GMX: Revolutionizing DeFi with Layer 2 Scaling, Governance, and Liquidity Innovation In 2025

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On the whole, GMX’s broad base of contributors and pseudo-advisors has been a net positive, filling the gaps that the small core team could not cover alone. It exemplifies the power of the DAO model: knowledgeable users become builders and decision-makers. For investors, this means the project isn’t solely reliant on a cloistered team – it has an army of engaged participants. The challenge will be maintaining this engagement and refreshing the talent pool over time. If GMX continues to perform and reward its community (financially through tokens and intellectually through being inclusive in governance), it’s likely to keep this network of contributors robust. This human capital diversity is a significant asset for GMX, one that traditional analyses might overlook but which our due diligence identifies as a key factor in GMX’s resilience and innovation capacity.

Governance Model and Associated Risks

GMX is governed as a decentralized autonomous organization (DAO), with decisions made by GMX token holders and implemented via smart contracts. Understanding this governance model is crucial, as it influences how agile and secure the project is in responding to challenges or opportunities.

Governance Structure:

• Token Holder Voting: Anyone holding GMX can participate in governance votes, proportional to their token holdings. GMX uses Snapshot, an off-chain voting tool, to tally votes based on a snapshot of token balances at a specific block. Snapshot is gasless, making it easy for even small holders to vote. Proposals are typically discussed on the GMX governance forum (gov.gmx.io) and, after community deliberation, moved to Snapshot for an official vote.
  
  
• Proposal Process: A community member or core contributor can initiate a proposal by writing a detailed post on the forum. There’s often an informal temperature check (sometimes via a forum poll) before a formal Snapshot vote. This ensures only proposals with some community support go to an official vote. Topics have ranged from technical parameters (like adjusting swap fees or margin requirements) to treasury decisions (such as approving the budget for a grants program).
  
  
• Multi-Sig Execution: As described, GMX has a 2-of-3 Gnosis Safe multi-signature wallet composed of trusted individuals (Krunal, Ben, and one other) (GMX V1 - detailed report | DeFiSafety). After a vote passes on Snapshot, these signers are responsible for executing the result. For example, if the DAO votes to deploy on a new chain or change a fee, the multi-sig will trigger the smart contract update or fund transfer. This adds a human check – signers confirm that the Snapshot vote was valid (no irregularities) and the action aligns with the vote. In practice, they have been faithful executors of the community’s will.
  
  

Decentralization and Voting Power:
GMX’s governance is fairly decentralized in terms of number of participants, but like most DAOs, there is a token concentration to be mindful of. Early on, the team and migration participants held a large chunk, but over time liquidity mining and market distribution have dispersed tokens. As of late 2023, no single holder can dominate votes outright, but small coalitions of whales could influence outcomes. For instance, Blocktower Capital’s ~336k GMX and Arthur Hayes’ ~200k GMX combined would account for a meaningful vote share. However, these holders have generally voted in line with the broader community’s interests (since they are aligned long-term). The voter turnout for major proposals has been decent – often 15-30% of supply, which in DAO terms is strong. This implies a healthy level of engagement and reduces risk of a sneak attack governance takeover (which often target low-participation DAOs).

Notable Governance Decisions:

• The DAO decided on the distribution of the Arbitrum (ARB) grant. There were debates on whether to sell ARB for stablecoins, stake it, or use it directly as incentives. The community coalesced around using it to boost GMX’s growth (trading incentives), reflecting a long-term growth mindset.
  
  
• A proposal to adjust trading fees and referral rewards was passed to ensure the protocol treasury (which gets a cut of fees) accrued more funds. This was slightly controversial, as it lowered referrer commissions, but the DAO agreed it was important for sustainability. The decision shows the DAO can make tough calls to prioritize protocol health.
  
  
• Listing new assets: Rather than the core team unilaterally listing many tokens, the DAO has been involved. For example, adding support for assets like LINK or UNI for margin trading was discussed and given the nod by the community, keeping a cautious approach to adding volatile assets. The DAO’s conservative stance (they haven’t pushed to list memecoins or extremely risky assets) indicates a responsible governance culture focused on stability.
  
  

Associated Governance Risks:
Despite a solid governance framework, there are risks:

• Voter Apathy or Centralization: If over time token ownership reconcentrates (say, if large investors accumulate more) or if many holders become passive (staking and forgetting), governance could centralize or be captured. For instance, an activist whale could propose something like an aggressive token buyback that benefits short-term price but might starve the treasury long-term; if turnout is low, they might succeed. To mitigate this, GMX has been discussing quorum thresholds or safeguards (like requiring a minimum turnout for certain critical proposals). So far, community vigilance has kept issues at bay.
  
  
• Multi-sig Trust: The multisig is a slight centralization point. In theory, the 2-of-3 signers could collude to execute something that wasn’t voted on. This risk is low – these individuals are reputable and would face legal repercussions (as they are known) if they attempted theft. Moreover, the transparency of blockchain would immediately reveal any rogue action. Still, it’s a trust assumption that the community monitors. There’s talk of expanding to a 4-of-6 multisig to dilute any one signer’s influence and include perhaps one core dev and more community-elected signers.
  
  
• Slow Response Time: DAO governance can be slow relative to the speed needed in some emergencies. For example, if a critical exploit is discovered, the team or multisig might need to act immediately (pause a market, etc.) without a vote. GMX’s contracts do have an emergency pause function for such cases, but using it without a prior vote could raise questions. The community has so far understood when immediate actions were taken (like capping AVAX OI in Sept 2022 pre-emptively). To formalize this, the DAO could pre-authorize the multisig to act in emergencies and then require a retrospective approval. This kind of arrangement is being adopted by some DeFi projects to balance agility and decentralization.
  
  
• Legal Uncertainty for DAO Participants: A unique risk to highlight is what happened in the Ooki DAO case – token holders who voted were deemed by the CFTC to be part of the “unincorporated association” running a possibly illegal platform. If U.S. regulators took a similar stance with GMX, active governance participants could theoretically face legal implications. This could chill governance (U.S. persons might abstain from voting to avoid being seen as “operators”). GMX’s saving grace is its more decentralized nature and the fact that it hasn’t been targeted by regulators to date. Nonetheless, the regulatory risk to DAO members exists. In response, some DeFi communities considered moving to “ advisory signaling votes” rather than binding votes to distance token holders from direct control. GMX may not need this yet, but it’s a point to watch. It’s also possible an entity (like a foundation) could be set up in a friendly jurisdiction to formally execute certain tasks, providing a legal shield for voters – though that introduces centralization.
  
  

Overall, GMX’s governance model has thus far functioned well, enabling community-driven growth while allowing the core team enough latitude to manage day-to-day operations. The associated risks, mainly around centralization and regulatory complexity, are recognized by the community and are being proactively managed (through discussion of multisig expansions, quorums, etc.). For investors, the governance structure is a reassuring sign that GMX is not reliant on a single decision-maker; instead, it benefits from collective wisdom and oversight. One can take comfort that drastic changes (like tokenomics alterations or reckless leverage increases) are unlikely to be made on a whim – they would go through rigorous debate. At the same time, it’s important to remain engaged or at least informed, because as a stakeholder, one has a voice in these decisions. The open governance model is part of GMX’s investment appeal, aligning with the ethos that those who invest in the protocol can actively influence its direction.

Current Status and Project Progress

As of the first quarter of 2025, GMX is in a position of strength, with a proven product, a growing multi-chain presence, and a clear roadmap. Summarizing the current status:

• Market Traction: GMX has facilitated over $140 billion in total trading volume since launch. Daily volumes regularly range in the hundreds of millions (fluctuating with market volatility), and GMX consistently ranks as the #1 decentralized derivatives exchange by volume on Arbitrum and Avalanche. The platform has processed more than 2.2 million transactions and has around 30,000 – 50,000 monthly active users across chains (these metrics have been on an upward trend especially after the Solana launch). GMX’s total value locked (TVL) across Arbitrum, Avalanche, and Solana is roughly $600 million (with Arbitrum’s GLP pool making up the majority). This TVL has remained sticky even in quieter markets, indicating user confidence in leaving capital in the protocol.
  
  
• Revenue and Token Holder Value: In 2024, GMX’s fee revenue has been averaging about $80,000 – $100,000 per day in a moderate volatility environment, which annualizes to ~$30 million. During high volatility spurts, daily fees have spiked to $500k+ (for example, during a sudden BTC price crash or pump, when liquidations and volume soar). About 30% of these fees go to GMX stakers, 70% to GLP (split by chain). For GMX token holders, this has meant yields in the range of 5-15% APR in ETH/AVAX over the past year, depending on conditions – a very healthy return for holding a governance token. The current circulating supply of GMX is ~9 million (out of 13.25M max), and issuance of new tokens is low (only through esGMX vesting and small liquidity mining, largely offset by tokens vesting). This puts GMX in a select category of crypto projects that are already generating cash flows to token holders, not just future promises.
  
  
• Cross-Chain Deployment: GMX is fully live on Arbitrum One, Avalanche C-Chain, and Solana mainnet. The Arbitrum deployment remains the largest, benefiting from the deep liquidity of its GLP (over $400M on Arbitrum alone). Avalanche’s instance, while smaller (~$50M GLP), caters to AVAX-centric traders and still sees meaningful volume, especially on AVAX and BTC trades. The Solana deployment, launched in March 2024, quickly gained traction: within a month, GLP-SOL amassed about $40M in liquidity and was handling ~$20M daily volume – notable for a new entrant. Solana users have shown interest particularly in SOL and ETH perps on GMX-Solana. This multi-chain approach not only diversifies usage but also serves as a hedge; for example, in late 2024, when Arbitrum experienced a brief network outage during an upgrade, GMX trading on Avalanche and Solana continued unaffected, and some traders even migrated temporarily to those networks to manage positions. The GMX interfaces allow easy switching between networks, making it seamless for users.
  
  
• Technology and Upgrades: GMX’s smart contracts have remained stable, with no hacks. The most recent audit (by Zellic in Jan 2024, for the Solana deployment) came back clean with only minor findings, all of which were addressed before launch. The protocol has implemented chainlink’s low-latency oracles on Arbitrum for even faster price updates, reducing oracle heartbeat from ~60 seconds to ~15 seconds for major assets, improving the precision of liquidations and stop orders. GMX also rolled out a referral program upgrade (GMX Affiliate V2) in mid-2024 that streamlined how referrers get their fee share and allowed them to offer custom kickbacks to referred traders. This has boosted marketing efforts, with more trading communities and influencers promoting GMX as they can earn a slice of fees transparently.
  
  
• Community and DAO Progress: The GMX DAO has matured significantly. It formed a Grants Council which has funded over 20 projects to date – including analytic tools (like a mobile GMX portfolio tracker), educational initiatives (e.g., a Spanish-language GMX podcast), and cross-project collaborations (such as sponsoring a trading competition in collaboration with a popular Arbitrum NFT project to bring in new users). The DAO treasury, apart from holding ARB, also holds about 8,000 ETH and several million USDC (bolstered by swapping some fee income and a portion of the ARB grant) – a war chest that can cover development and incentives for several years if needed. Governance participation remains robust; a late-2024 vote on adjusting the GLP asset composition (tweaking the target weight of ETH from 25% to 30% of the pool to meet trader demand) saw over 10% of supply voting, with >95% approval, and was executed smoothly. This indicates token holders are paying attention and align on key changes.
  
  
• Competitive Position: GMX currently holds a dominant 40-50% market share in DeFi perpetual DEX volume (varying by week) and an even larger share of DeFi perp open interest (OI) on Layer-2s (because some competitors like dYdX v3 have winded down before their v4). Its main decentralized competitors are dYdX (still transitioning to full decentralization on a Cosmos appchain in 2024) and smaller platforms like Gains Network on Polygon/Arbitrum. GMX has managed to fend off competition through superior liquidity (GLP is larger than most competitor liquidity pools) and a strong community moat. Many traders have come to trust GMX for large orders due to minimal slippage and reliable withdrawals – a trust competitors will need time to build. On the centralized side, while Binance and others still dwarf GMX in volume, GMX’s share of the overall crypto derivatives market has been creeping up, now estimated around 1-2%. This is small in absolute terms but the trend is what excites investors: GMX’s volume has grown even in a bear market, which suggests considerable upside if a bull market returns and more traders enter the fray.
  
  
• Token Performance: The GMX token, after an initial meteoric rise in 2021-2022, has traded in a relatively stable range through 2023, reflecting its nature as both a growth and yield asset. It has exhibited lower volatility than many altcoins, possibly due to the support from dividend-seeking holders (who accumulate on dips for the APY). When the rest of the market declined in mid-2023, GMX token actually outperformed, only dipping modestly and rebounding quickly, buoyed by the narrative of “real yield DeFi.” Analysts from Delphi Digital and The Block Research published reports in late 2023 suggesting GMX’s valuation (in P/E terms) was low compared to traditional exchange comps, which attracted some value investors. However, the token’s upside is naturally linked to platform growth – which is precisely why the opportunities around new markets and user growth are so exciting to GMX holders.
  
  

Project Progress and Roadmap:
Looking forward, the GMX core contributors and DAO have outlined several roadmap items:

• X4 Protocol: This is in active development in early 2025, with a testnet expected by mid-year. X4 will allow anyone to permissionlessly create a market using GMX’s liquidity framework. The progress so far (per developer updates) includes writing smart contracts for customizable pool parameters and a factory contract for deployments. If X4 succeeds, by late 2025 we could see an expansion from ~15 markets on GMX to hundreds of markets (some long-tail or project-specific). The team is prioritizing security here, given the added complexity.
  
  
• Additional Chains: While no specific new chain deployments are confirmed, the team and community have discussed exploring zk-rollup ecosystems. zkSync Era and StarkNet are candidates – both saw growth in DeFi activity in late 2024. A proposal to deploy on zkSync Era was introduced in the forum, highlighting that GMX could capture first-mover advantage in the Layer-2 ZK space. The community is evaluating technical feasibility (e.g., availability of oracles and whether GMX’s contracts can be ported) and will likely decide in 2025. If it goes through, GMX might be on a zk-rollup by early 2026, further cementing its cross-chain strategy.
  
  
• Asset Expansion: Post-V2, the list of supported assets on GMX has grown (it now includes ~10-12 major coins like LTC, BCH, and others for swaps and collateral). The community is now cautiously considering synthetic forex pairs, as Chainlink has feeds for EUR, JPY, GBP, etc. A trial with low leverage and strict caps might happen in 2025 – this would be a toe in the water toward the vision of listing non-crypto assets. Progress here depends on how comfortable the DAO is with the oracle reliability and pool risk; initial sentiment is positive, as it diversifies volume.
  
  

Mobile App: Recognizing the importance of user experience, a group of community developers funded by a DAO grant is building a GMX mobile app (initially a wrapper around the web interface with added notifications for liquidations/prices). Beta testing for iOS is slated for mid-2025. If successful, this could boost user retention and engagement, as many traders prefer mobile interfaces.

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