAO. However, this has changed now, as markets themselves have more autonomy to make these adjustments. With changes in the trading behavior and preferences of market participants, markets can automatically adjust their parameters to better meet traders' needs.
