A Quick Overview of 28 Projects Built on GMX

Source: TokenInsight

Composability is the core feature of DeFi, allowing developers to quickly create new projects by integrating existing protocols. One such existing protocol is GMX, which achieved remarkable success in 2022. Its LP token GLP consistently provided over 20% returns in terms of $ETH, sparking the popular narrative of "real yield."

As a result, developers began building new projects on top of GMX, and to date, there are already 28. This article introduces all the projects and analyzes the key ones. They can be categorized into five types: vaults, lending, social trading, options, and others.

Vaults

Vaults are the largest category, with 13 projects ranging from basic auto-compounding pools to complex structured financial products aimed at enhancing GLP returns.

Auto-compounding

Einstein considered compound interest to be the eighth wonder of the world. If you are like me and always forget to reinvest GLP earnings back into the GLP pool, we are missing out on some free money.

If you do not auto-compound, your initial investment of $100 at the beginning of the year will only grow to $120 by the end of the year, assuming a 20% return. However, if you operate twice a day and reinvest the earnings back into the GLP pool, your $100 will grow to $122.14 by the end of the year. If you consider the enhancement of multiplier points, the returns will be even higher. Multiplier points are a unique feature of GLP that rewards long-term users.

Quite a few products offer auto-compounding services for GLP holders, so they do not miss out on potential compounding gains.

Abracadabra

Abracadabra is the largest GLP auto-compounding pool, with a TVL of $15.47 million. Users deposit GLP to receive magicGLP, which automatically reinvests the earned yields back into the GLP pool twice a day, maximizing returns. Like other vault tokens, the value of magicGLP increases over time, leading to a higher exchange rate of magicGLP for GLP.

Abracadabra charges a 1% fee on the earnings for this service and has no entry/exit fees, which is the lowest price among auto-compounding pools.

Plutus

Plutus is the second-largest auto-compounding pool, with a TVL of $7.86 million, allowing users to deposit GLP to receive plvGLP. It auto-compounds every 8 hours and charges a 2% exit fee and a 10% vault fee.

In exchange, plvGLP holders receive a 15% $PLS liquidity mining reward, equivalent to distributing 2.25 million $PLS to plvGLP holders over two years. The rewards are weighted in the initial months, meaning the rewards are highest in the first few months. $PLS can be locked to earn a share of the yields generated by the Plutus protocol and gain control over veTokens locked in Plutus. Besides plvGLP, Plutus also has a range of governance aggregation and liquidity-related products.

Yield Yak

Yield Yak is a GLP farm on Avax, with a TVL of $7.31 million. Similar to Abracadabra and Plutus, Yield Yak automatically reinvests $AVAX rewards into GLP and earns esGMX to increase rewards. Yield Yak charges a 9.5% management fee on the earnings, with no entry/exit fees.

Beefy Finance

Beefy Finance has a TVL of $1.36 million. Its vault compounds at least once a day and compounds every time there is a deposit. Therefore, compounding occurs 10-20 times a day. It also charges a 9.5% management fee on the earnings, with no entry/exit fees, which is identical to Yield Yak.

Redacted

Redacted adds some diversity to vault products. The Pirex launched by Redacted provides liquidity for staked GMX and GLP based on auto-compounding. It has two modes: simple mode and standard mode.

The simple mode is similar to the other auto-compounding pools mentioned above. Interestingly, they also offer a GMX vault. Users deposit GMX or GLP to receive apxGMX or apxGLP. The simple mode charges a 1% withdrawal fee, which is returned to the vault token holders. Additionally, it charges a 10% platform fee on the earnings and a 0.3% welfare reward fee.

The standard mode provides liquidity for staked GMX and GLP. Users deposit GMX and GLP to receive pxGMX and pxGLP. The deposited GMX and GLP are treated the same as native staking on GMX.

The difference is that pxGMX and pxGLP are transferable, allowing users to sell them at any time. pxGMX has a pool on Camelot on Arbitrum and a pool on Trader Joe on Avax.

When staking through the GMX protocol, the earned esGMX is non-transferable. However, when deposited through Pirex, the earned esGMX is marked as pxGMX and can be transferred. Additionally, the earned multiplier points are never lost, as the underlying GMX remains staked when users sell pxGMX on the open market. Therefore, users are not penalized for lacking multiplier points or for selling staked GMX.

The standard mode charges a 1% exchange fee and a 10% fee on earnings.

Pirex's GMX vault is an interesting innovation, while the GLP vault is similar to other auto-compounding vaults but with higher fees. Thus, the TVL of Pirex GMX Vault is $404,555, while the TVL of GLP Vault is only $38,557.

Mugen Finance

Mugen Finance has a GLP vault with a TVL of $3.23 million. It claims to be a multi-chain aggregator that uses sustainable protocol income to generate yields. However, Mugen currently only supports one protocol on one chain, which is GMX.

Mugen's mechanism differs from the aforementioned GLP vaults. $MGN is the protocol token. Users deposit $USDC into the Mugen vault to mint $MGN, which Mugen uses to purchase GLP. Users stake $MGN to earn yields generated by GLP.

What is the difference between buying $MGN and directly purchasing GLP? Buying $MGN is 3 times worse.

When you purchase with $MGN, the Mugen team deducts 10% from your GLP returns.

While you can burn GLP to redeem assets from the GLP pool, you cannot withdraw assets from the Mugen vault. You can only sell $MGN on the open market. Currently, the market price of $MGN is $81, while its corresponding vault value is $126, meaning that early users must accept a 35% loss if they want to exit.

Mugen also has a special design to "prevent users from opening and withdrawing stakes before and after yield distribution." This design causes the protocol to delay GLP reward payments for 30 days. For example, if Mugen earns 100 $ETH from today's GLP yields, each Mugen staker will receive 1/30 of their share of the 100 $ETH daily over the next 30 days. If you want to exit early, you will lose the remaining rewards.

So why would anyone buy $MGN? They can benefit from the losses of early users. Since early users can only sell $MGN on the open market, this causes the price of $MGN to be lower than its actual value. If you buy $MGN today, you can purchase GLP worth $126 for only $81.

Moreover, only 84% of MGN is staked. Therefore, stakers receive higher yields because 16% of MGN holders are willing to forgo their GLP earnings (though it should be noted that GLP is auto-staked).

Using any auto-compounding pool comes with additional smart contract risks. When users expect yield distribution to occur automatically through smart contracts, Mugen previously paused yield distribution without explanation.

Finally, the project relies on a community-developed front end for users to interact with its contracts. The project has its own official link, but its functionality is very limited.

The table below summarizes the basic information of the six auto-compounding pools mentioned above.

Advanced Strategies

In addition to basic auto-compounding, several projects have designed more complex GLP strategies.

The most common is the Delta Neutral strategy. Since GLP consists of 50% stablecoins and 50% $BTC + $ETH, GLP holders effectively hold a 0.5x leveraged crypto long position, thus facing price volatility risks for BTC and ETH (along with slight exposure to some smaller coins in the GLP pool, such as $UNI and $LINK). This works well in a bull market. But it poses problems in a bear market. Therefore, Delta Neutral vaults have emerged to hedge these risks.

Rage Trade

Rage Trade has the most popular Delta Neutral vault, known as the Risk On Vault. Rage Trade's Risk On Vault allows users to deposit $USDC to invest in the GLP pool while establishing short positions in $ETH and $BTC through flash loans. Our previous article explains the mechanism of Rage Trade in more detail. The end result is that when you hold GLP, Rage Trade automatically hedges your long exposure.

Rage Trade also designed a Risk Off Vault to complement the Risk On Vault. The Risk Off Vault lends USDC to the Risk On Vault to establish short positions. The Risk Off Vault earns Aave lending rates and a portion of the GLP rewards earned by the Risk On Vault.

The TVL of the Risk On Vault is $7,330,180, while the TVL of the Risk Off Vault is $3,799,645. The total TVL is $11.13 million.

Neutra Finance

Neutra Finance achieves Delta Neutral through another approach. It hedges the long exposure of GLP by opening leveraged short positions on GMX. It maintains Delta Neutral through a unique rebalancing mechanism. Its current TVL is $1.16 million. Source: Neutra Finance

Umami

Similar to Neutra, Umami also involves hedging trades on GMX in its Delta Neutral strategy. It also implements an internal net settlement strategy that reallocates Delta among Umami vaults to minimize hedging costs. The hedged amounts are regularly rebalanced algorithmically.

Umami was scheduled to launch its Beta in March. However, its CEO recently fled and sold all his tokens. While other team members decided to continue developing Umami in the form of a DAO, this unfortunate incident may lead to product delays. Source: Umami

Vovo Finance

Vovo Finance is another interesting Delta Neutral solution. Vovo allows users to hedge manually rather than automatically.

Each week, the vault collects yields from staked GLP and uses these yields to open 10x leveraged positions on GMX. Users can choose their preferred asset and direction from ETH up, ETH down, BTC up, and BTC down. After a week, the vault automatically closes the leveraged positions and reinvests the profits to buy and stake more GLP.

Vovo has a total TVL of $66,013 across four vaults.

GMD

GMD offers a variant of the Delta Neutral strategy. GMD does not directly hedge against price fluctuations of GLP's underlying assets but creates three independent vaults, allowing users to have risk exposure to only one asset instead of all assets in the GLP pool. For example, holding GLP means holding both BTC and ETH simultaneously, but GMD allows users' GLP to include only one of BTC, ETH, or USDC. It also uses protocol income to protect users from traders' PnL impacts. However, as discussed in my previous article, in most cases, GMX traders are losing money.

GMD's GLP TVL is $4.27 million.

Olive

Olive joins the competition with more financial alchemy. It offers principal-protected vaults that enhance yields by combining composability and structured products without exposing users' principal to risk. Olive trades the weekly yields from deposited GLP through various complex strategies. It charges a 2% management fee on a weekly basis and a 10% performance fee if the yield for that period is positive.

Its current TVL is $299,000.

Jones DAO

The final participant in the GMX war is Jones DAO, with a TVL of $10.75 million.

This is a leveraged auto-compounding pool consisting of two vaults: a GLP vault and a USDC vault. Our previous article discusses its mechanism in great detail. In short, the Jones DAO GLP vault purchases GLP and mints jGLP, then borrows $USDC from the USDC vault to buy more GLP. The amount of leverage is dynamic and determined by market trends.

Depositors in the USDC vault earn interest and a portion of GLP rewards as lenders.

jGLP can be used to provide liquidity on the Jones DAO platform and throughout the Arbitrum ecosystem. For example, users can provide liquidity in the jGLP-USDC pool on Camelot.

GMX War

The GMX War has begun, with vault players built on GMX competing for more GLP shares. While the basic auto-compounding functionality is already attractive, further innovations may enhance GLP yields even more.

I am very optimistic about vault products. The current AUM of GLP is $443 million, while all vault products combined account for only a small portion (15%) of the total GLP. Most GLP remains idle in holders' wallets, waiting to be captured by vault providers.

Moreover, GLP, as a yield-generating product, has immense potential. Anchor (the one on Terra) successfully accumulated over $17 billion AUM by promising a 20% return from a Ponzi scheme. GLP has consistently outperformed this 20% benchmark, and its yields come from real trading fees. There is a significant gap between $443 million and $17 billion, and better vault products will attract more people to mint GLP.

However, one thing to note is that we are at or near the bottom of a crypto cycle. While Delta Neutral has been a good strategy for GLP over the past year, we are pulling back from historical highs. But when we rise, it has the side effect of hedging all the gains from price increases.

Lending

Outside of vault products, lending is the second-largest ecosystem on GMX, allowing users to borrow against their GLP assets as collateral to leverage yield farming. The Jones DAO Vault is also a yield product with built-in lending.

The main players in the lending space are Vesta, Sentiment, Rodeo, and Tender.fi, as well as Delta Prime, Yeti, and Moremoney on Avax. All of these allow users to borrow against their GLP as collateral. Sentiment also allows GMX to be used as collateral, while Rodeo has its own GLP auto-compounding vault.

Options

Perp trading on GMX also synergizes well with options exchanges.

Lyra

Lyra is a DEX for trading options. The protocol aims to keep liquidity providers' exposure close to Delta Neutral, achieved by opening long or short positions on GMX or Synthetix.

Dopex

Dopex is also an options DEX that integrates GMX in two ways.

Their Atlantic Perp Protection protects traders on GMX from liquidation risks. After purchasing options, when a trade approaches liquidation, the stablecoin collateral for the options on Dopex will automatically transfer from the Dopex contract to the trader's GMX collateral account.

Dopex also helps users hedge against GLP price fluctuations. If the GLP price falls below the option's strike price, users will receive settlement gains. If the GLP price rises, users can maintain their GLP holdings and benefit from the price increase.

Social Trading

With the launch of STFX and Perpy, social trading has gained momentum recently. It allows users to copy trades from high-profit traders.

STFX

STFX stands for Single Trade Finance Exchange. It offers short-term, non-custodial, active asset management vaults specifically for single trades. STFX traders use GMX to execute their trades. The platform charges a fixed 20% performance fee.

Perpy Finance

Perpy Finance is conceptually similar to STFX but differs in setup. According to Perpy, the main difference is that the Perpy Vault is continuous, charges variable fees, has no fundraising period, and protects privacy. Source: Perpy Finance

Puppet Finance (GMX Blueberry Club)

Puppet Finance is the upcoming copy trading feature of GMX Blueberry Club. Users can deposit funds into different pools based on their intent. For example, depositing ETH into an ETH bullish pool or USDC into an ETH bearish pool. Puppet tracks the performance of each registered trader, allowing users to match their trades with them. This product is still in development, and more details will be announced when GMX synthetics products launch.

Others

DappsOS

DappOS is an operating protocol designed to lower the barriers to interacting with crypto infrastructure. On GMX, DappsOS allows users to access GMX directly through BSC wallets. It’s very cool and will bring more users to GMX.

Demex

Demex bridges GLP to Cosmos through smart contracts and provides auto-compounding services, allowing Cosmos users to access GMX and earn from GLP.

MUX

MUX, formerly known as MCDEX, is an independent perp DEX and trading aggregator. MUX's perp DEX is the same as GMX. If fees are lower, it also allows MUX traders to open positions directly on GMX.

Conclusion

The synergies provided by the GMX ecosystem benefit all its projects. For example, vault products can collaborate with lending protocols, allowing degens to leverage their GLP farms. Social trading products can drive trading volume on GMX and bring greater returns to GLP through increased fees.

Additionally, an Arbitrum airdrop could happen at any time, and I expect that most of the airdrop gains will be reinvested into Arbitrum projects. The GMX ecosystem is currently the most vibrant on Arbitrum. One or more of the projects mentioned above will benefit from the Arbitrum airdrop.

Furthermore, I believe that despite regulatory risks, the "real yield" narrative will sweep through DeFi. Existing leading projects like Uniswap will be replaced by protocols that share revenue. As Bezos famously said, "Your cut is my opportunity." Uniswap will likely struggle to compete with a similar protocol that shares revenue with users if they have an equally excellent product experience. GMX, as the leader of the "real yield" narrative, will also receive more attention, and its ecosystem projects will thrive.

Therefore, the projects mentioned in this article are worth keeping an eye on, as they may include the next hundred-fold projects during the next bull market.