Jamie McNeill
What is Arbitrum?
“Arbitrum is a suite of fast, low cost and secure, Ethereum scaling solutions by @OffChainLabs“, and has been growing more and more popular, especially since their partnership with Aave, which has attracted tens of millions of dollars to the scaling solution itself.
Arbitrum prides itself on having a high degree of security, but without compromising on low fees. The blockchain has become increasingly popular despite the fact that a native token still has not been released.
Consequently, many people are trying to use the blockchain in various ways to preemptively win allocations for a potential airdrop in the future.
GMX is a spot and perpetual contract trading platform
GMX, formerly known as Gambit Exchange, is a trading platform that launched in September 2021, and has launched on both Arbitrum One and Avalanche.
Not dissimilar from dYdX, GMX is first and foremost a spot trading platform that allows users to trade seamlessly without giving up custody of their keys.
As a decentralised exchange there are huge advantages: the lack of KYC and AML checks required to use the exchange means that there is no maximum amount that can be traded, the entire process is easy to verify on-chain (it is easy to find bad actors), people retain custody of the funds, and the entire process is far more user friendly.
However, the spot exchange isn’t the only for offering spot trading to their users.
GMX has become extremely popular for offering high amounts of leverage to their users as well, with the highest amount of leverage that can be taken out standing at 30x.
They do this by offering both perpetuals contracts and futures contracts, which can function as a good way for investors to hedge themselves – or a good way to take on a lot of leverage.
GMX and GLP tokens
At the core of the GMX exchange is the idea that the exchange must be decentralised itself, and so it requires a pool of funds from which to offer leverage to other users.
Their “community owned liquidity pool” hosts a range of different assets, which are used in order to offer the high degrees of leverage (up to 30x).
Anyone can contribute to the GLP pool, and users can provide single assets if they’d rather not provide LP tokens.
When send their assets to the GLP pool, they receive GLP tokens in return, which reflect their share of the pool.
Those who wish to participate in the GMX ecosystem can purchase the GMX token on Trader Joe’s on Avalanche network, or on Uniswap on the Arbitrum network.
$60 billion in trading volume and 100,000 users
GMX has done incredibly well recent to cement itself within the trading market; GMX’s userbase has grown to over 85,000 active users who have collectively traded over $60 billion in volume
Liquidity begets liquidity, and in the case of GMX their GLP pool has allowed them to sustainably grow how much liquidity they have, which means that they can offer more and more leverage to more and more traders.
Currently, the GLP pool stands at over $300m across both the Avalanche and Arbitrum networks, and the project doesn’t appear to be slowing down.
In the previous bull market, the “Ethereum killers” were some of the best performing assets. Fantom, Solana, Avalanche, Polygon, BNB, etc., all had incredibly explosive growth, and there is no doubt that the team at Arbitrum are hoping for something similar.
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This article was written for Business 2 Community by Jamie McNeill.
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