Podcast Notes | Interview with GMX Core Contributor: V2 Innovations and Market Expectations

2023.09.01

Podcast Notes | Interview with GMX Core Contributor: V2 Innovations and Market Expectations

What specific changes does the new version of GMX have? What other features are worth our attention?

2023.09.01 - 02:49:39

GMX

Navigating Web3 tides with focused insights

What specific changes does the new version of GMX have? What other features are worth our attention?

Compiled & Translated by TechFlow

Despite the continuous emergence of decentralized exchanges, GMX still maintains its leading position. In early August, GMX launched its V2 version, supporting more trading pairs and offering an improved oracle environment.

So, what specific new changes does GMX's latest version bring? And what other features are worth paying attention to?

In a recent episode of the blocmates podcast, the host invited Coinflip, a core contributor to GMX, to discuss the advantages of GMX V2 over V1, as well as expectations from traders, liquidity providers, and investors regarding the new product release.

Read this 5-minute podcast summary and save yourself 60 minutes.

Below are the main points of the discussion, transcribed and compiled by TechFlow:

Host: Grant, blocmates Podcast

Guest: Coinflip (@coinflipcanada)

Program: blocmates Podcast

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

Link: Link

Date: August 22

Market Fluctuations, On-Chain Transparent Trading, and Open Ecosystem Collaboration

Coinflip stated that over the past 18 months, GMX has gone through multiple market cycles—not only in terms of price volatility but also in technological development, user growth, and ecosystem expansion. Despite market uncertainty, GMX’s products and protocols have matured during this period and gained increasing attention. This maturity is reflected not just technologically, but also in user experience and market adoption.
Coinflip emphasized that on the GMX platform, users can conduct various trades—including long and short positions—all executed on-chain. Most importantly, users can verify and audit transaction records at any time. They can fully understand the protocol’s assets and verifiability when trading, which is a key advantage compared to other DeFi platforms, providing higher transparency and trust.
Coinflip mentioned that GMX has integrated and collaborated with many partners within the ecosystem, including other DeFi platforms, oracles, risk managers, and technology providers.
When multiple platforms and protocols collaborate, they can jointly respond to market changes and challenges, thereby offering users more stable and reliable services, strengthening the overall resilience of the ecosystem. For example, through integration with other platforms, GMX can offer its users more trading and investment options while bringing more users and trading volume to its partners.
The host noted that many products and projects are built on top of GMX or GLP—how should such collaborations be managed?
Coinflip highlighted GMX’s flat organizational structure, lacking rigid hierarchies, instead encouraging 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 engage in governance and decision-making.
GMX consistently promotes open and permissionless protocols—anyone can build on GMX without needing specific permission or approval. This openness encourages innovation and diversity, enabling many different products and projects to launch and grow rapidly on top of GMX.

Differences Between V2 and V1

Coinflip emphasized that the architecture of GMX V2 was thoughtfully designed so that traders, liquidity providers, developers, and other participants could all benefit from its features and services. To ensure broad support, GMX V2 adopts a modular design, allowing the platform to easily add, modify, or remove specific functions or services in response to evolving ecosystem needs.
Coinflip introduced GMX’s GLP—an algorithmically managed liquidity product. Unlike traditional liquidity pools, GLP uses algorithms to automatically adjust its parameters to ensure market efficiency and liquidity, enabling quick market creation for new or small-cap assets. A key feature of GLP is that it allows even small amounts of capital to create efficient on-chain markets for assets.
The host asked Coinflip what lessons were learned from V1 and what improvements or enhancements were desired for V2.
Coinflip responded by returning to GMX’s original vision: creating on-chain markets. They aim to ensure all trades and assets are conducted and stored on-chain to maximize transparency and security.
Coinflip mentioned how GLP helps address the issue of liquidity fragmentation. By using GLP, GMX ensures the creation of efficient markets even with limited capital. GLP uses algorithms to automatically tune its parameters to maintain market liquidity and efficiency.

TechFlow Note: Liquidity fragmentation refers to liquidity being dispersed across multiple different markets or platforms, which may increase trading costs and reduce market efficiency.

Coinflip mentioned the collaboration with Chainlink, a well-known decentralized oracle solution that provides critical price and data feeds for many DeFi projects.
Through this partnership, GMX developed new oracles that deliver stronger, low-latency data, ensuring trades and contracts are based on accurate and timely market information. This collaboration not only enhances GMX’s data capabilities but also increases user trust, as users know the data used by GMX is reliable and up-to-date.
Coinflip discussed how V2 changes liquidity provision. In V2, liquidity providers can more precisely target their liquidity. For example, they can choose to provide liquidity exclusively for specific markets like ETH and USDC, rather than across all markets.
Additionally, in V2, liquidity providers can receive better compensation for the risks they take. If a provider chooses to supply liquidity to a high-risk market, they can expect higher returns.
Coinflip compared the market creation process in GMX V2 versus other platforms. He noted that the GMX V2 market creation process is more complex, possibly due to multi-asset support, new liquidity provision strategies, or other technical innovations.
The host asked how traders can trade on GMX V2 and what new features or advantages the V2 version offers them.
Coinflip explained that traders on GMX V2 can choose which of two supported tokens to use as collateral. This provides greater flexibility, allowing traders to select the most suitable collateral asset based on their strategy and market outlook. Beyond choosing collateral, traders can maintain exposure to the underlying assets. Even after selecting a token as collateral, they can still invest in or trade other assets, capturing more market opportunities.
The host expressed interest in the listing process for new assets on GMX V2, asking whether it is entirely governed by the governance mechanism.
Coinflip explained that in theory, any asset with a proper oracle can be listed permissionlessly on GMX, provided it meets certain technical and security requirements.
Although GMX V2 allows permissionless listings, they currently employ a strategic approach based on market demand, asset safety, and other factors to determine which assets are listed.
Coinflip discussed how funding rates on GMX V2 differ from those on GMX V1.
He mentioned that strong funding rates are applied to positions opened against the prevailing market trend. Traders who adopt strategies opposing the dominant market direction may face higher funding rates.

GMX’s Reward Mechanism

Coinflip mentioned that GMX aims to establish a reward mechanism for all participants.
- For traders, the reward mechanism incentivizes increased trading activity on GMX, boosting market liquidity and engagement.
- For liquidity providers, it encourages them to supply more capital, deepening market depth.
- For market makers, it incentivizes tighter quotes on GMX, enhancing market competitiveness.
Coinflip emphasized that this reward mechanism is not merely for short-term incentives but to ensure GMX’s long-term success and ecosystem health. By rewarding all participants, GMX aims to attract and retain more users and sustain active, healthy markets.
The host asked if there is a mechanism allowing users to deposit one asset and gain exposure to all GMX pools, simplifying the investment process.
Coinflip responded that they’ve already seen many protocols partnering with GMX to create such products. Through these collaborations, GMX may offer simplified solutions enabling users to gain diversified pool exposure through a single deposit.
Although V2 offers enhanced liquidity control, allowing LPs to precisely target their liquidity, not everyone requires such granular control. Coinflip expects ecosystem products to emerge that help manage this complexity, offering simplified solutions for users who don’t want or need fine-grained liquidity management.
Liquidity providers always bear some risk, as market volatility can affect the value of their capital. Providers can choose markets they’re comfortable with, selecting where to provide liquidity based on their risk tolerance, and decide based on trading volume to allocate capital to the most active and potentially profitable markets.
Coinflip mentioned that GMX encourages and supports external partners conducting audits. These audits aim to ensure GMX’s code, protocols, and technical implementations are secure and reliable. Beyond audits, GMX also supports other external fees.
Coinflip noted that the current market structure enables more targeted growth, allowing markets to adjust and optimize based on their own needs and trader behavior, rather than relying entirely on external decisions.
Previously, adjustments to certain market parameters—especially changes in asset weights—might have required a vote from GMX’s DAO. Now, that has changed: markets themselves have greater autonomy to make such adjustments. As trader behavior and preferences evolve, markets can automatically adapt their parameters to better meet user needs.