GMX Ecosystem: A Recent Quick Overview Of Active Projects
Key Points:
There are now 28 projects being built on top of GMX as a consequence of developers starting to create new ones. This page describes each project in detail and evaluates the most important ones. Treasury, lending, social trading, options, and others are the five categories into which they may be separated.
Treasurys are the largest category, with 13 projects ranging from basic auto-compounding to complex structured financial products designed to enhance GLP returns.
Einstein considered compound interest the eighth wonder of the world. If you’re like me and keep forgetting to put your GLP proceeds back into the GLP pool, we’re all missing out on some free money.
If you don’t roll interest, the $100 invested at the beginning of the year will only turn into $120 at the end of the year, assuming a return of 20%. However, if you operate twice a day and put the proceeds back into the GLP pool, your $100 becomes $122.14 at the end of the year. If you take into account the boost in multiplier points, the rewards are even higher. Multiplier points are a unique feature of GLP to reward long-term users.
Quite a few products offer automatic compounding to GLP holders so they don’t miss out on potential compounding benefits.
Abracadabra is the largest GLP rolling pool with a TVL of $15.47 million. Users deposit GLP to obtain magicGLP, and magicGLP automatically reinvests the earned income into the GLP pool twice a day to maximize returns. Like other vault tokens, magicGLP will increase in value over time, causing the ratio of magicGLP to GLP to increase.
Abracadabra charges a 1% fee on proceeds from the service and has no entry/exit fees, which is the lowest rate in the automatic rolling pool.
Plutus is the second largest rolling pool with a TVL of $7.86 million, and users can deposit GLP to get plvGLP. It is automatically compounded every 8 hours and has a 2% exit fee and a 10% vault fee.
In exchange, plvGLP holders receive a 15% PLS liquidity mining reward, equivalent to 2.25 million PLS allocated to plvGLP holders over 2 years. Rewards are weighted in the first few months, meaning the rewards are highest in the first few months. PLS can be locked to earn a portion of the revenue generated by the Plutus protocol and gain control over the veTokens locked within Plutus. In addition to plvGLP, Plutus also has a series of governance rights aggregation and liquidity-related products.
Yield Yak is a GLP farm on Avax with a TVL of $7.31 million. Similar to Abracadabra and Plutus, Yield Yak automatically stakes AVAX rewards into GLP and earns esGMX for increased rewards. Yield Yak charges a management fee of 9.5% of proceeds and no entry/exit fees.
Beefy Finance has a TVL of $1.36 million. Its treasury rolls over at least once a day and rolls over every time a deposit is made. Therefore, interest rate operations occur 10-20 times a day. It also charges a management fee of 9.5% of proceeds and no entry/exit fees, exactly the same as Yield Yak.
Redacted adds some variety to the vault offering. Pirex, released by Redacted, provides liquidity for pledged GMX and GLP on the basis of automatic compound interest. It has two modes, easy mode and standard mode.
Easy mode is the same as the other rolling pools above. The cool thing is that they also offer a GMX vault. Users deposit GMX or GLP to get apxGMX or apxGLP. Easy mode charges a 1% withdrawal fee, which is rewarded to holders of Vault Tokens. In addition, it charges 10% of the proceeds as a platform fee and 0.3% as a reward fee.
The standard model provides liquidity for GMX and GLP in pledge. Users deposit GMX and GLP to get pxGMX and pxGLP. Deposited GMX and GLP are the same as natively staked on GMX.
The difference is that pxGMX and pxGLP are negotiable; users can sell at any time; pxGMX has a pool on Camelot on Arbitrum and a pool on Trader Joe on Avax.
When staking through the GMX protocol, the esGMX acquired are non-transferable. While depositing through Pirex, the esGMX obtained is marked as pxGMX and can be transferred. Additionally, earned multiplier points can never be lost, as when users sell pxGMX on the open market, their underlying GMX remains staked. Therefore, users will not be penalized for lack of multiplier points or selling pledged GMX.
The standard model charges a 1% exchange fee and 10% of proceeds.
Pirex’s GMX vault is an interesting innovation, while the GLP vault is similar to other compound interest vaults, albeit with a higher fee. Therefore, the TVL for the Pirex GMX Vault is $404,555, while the TVL for the GLP Vault is only $38,557.
Mugen Finance‘s GLP vault TVL is $3.23 million. It claims to be a multi-chain aggregator that uses sustainable protocol revenue to generate yield. However, Mugen currently only supports one protocol on one chain, namely GMX.
Mugen’s mechanics are different from the GLP vaults described above. MGN is the protocol token. Users deposit USDC into Mugen vaults to mint MGN, and Mugen uses their vaults to buy GLP. Users pledge MGN to obtain the income generated by GLP.
What is the difference between buying MGN and buying GLP directly? Buying MGN is 3x worse.
The Mugen team will deduct 10% from your GLP returns when you buy with MGN.
While you can burn GLP to redeem assets from the GLP pool, you cannot withdraw assets from Mugen vaults. You can only sell MGN on the open market. Currently, the market price of MGN is $81, and its corresponding treasury value is $126, which means that if early users want to exit, they must accept a 35% loss.
Mugen also has a special design to “prevent users from opening and unstaking before and after the reward distribution.” This design allows the agreement to defer payment of GLP rewards for 30 days. For example, if Mugen received 100 ETH from today’s GLP proceeds, each Mugen staker will receive 1/30 of their share of the 100 ETH per day for the next 30 days. If you attempt to withdraw early, you will forfeit your remaining rewards.
So why would anyone buy MGN? They can benefit from the loss of early users. Because early users can only sell MGN on the open market, the price of MGN is lower than its actual value. If you buy MGN today, you can buy $126 worth of GLP for only $81.
Furthermore, only 84% of MGN is staked. As a result, stakers are rewarded more, as 16% of MGN holders are willing to give up their GLP yield (though it should be noted that GLP is automatically staked).
Using any rolling pool comes with additional smart contract risk. When users believed that the distribution of income should be done automatically through smart contracts, Mugen had previously suspended the distribution of income without explanation.
Finally, the project relies on a community-developed front end for users to interact with its contracts. The project has its own official website link, but its functionality is very limited.
In addition to the basic rolling interest, many projects have also designed more complex GLP strategies.
The most common is the Delta Neutral strategy. Since GLP is composed of 50% stablecoins and 50% BTC+ETH, GLP holders are equivalent to holding long positions in crypto with 0.5 times leverage, so they are exposed to the risk of price changes in BTC and ETH (plus the risk of price changes in the GLP pool Slight exposure to some other smaller coins like UNI and LINK).
That’s fine in a bull market. But there is a problem in a bear market. Therefore, Delta Neutral vaults appeared on the market to hedge these risks.
Rage Trade‘s Delta Neutral vault is the most popular, and it’s called the Risk On Vault. Rage Trade’s Risk On Vault deposits users’ USDC into the GLP pool, while establishing short positions in ETH and BTC through flash loans. Our previous article explained the mechanics of Rage Trade in more detail. The end result is that Rage Trade automatically hedges your long exposure while you hold GLP.
Rage Trade has also designed a Risk Off Vault to accompany the Risk On Vault. Risk Off Vault lends USDC to Risk On Vault to open a short position. Risk Off Vault gets Aave lending rates and a portion of the GLP rewards that Risk On Vault gets.
The TVL for Risk On Vault is $7,330,180, and the TVL for Risk Off Vault is $3,799,645. The combined TVL is $11.13 million.
Neutra Finance realizes Delta Neutral through another approach. It hedged its long exposure to GLP by opening a leveraged short position in GMX. It maintains Delta Neutral through a unique rebalancing mechanism. It currently has a TVL of $1.16 million.
Similar to Neutra, Umami‘s Delta neutral strategy also involves hedging trades on GMX. It also implements an internal netting strategy that redistributes Delta among Umami vaults to minimize hedging costs. The hedged amount is periodically rebalanced algorithmically.
Umami was originally scheduled to launch a beta in March. However, its CEO recently ran away and dumped all his tokens. While the rest of the team decided to continue developing Umami as a DAO, this unfortunate interlude could cause product delays.
Vovo Finance is another interesting Delta Neutral solution. Vovo allows users to hedge manually, rather than automatically.
Every week, the treasury collects the proceeds of the staked GLP and uses these proceeds to open 10x leveraged positions on GMX. Users can choose their favorite asset and direction from ETH up, ETH down, BTC up and BTC down. After one week, the vault automatically closes the leveraged position and reinvests the profits to buy and stake more GLP.
Vovo has a combined TVL of $66,013 across the four vaults.
GMD offers a variant of the Delta Neutral strategy. Instead of directly hedging against price movements of GLP’s underlying assets, GMD allows users to have exposure to only one asset, rather than all assets in the GLP pool, by creating three separate vaults. For example, holding GLP means holding both BTC and ETH, but GMD allows users’ GLP to only include one of BTC, ETH or USDC. It also uses protocol revenue to protect users from trader PnL. However, as discussed in my previous article, in most cases GMX traders lose money.
GMD’s GLP TVL is $4.27 million.
Olive has added more financial alchemy to the competition. It provides principal protection vaults that increase yields without putting users’ principal at risk by combining composable and structured products. Olive trades weekly returns on deposited GLPs through various complex strategies. It trades on a weekly basis and charges a pro-rated 2% management fee, plus a 10% performance fee if the period is positive.
Its TVL is currently $299,000.
The last player in the GMX wars is Jones DAO, with a TVL of $10.75 million.
This is a leveraged interest rate pool consisting of two vaults, a GLP vault, and a USDC vault. Our previous article discussed its mechanism in great detail. In simple terms, the Jones DAO GLP vault buys GLP and mints jGLP, then borrows USDC from the USDC vault to buy more GLP. The amount of leverage is dynamic and determined according to market trends.
Depositors in USDC vaults earn interest and a portion of GLP rewards as lenders.
jGLP can be used to provide liquidity on the Jones DAO platform and across the Arbitrum ecosystem. For example, users can provide liquidity in the jGLP-USDC pool on Camelot.
The GMX War has begun, and vault players built on top of GMX are fighting each other for more GLP shares. While basic compounding features are already attractive, further innovations could further improve GLP yields.
I am very bullish on treasury products. GLP AUM is currently $443 million, and all treasury products combined represent only a small fraction (15%) of total GLP. Most GLP is still sitting idle in holder wallets, waiting to be captured by vault providers.
Furthermore, GLP itself has great potential as a revenue-generating product. Anchor (the one on Terra) that promised 20% returns from the Ponzi scheme managed to amass over $17 billion in AUM. GLP has consistently outperformed the 20% benchmark, and its gains come from real transaction fees. There is a big gap between $443 million and $17 billion, and a better vault product would also attract more people to mint GLP.
But there is one caveat. We are at or near the bottom of a crypto cycle. While Delta Neutral has been a great strategy on the GLP over the past year, we’re coming off all-time highs. But when we go up, it has a side effect because all the gains from the price increase are hedged by the strategy.
In addition to Vault products, lending is the second largest ecosystem on GMX, enabling users to borrow against their GLP assets to increase leverage for yield farming. Jones DAO Vault is also a yield product with built-in lending.
The main players in the lending space are Vesta, Sentiment, Rodeo and Tender.fi, and Delta Prime, Yeti and Moremoney on Avax. All of these allow users to borrow against their GLP as collateral. Sentiment also allows the use of GMX as collateral, while Rodeo has its own GLP rolling interest vault.
Perp trading on GMX also synergizes well with options exchanges.
Lyra is a DEX for trading options. The protocol is designed to keep liquidity providers’ exposure close to Delta Neutral, which is achieved by opening long or short positions on GMX or Synthetix.
Dopex is also an option DEX, which integrates GMX in two ways.
Their Atlantic Perp Protection protects traders on GMX from liquidation risks. Once an option is purchased, when a trade is close to liquidation, the stablecoin collateral for the option on Dopex will automatically be transferred from the Dopex contract to the trader’s GMX collateral account.
Dopex also helps users hedge against GLP price changes. If the GLP price is lower than the option strike price, the user will receive settlement benefits. If the price of GLP rises, users can maintain their GLP positions and receive the benefits of the price increase.
Social Trading has gained momentum recently with the launch of STFX and Perpy. It allows users to copy trades of highly profitable traders.
The full name of STFX is Single Trade Finance Exchange. It provides short-term, non-custodial, active asset management vaults dedicated to one transaction. STFX traders use GMX to execute their trades. The platform charges a flat performance fee of 20%.
Perpy Finance is conceptually similar to STFX but differs in setup. According to Perpy, the main differences are that Perpy Vault is continuous, charges variable fees, has no fundraising period, and preserves privacy.
Puppet Finance is an upcoming copy trading feature of GMX Blueberry Club. Users can deposit funds into different pools based on intent. For example, deposit ETH into an ETH long pool or deposit USDC into an ETH short pool. Puppet tracks the performance of each registered trader, and users can match their trades with it. This product is still in development and more details will be announced when the GMX synthetics product is launched.
DappOS is an operating protocol designed to lower the barriers to interacting with cryptographic infrastructure. On GMX, DappsOS allows users to access GMX directly through the BSC wallet. It’s pretty cool and will bring more users to GMX.
Demex bridges GLP to Cosmos through smart contracts and provides automatic compound interest services, allowing Cosmos users to access GMX and earn income from GLP.
Renamed from MCDEX, MUX is an independent perp DEX and transaction aggregator. MUX perp DEX is the same as GMX. It also allows MUX traders to open positions directly on GMX for lower fees.
The synergy provided by the GMX ecosystem benefits all its projects. For example, a Vault product could work with a lending protocol, enabling degens to add leverage to their GLP farms. Social trading products can drive GMX’s trading volume and generate greater returns for GLP through increased fees.
Also, the Arbitrum airdrop could happen at any time, and we expect most of the airdrop proceeds to be reinvested into the Arbitrum project. The GMX ecosystem is currently the most vibrant on Arbitrum. One or more of the above projects will benefit from the Arbitrum airdrop.
Additionally, despite the regulatory risks, the “real yield” narrative will sweep DeFi. Existing leading projects like Uniswap will be replaced by revenue-sharing protocols.
Uniswap must not be able to compete with a similar protocol that shares revenue with users if their product experience is as good. GMX will also receive more attention as a leader in the “real revenue” narrative, and its ecosystem projects will flourish.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.
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Harold
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