GMX Challengers
Dr. DODO is Researching
March 16th, 2023

Since GMX’s token launch on Binance in 2022, GMX's figures have been hitting new highs. To date, GMX's total platform transaction volume has exceeded $100 billion, AUM is over $1 billion, unique addresses are over 160,000, and fees distributed to users are over $100 million.

In the nearly 1.5 years since its official launch, GMX has been operating under skepticism. Yet, the "betting" model of GLP is gradually being accepted under the “real-yield narrative”.

Up to now, there are nearly 20 GMX fork protocols online by Defillama, distributed on different chains, and here we picked seven representative projects for discussion.

GMX Mechanism
GMX Mechanism
GMX forks
GMX forks

1. Mummy Finance

Mummy finance is a GMX fork backed by Fantom Foundation. Regarding its innovation, Mummy finance uses NFT to distribute esMMY as its cold-start token distribution method. It gives NFT holders 80% of the treasury FTM dividend. And reduces the percentage of MLP from 70% to 60% for fee distribution, of which 5% is allocated to the development team and 5% is used to buy back and add to the LP pool (MMY-FTM) on Equalizer (Solidly fork). In addition, the rest of the mechanism is the same as GMX, except that the MLP has FTM as a basket of assets.

To date, Mummy finance's platform volume has exceeded $400 million, and the MLP has had a TVL of nearly $15 million, generating about $780,000 in fees - the number is not too exciting.

2. Vela Exchange

Vela Exchange was formerly known as Dexpool, an OTC marketplace. Vela emulates Gains' gDAI and uses USDC to mint VLP and can be further collateralized to obtain eVELA. Vela allows users to trade multiple assets and supports more features for managing positions, such as multiple stop-losses on current positions, changing the amount of collateral in a position at any time, increasing the leverage of an opened position at any time, etc.

Unlike GMX, Vela's price feed is more decentralized, with only some of the contract addresses having administrator status. In addition, the price is refreshed every minute or when the price fluctuates by more than 0.1% (0.02% for forex). Vela also adds a real-time funding rate that GMX does not have, which is calculated in real time after the user opens a position and is automatically deducted from the position.

Since there are no volatile assets, VLP holders only lose money when traders take profits. 50% of the agreed fee is allocated to the VLP holder in USDC, 10% to the VLP stakers in eVELA, 5% to the VELA stakers in USDC, 10% to the VELA stakers in eVELA, and the remaining 25% goes to the team.

To date, VC-backed Vela has had nearly $3 billion in transaction volume and generated $1.5 million in transaction fees in just a few weeks since its launch. Along with the recent trading incentive campaign, Vela numbers are still showing a clear upward trend.

3. Mycelium

Mycelium is a protocol backed by former BitMEX founder Arthur Hayes and merged from TracerDAO. Its GMX fork product is called Perpetual swap. The economic model for MLP is almost identical to GLP, with a transaction fee of 0.4% for non-stablecoin assets and 0.03% for stablecoin assets. The MYC staking reward comes from a 10% platform fee with a 14-day withdrawal time. For esMYC, which is partially rewarded by LP, there is no multiplier reward for reinvestment; and the period for choosing linear redemptions is shortened to 6 months compared to GMX.

In addition, the biggest difference from GMX is that Mycelium claims to be able to trade a wider variety of products, involving foreign exchange, commodity futures, etc. However, currently it only supports WTI crude oil futures in addition to BTC and ETH. To date, the TVL of Perpetual swap is only about $6 million, but the total trading volume reached $1.7 billion, generating more than $1.6 million in protocol fees.

4. MUX Protocol

MUX was formerly known as MCDEX. In the process of completely transforming into a GMX fork, the team made a very eye-catching change in its V2 version, which was to make a Perp aggregator with its own liquidity routing, allowing users to open positions with one click to allocate leveraged positions to different derivatives protocols in a reasonable manner. During the aggregation process, MUX provides users with additional margin to protect them from losses due to the difference in maximum leverage and clearing thresholds supported by different platforms.

In addition, MUX aggregates users' stablecoins and volatile assets, using a portion for derivatives market liquidity and the rest to earn additional revenue for users in other interest-bearing protocols. In a future V3 release, MUX will also support cross-chain aggregation, unifying derivatives liquidity between Arbitrum, Optimism, BNB Chain, Avalanche and Fantom.

To date, the MUX protocol has shown a healthier and more stable growth trend than other fork protocols, with over $60 million in daily trading volume and over 10,000 unique addresses.

5. Level Finance

Level Finance on BNBChain is also a very unique GMX fork protocol. Level utilizes the idea of structured fund to assign different incentives and income allocations to different percentages of a pool of assets, providing users with a variety of matching ETF options.

Notably, Level uses a dual token model, with LVL as an incentive token subsidizing all Tranche and LGO as a pure governance token participating in the redistribution of 50% of the protocol fees (the other 50% is distributed to all Tranche via lyLVL). In addition, Level has a transaction fee of 0.2% for non-stablecoin assets and 0.01% for stablecoin assets, with a fluctuation of 0 - 0.6%.

So far, traders have generated over $3 billion in trading volume for Level finance. The numbers are not as phenomenal as Vela, but it has been running steadily for almost 2 months. Still, its dual-token gaming design is yet to be tested.

6. El Dorado Exchange

In addition to Level finance, there is a micro-innovation of the GMX fork - El Dorado Exchange on BNBChain. El Dorado adds to the structured fund concept of Level a stablecoin EUSD backed by protocol fees, with 60% allocated to ELP and 40% to gEDE holders.

Since EUSD needs to maintain its peg, there is a Stake & Bond mechanism to maintain the peg when the value of the collateral fluctuates:

  • When the collateral ratio rises above 100%, the Stake mechanism is activated and the user stakes EUSD to receive an interest bonus, the total amount of EUSD increases and the collateral ratio returns to 100%;

  • When the collateral ratio falls below 100%, the Bond mechanism is activated and the user sells EUSD to the protocol to receive an interest bonus. The user sells EUSD to the protocol to get EDE tokens at a discount. The protocol then destroys the EUSD sold by the user and gradually brings the collateral ratio back to 100%.

In terms of data, El Dorado can hardly compete with Level due to the homogenous nature between the two. However, El Dorado is already experimenting with multi-chain operation and will soon be extended to Arbitrum.

In addition to the above protocols, there are also forks like Metavault (Polygon), Madmex (Polygon), Tethys Perpetual (Metis), Lif3 Trade (Fantom), OPX (Optimism), etc. that are basically homogeneous with GMX running on their own ecologies. It can be seen that most of the GMX fork are community projects, and the model of "betting" between GLP and traders has been recognized by the community along with high LP incentives. Does such a number of fork remind you of the Uniswap V2 fork wave of the former DeFi summer?

Today's GMX still has many flaws: centralized oracle price feed, no double-sided funding rate, limit of GLP open positions, possible “death spiral” in bear market with one side down, and there was a case of GLP losing due to manipulation of AVAX drastic difference oracle price on Avalanche.

It is foreseeable that the shortcomings of the above mechanism of GMX will soon be iterated by the synthetic asset version of GMX X4 or innovated more diversely by new protocols. For now, there are a few capital-backed protocols that are still not widely seen that are worth tracking:

  1. Lighter, derivatives protocol supported by a16z, the mechanism remains unknown.

  2. Vest Exchange, GMX fork powered by Jane Street.

  3. Perennial Labs, the launch of the AMM derivatives market, backed by synthetic assets, has many mechanisms very similar to the X4 version of GMX, but with Opyn as the underlying layer.

The most anticipated GMX competitor is Perennial.  Specifically, Perennial provides a permissionless tool that allows for the creation of two-sided markets rather than simply provides a trading market. It sets up a set of trading rules for derivatives and allows anyone to set the parameters to build their own market.

Through the peer-to-pool trading model, each public market has 3 participants, market operator, liquidity provider, and trader. The existing document shows that the current Long-SQTH pool is operated by Opyn's multi-signature address. The other two markets, Ethereum’s long and short markets, are managed by Perennial multisig addresses.

First, market operators will only receive a small portion of the trading fees as revenue and will not be mandated to provide liquidity. The parameters that need to be set include utilization curve, fee structure, leverage and maximum liquidity. Among them, the fee structure (opening and closing positions) and the maximum liquidity are relatively easy to understand, but the key is utilization curve and leverage.

The utilization curve is the functional relationship between the market utilization rate and the funding rate. Perennial claimed that this parameter refers to the relationship between Aave and Compound on the loan utilization rate and interest rate. In Perennial, traders need to pay liquidity providers a funding fee, and the level of the fee depends on the utilization rate (that is, the ratio of the nominal value of trader’s position to the nominal value of the liquidity provider’s position), the higher the utilization rate, the higher the funding fee, but maintain a low growth rate before 80%. After reaching 80%, in order to balance the liquidity on both sides of the market, funding fee will rise significantly, and the market is only PvP by both long and short sides, all designs coincide with the concept of GMX X4.

So far, Perennial is at its early stage. Once the GMX X4 launches, the two will become head-on competitors.

In conclusion, GMX is not recognized by the community until one year of its launch. The whole process of "value" discovery is also very similar to the emergence of Uniswap. Perhaps at some point, timing is the essential catalyst for a sector to gain traction.


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