The GMX ecosystem operates through the dual token model established in the form of the GMX and GLP tokens. To reiterate, the GMX token is the official utility token of the ecosystem, providing holders with the ability to earn passive yield (paid out via protocol revenues) and participate in the protocol’s governance. Likewise, as established above, the GLP token represents a form of “proof of liquidity” for GMX LPs.
The GMX ecosystem’s tokenomics, based on the innovative nature of the multi-asset pool and vAMM integrated technologies, provide a unique DeFi opportunity in that 100% of all generated revenues are distributed to the ecosystem’s stakeholders. This is one of the leading examples in DeFi showcasing true “ownership economy” principles where users double as owners over the revenues of the business (in this case, the GMX protocol).
The following sections will offer more depth on the GMX and GLP tokens, as well as provide key financial metrics on the GMX ecosystem as a whole.
GMX Token
The GMX token is the true native token to the GMX protocol, giving holders the right to a percentage of the 30% of platform generated fees that go to GMX holders. This is the real yield associated with the GMX protocol, paid out by real revenues rather than complex tokenomics, inflation mechanisms, or other convoluted methodologies commonly used in dApps. The token itself is well within the top 100 cryptocurrencies by market capitalization, holding a market cap of just over $500 million as of Q2 2023 at ~$57 per token.
GMX Staking
The GMX token’s primary utility is . There are three separate affiliated rewards for participating in staking within the GMX ecosystem:
- Escrowed GMX (esGMX)
- Multiplier Points
- ETH / AVAX Rewards
The rewards are paid out from the 30% of accrued revenues paid out to GMX stakeholders. Furthermore, stakers have two separate options for paid-out rewards. Each user can either: 1) choose to compound their rewards or 2) claim their rewards outright. Compounding ensures that any accrued rewards get added to the stake (this includes esGMX and multiplier points). Claims payout rewards directly in the native token of the host network that the user is on. GMX is available on both Avalanche (L1) and the Arbitrum L2 network on top of Ethereum.
As of Q2 2023, there are 8.5 million GMX tokens staked on the network. This is spread over an estimated ~40,000 different wallets.
Escrowed GMX (esGMX)
Stakers can compound their esGMX rewards or convert esGMX into fully realized GMX tokens through vesting. In vesting, the average of GMX and GLP tokens that were used to accrue rewards will be reserved and unlocked at an equivalent value in the future. Any esGMX tokens that’ve been unstaked and submitted into vesting will no longer earn any rewards. So, it's recommended that holders continue to stake their vested tokens. Vested esGMX tokens take 365 days to fully unlock and will then become claimable GMX tokens.
As of Q2 2023, there are a total of ~472,000 esGMX tokens in the GMX vault. The percentage of vested tokens has been steadily declining over several quarters while the total number of esGMX tokens staked has begun to slow its growth that began in October 2021. This is seen graphically below:
Multiplier points (MP)
Multiplier points (MPs) are a reward tool used to compound reward accrual for stakers. MPs avoid inflationary reward mechanics and are earned at a fixed 100% APY rate when users stake their GMX tokens. Each MP goes to boost the ETH/AVAX APYs for staking. The more a user’s stake is compounded, the more MPs they have that are helping to increase their overall real yield.
When tokens are unstaked, the proportional amount in MPs is effectively burned. Thus, it's not carried over or exchangeable in any way. You can transfer staked tokens without burning MPs via the GMX UI. The UI also gives players the ability to track their “Boost Percentage” to calculate real yield rates on the GMX platform.
The Boost Percentage uses the following formula to calculate the ratio of MPs to a user’s GMX stake:
So, to put this concept into context, someone who has 10,000 GMX staked for one year would expect to earn 1,000 MPs. The key concept to take away from this tool is that it creates extremely strong incentives for users to continually stake their GMX (and esGMX) without claiming. When a stake is removed, the collected MPs are burned and lost. So, to avoid losing the MPs that have been building up for that user’s stake over time, they have no choice but to keep it locked up essentially until they're ready to leave the ecosystem entirely.
This helps to vastly alleviate selling pressure on the GMX token, especially so when considering that many inflationary tokenomics models for other DeFi projects lead to negative pressures on price over time. GMX’s reward system does the exact opposite.
