GMX V2: Improved UX And LP Risk Management

In 2022, GMX shook the decentralized perpetual futures landscape with its novel AMM solution for trading perps. With the invention of GMX, there was no longer a need to find a counterparty for leveraged token trading onchain. A simple UX and up to 50x leverage made the exchange a one-stop-shop for Arbitrum’s onchain traders and degens. Additionally, the “real yield” GMX token provided holders quantifiable and sustainable returns in the form of ETH, helping create a captivating narrative and desire for fundamental token value accrual within the greater crypto ecosystem. Not many tokens in history have caused as much stir among the industry's native investors.

GMX’s success sparked a firestorm of innovation in the onchain derivatives landscape, with notable competition coming from Synthetix Perps V2, Gains Network’s gTrade, Vertex, and more. Despite its first-mover advantage and popularity among users, GMX's market share has declined substantially over the past year as competitors gain traction and GMX’s ability to attract liquidity/volume lags behind that of newer entrants.

In an effort to outcompete the other exchanges and cement itself as the king of the perp AMM market segment, GMX launched its V2 product on August 3rd, hoping to overcome many of the drawbacks of the V1 product. The latest update aims to create a better user experience for traders and offer increased risk management for liquidity providers. V1 of the product is still alive and well, and V2 exists as a complimentary offering.

Isolated Pools (GM Pools)

In GMX V1, liquidity providers (GLP holders) must be exposed to the entire basket of assets that GMX offers. Though the composition of the basket may vary slightly from the target percentages, an LP’s notional value is dependent on the directional movements of the assets in the breakdown below: