GMX

Overview

• Decentralized spot and perpetual exchange that allows slippage-free trades on its platform.

• Dual-token model

  • GLP for liquidity providers - receive 70% of platform fees

  • GMX for governance - receive 30% of platform fees

• GMX can be staked for esGMX to earn

  • Escrowed GMX

  • Multiplier Points

  • ETH / AVAX Rewards (from fees)

• Traders can swap assets or get perpetual exposure through an asset pool made up of LPs.

• Spot trading

  • swap directly against the liquidity pool

  • price is determined with Chainlink price feeds and allows zero-slippage trades at that price

  • fees vary based on the proportion of the assets in the liquidity pool versus the target proportion

• Perpetuals trading

  • traders can open a long or short position on any listed asset with up to 30x leverage

  • liquidity pool synthetically takes the opposite position of the trader, such that any profit made by the trader is a loss for the liquidity pool and vice versa

• Traders pay 0.1% fees on their notional size when opening or closing a position, and a borrow fee for every hour the position is open.

• Target weights for assets in the liquidity pool are set according to the positions of the traders. For example, if traders are levered long on ETH, a higher proportion of ETH will be targeted for the liquidity pool.

• The execution price on GMX is decided by the Chainlink oracle, so the depth of the liquidity pool does not affect slippage.

• Liquidity depth will constrain growth for perpetuals. The protocol reserves an equivalent amount of assets from the liquidity pool as open positions to mitigate the risk of insolvency. As such, the protocol cannot support net open interest beyond the assets available in the liquidity pool.

• Depth of the liquidity pool inversely affects the borrowing fee. The borrowing fee is similar to funding rates and is paid every hour. It is calculated as (assets borrowed / total assets in pool * 0.01%). Greater depth ⇒ better pricing for traders.

Contracts

• Vault

  • Vault contract stores deposits and handles the main trading functions.

  • Deposit: Funds are deposited into the Vault through the minting of GLP tokens

  • Withdrawal: Funds can be withdrawn from the vault through the burning of GLP tokens

  • Swap: The vault allows swapping of the tokens held in the vault

  • Longs: Users can open a long position using the vault. A snapshot of the collateral value is taken when the position is opened. To ensure the vault has sufficient funds to pay out any profits, an amount of ETH equivalent to the position’s size is marked as reserved, for this position, 5 ETH in the vault would be reserved.

  • Shorts: Users can open a short position using the vault. Stablecoins are required as collateral for shorts and similar to longs, an amount of stablecoins equivalent to the size of the position would be reserved to pay out any profits.

  • Liquidations: A position can be liquidated by keepers if the losses of the position reduces the collateral to the point where position size / remaining collateral is more than the max allowed leverage.

• Router

  • Router contracts provide convenience functions on top of the vault

  • router handles transferring the tokens to the vault as well as wrapping / unwrapping of native tokens if required

  • users interact with the router and sends tokens to it, which are then processed and sent to the Vault contract for execution

• Position Router

  • The PositionRouter contract handles a two part transaction process for increasing or decreasing long / short positions.

  • This process helps to reduce front-running issues:

    1. User sends request to increase / decrease a position to the PositionRouter

    2. A keeper requests the index price from an aggregate of exchanges

    3. The keeper then executes the position at the current index price

    4. If the position cannot be executed within the allowed slippage the request is cancelled and the funds are sent back to the user

  • Working to integrate with KeeperDAO so that if a price update creates an arbitrage opportunity, profits from the arbitrage are captured and redirected into the pool.

• PriceFeeds

  • The PriceFeed contract accepts submissions from the price feed keeper. This keeper calculates prices using the median price of Binance, Bitfinex and Coinbase. There are two types of keepers:

    • Price feed keeper: submits prices routinely for swaps

    • Position keeper: submits prices when executing a position

  • The vault uses the price from the keeper if it is within a configured percentage of the corresponding Chainlink price. If the price exceeds this threshold then a spread would be created between the bounded price and the Chainlink price.

  • Prices from the keeper have an expiry of five minutes. if the last price has been submitted more than five minutes ago, the Chainlink price will be used instead.

  • Liquidations can only occur if the Chainlink price reaches the liquidation price for a position.

  • Watcher nodes also run to verify that the prices submitted by the keepers have not been tampered with. Watcher nodes continually compute the median price and compare this with the prices submitted by keepers.

Access Control

Parameters that can be adjusted by a controller account currently controlled by the team:

• Setting of swap and margin trading fees up to a maximum of 5%

• Setting of token weights for the GLP pool, token weights affect the dynamic fees of swaps, these fees are such that a swap which increases the balance towards the specified token weight will be lower, while a swap that moves the token weight away from the desired amounts will have higher fees, the details of the calculation can be found from Vault.vaultUtils.getSwapFeeBasisPoints

• Pausing of swaps or leverage trading for emergency use

• Setting of the maximum allowed leverage

• Setting of maximum total capacity for long and short positions

Parameters that can be adjusted by a Timelock controlled by the team:

• Listing of new tokens

• Updating Vault.priceFeed

• Updating Vault.vaultUtils, the VaultUtils contract validates the opening and closing of positions and also specifies how fees are calculated

• Updating of gov values

The Timelock works by requiring a 24 hour gap between when the full details of an action is signalled on-chain to when the action is executed. An example flow would be:

• Timelock.signalSetPriceFeed is called, this specifies the Vault address and the address of the new price feed

• At least 24 hours must pass

• Timelock.setPriceFeed can be called, this will update the Vault.priceFeed value