Dialogue with GMX Core Contributors: V2 Innovation and Market Expectations

Compiled by: Deep Wave TechFlow

Although decentralized exchanges are emerging one after another, GMX still occupies the leading position. In early August, the V2 version of GMX was launched, supporting more trading pairs and a better oracle environment.

So, what are the new changes in the new version of GMX? What other features are worthy of our attention?

In a recent blocmates podcast, the host invited Coinflip, a core contributor to GMX, to discuss the advantages of GMX V2 over V1, as well as the expectations of traders, limited partners, and investors for the new product release.

The following is the main content of this dialogue, which was translated and organized by Shenchao, and the main points were output:

Host: Grant, blocmates podcast

Speaker: Coinflip (@coinflipcanada)

Show attribution: blocmates podcast

Original title: "GMX V2 Explained | Fees, LPs, Rewards, Incentives, New Tokens More"

Time: August 22

Market ups and downs, transparent transactions on the chain and open ecological cooperation

• Coinflip said that over the past 18 months, GMX has experienced multiple ups and downs in the market, not only in price fluctuations, but also in technological developments, user growth and ecosystem expansion. Despite the uncertainties in the market, GMX's products and protocols began to mature and gain more attention during this period. This maturity is not only reflected in technology, but also in user experience and market acceptance.
• Coinflip emphasized that on the GMX platform, users can conduct various transactions, including long-term and short-term transactions, and all transactions are conducted on the chain. The most important thing is that users can verify and audit transaction records at any time, and can fully understand the assets and verifiability of the protocol when making transactions. This is a key advantage of GMX compared with other DeFi platforms, which also provides users with Greater transparency and trust.
• Coinflip mentioned that GMX has integrated and cooperated with many partners in the ecosystem, including not only other DeFi platforms, but also oracles, risk managers and other technology providers.
• When multiple platforms and protocols cooperate with each other, they can jointly respond to market changes and challenges, thereby providing users with more stable and reliable services and helping to enhance the robustness of the entire ecosystem. For example, through integration with other platforms, GMX can provide its users with more trading and investment options, while also bringing more users and trading volume to its partners.
• The moderator mentioned that many products and projects are built on top of GMX or GLP products, how should these collaborations be managed?
• Coinflip emphasizes the flat management of GMX, without a strict hierarchical structure, but encourages community members to participate in decision-making and project development. He also mentioned the potential of DAOs, which provide a platform for the community to participate in decision-making and governance.
• GMX has always encouraged an open and license-free protocol, where anyone can build on GMX without specific licenses or approvals. This openness encourages innovation and diversity, enabling many different products and projects to be launched and developed quickly on top of GMX.

The difference between V2 and V1

• Coinflip emphasized that the architecture of GMX V2 is well thought out, and all participants, whether traders, liquidity providers, developers or other participants, can benefit from the functions and services of GMX V2. To ensure broad support, GMX V2 adopts a modular design, allowing the platform to easily add, modify or remove specific features or services to meet the changing needs of the ecosystem.
• Coinflip introduces GMX’s GLP, an algorithmically managed liquidity product. Unlike traditional liquidity pools, GLP uses algorithms to automatically adjust its parameters to ensure the efficiency and liquidity of the market, and can quickly create markets for new or small assets. A key feature of GLP is that it allows even a small amount of capital to create an efficient market for assets on-chain.
• The moderator asked Coinflip what it learned in V1 and what improvements or enhancements it hopes to make in V2.
• Coinflip responded that going back to the original intention of GMX, which was to create an on-chain market, they wanted to ensure that all transactions and assets were conducted and stored on-chain to ensure maximum transparency and security.
• Coinflip mentioned how GLP can help solve the problem of liquidity fragmentation. By using GLP, GMX ensures the creation of these efficient markets, even with only a small amount of capital. GLP uses algorithms to automatically adjust its parameters to ensure market liquidity and efficiency.

**Deep Tide Note: **Liquidity fragmentation means that liquidity is scattered across multiple different markets or platforms, which may lead to increased transaction costs and reduced market efficiency.

• Coinflip mentioned its partnership with Chainlink, a well-known decentralized oracle solution that provides key price and data feeds for many DeFi projects.
• Through cooperation with Chainlink, GMX has developed new oracles that provide GMX with more powerful, low-latency data, ensuring that transactions and contracts can be conducted based on accurate and timely market information. This collaboration not only enhances GMX's data capabilities, but also provides users with a higher level of trust because they know the data used by GMX is reliable and timely.
• Coinflip discusses how V2 will change liquidity provision. In V2, liquidity providers can more precisely target their liquidity. For example, they can choose to only provide liquidity to specific markets, such as the ETH and USDC markets, instead of providing liquidity to all markets.
• Additionally, liquidity providers are better compensated for the risk they take in V2. If liquidity providers choose to provide liquidity to a high-risk market, they can expect higher returns.
• Coinflip compared the creation process of the GMX V2 market to other markets. Coinflip mentioned that the creation process of the GMX V2 market is more complex, which may be related to the multi-asset support of the V2 market, new liquidity provision strategies, or other technological innovations.
• The moderator asked, how do traders trade in GMX V2? And what new features or advantages does V2 offer traders?
• Coinflip explains that traders in GMX V2 will be able to choose which of the two supported tokens they want to hold as collateral. This provides traders with greater flexibility, allowing them to choose the collateral assets that best suit them based on their strategies and market views. In addition to selecting collateral assets, traders can maintain their exposure to the underlying asset. Even if they choose a certain token as collateral, they can still invest or trade in other assets, thereby gaining access to more market opportunities.
• The moderator expressed interest in the listing process of new assets in GMX V2 and asked whether this process is fully controlled by the governance mechanism.
• Coinflip explained that, in theory, an asset can be listed permissionlessly on the GMX platform as long as it carries the appropriate oracles, and that any asset could potentially be listed as long as it meets certain technical and security requirements.
• While GMX V2 allows assets to be listed without permission, they currently take a strategic approach to deciding which assets can be listed based on a combination of market demand, asset security, and other factors.
• Coinflip discussed how funding rates differ in GMX V2 from GMX V1.
• Coinflip mentioned that it offers strong funding rates for traders who open positions against the dominant trend. If traders choose a trading strategy that goes against the prevailing trend of the market, they may face higher funding rates.

GMX reward mechanism

• Coinflip mentioned that GMX’s goal is to create a reward mechanism for all participants.
• For traders, the reward mechanism encourages them to conduct more transactions on GMX, thereby increasing market liquidity and activity.
• For liquidity providers, the incentive mechanism encourages them to provide more capital, thereby increasing the depth of the market.
• For market makers, the incentive mechanism encourages them to provide better quotes on GMX, thus increasing the competitiveness of the market.
• Coinflip emphasized that this reward mechanism is not just for short-term incentives, but to ensure the long-term success of GMX and the health of the ecosystem. By providing rewards to all participants, GMX hopes to attract and retain more users and ensure the continued activity and health of the market. *The moderator asked if there was some mechanism that would allow users to deposit one asset to gain exposure to all GMX pools, thus simplifying the investing process for users.
• Coinflip responded that they have seen many protocols partner with GMX to create such products. Through partnerships with other protocols, GMX may offer a streamlined way to allow users to gain exposure to multiple pools with a single investment.
• Although V2 provides more liquidity control, allowing liquidity providers to target their liquidity more precisely, not everyone needs this granular control. Coinflip anticipates that there will be products emerging in the ecosystem to help people manage this liquidity, and these products may provide simplified solutions for users who do not want or need granular liquidity management.
• Liquidity providers always bear a certain amount of risk, and market fluctuations may affect the value of the capital they provide. Liquidity providers can choose their most comfortable market, choose which markets to provide liquidity according to their own risk tolerance, and also decide where to provide liquidity according to the trading volume of the market, so as to ensure that their capital is allocated to the most active and the markets most likely to reward them.
• Coinflip mentioned that GMX encourages and supports external partners to conduct audits. This audit is designed to ensure that GMX’s code, protocols and other technical implementations are safe and reliable. In addition to audits, GMX also supports other external expenses.
• Coinflip mentioned that the current market structure allows for more targeted growth, where the market can adjust and optimize based on its own needs and trader behavior, rather than relying entirely on external decisions.
• In the past, the adjustment of certain market parameters, especially the weight change of assets, may require GMX's DAO to vote. But now, that has changed and the market itself has more autonomy to make these adjustments. As the trading behavior and preferences of market participants change, the market can automatically adjust its parameters to better meet the needs of traders.