Key Points: There are two tokens within the GMX ecosystem: The governance and dividend token GMX, and the liquidity token GLP.
GLP derivative products have two main objectives: to lower investors’ risk and increase holders’ income. This will increase the capital efficiency of assets.
The GMX/GLP derivatives agreement is a win/win partnership.
Over the past few years, there has been an astonishing amount of DeFi innovation on Arbitrum. This is due to the deployment of GMX, a decentralized derivatives exchange on Arbitrum – thanks DeFi’s LEGO attributes other DeFi protocols started to build products based upon GMX. The most popular design is the product framework based upon GLP. One party is a liquidity provider and the other a trader in the GMX market. GLP can be purchased by investors to provide liquidity to traders on GMX. Investors can also share 70% of the GMX transaction fees. The trader and the liquidity provider are counterparties. This means that the trader can make a profit by purchasing GLP. Investors can also share 70% of the GMX transaction fee sharing. According to Wikipedia, a portfolio that is made up of related financial products and whose value is not affected significantly by changes in the price of the underlying assets is considered Delta neutral. Portfolio strategies that make money in sideways market are called delta-neutral. GLP Delta neutral strategies are designed to reduce price sensitivity and provide yield to GLP holders. Rage Trade offers users a vault product called Delta Neutral Vault. It is divided into Risk-On Vault (9% APR) and Risk-Off Vault (5 APY). Deposit USDC to benefit. The current treasury is at its limit. Rage Trade launched two products to address the needs of users with different risk preferences to reduce risk exposure. Rage Trade matches funds in the Risk–On Vault and Risk–Off Vault to realize returns under different risk levels. Rage Trade then converts part of the USDC into GLP and deposits it there to get a share of the service fees. The second stage: Based on the ETH or BTC positions in GLP Rage Trade can take out flash loans on Balancer to loan ETH or BTC and then sell ETH on UniSwap for USDC. Rage Trade then deposits USDC in AAVE and borrows ETH or BTC to repay the loan from Balancer. Rage Trade then deposits USDC into AAVE and borrows ETH and BTC to repay the loan on Balancer. This refines the process. DeCommas purchases half of USDC into GLP, and deposits half to AAVE to earn interest to lower risk exposure. This is Rage Trade’s main advantage. Users will be able to receive loan interest income as well as GLP dividend income (Vesta takes 20%). GLP users can deposit VST into GLP, which can be used to liquidation staking or liquidity mining. This greatly increases the capital efficiency for GLP holders. GLP holders have a greater capital efficiency because they can stake USDC, ETH and BTC into the single-currency vault of GMD Protocol. GMD Protocol will increase the user’s investment. GMD Protocol will offer users gmdUSDC and gmdETH as asset certificates. It will also encourage them to earn additional income with these tokens. Users can choose to quit and exchange USDC, ETH or BTC for additional income. VLP’s only asset class is USDC, which is a significant difference to GMX. To obtain VLP, users only need to mortgage USDC. VLP holders do not lose money if traders make money, since there are no volatile assets. VLP holders’ income comes from 60% transaction fees and traders’ losses. VLP holders don’t need any other protocols to offer Delta-neutral policies. Parts “2” and “3” in the previous article could be part of innovation based upon VLP. Vela Finance offers higher liquidity injection rewards and rewards VLP provider with native tokens. The event will begin on March 14th. The VLP coffers are currently worth $2.5million. However, Vela Finance, which is just starting, still has a large gap. VLP cannot challenge GLP in a short time, especially after the GLP derivative agreement matures. VLP cannot threaten GLP in a short time, especially when the GLP derivative agreement has matured. The Gains Network can pose a threat for GMX’s market share. Gains Network is able to compete with GMX thanks to a full asset guarantee – currently deployed using Arbitrum. The DAI treasury follows the same principles as GLP but does not have the high scalability. Gains Network announced a new vault strategy on December 8, last year: Users will receive gToken upon depositing assets into the vault. If we deposit DAI into a vault, we receive a gDAI credential. The redemption price for gTokens will be affected by the accumulated fees and open-interest PnL measurements. Although the principle is similar to VLP, it is more complex than VLP. In the future, Gains Network will also set up liquidity lock incentives.Since the gToken model is more complex and has Delta neutrality, it is more difficult to build products based on it, and it is very difficult to form a trend among developers.ConclusionGMX and the GLP derivatives agreement are win-win cooperation, GMX provides investors with LP tokens with low volatility, and the GLP derivatives agreement provides GLP holders with a strategy that is more capital efficient and has higher hedging returns. GLP was launched by GMX to support the GLP derivatives arrangement. GLP will also be promoted to increase its share and create a strong liquidity moat to support GMX. But, liquidity providers can only be attracted to the spot/futures leveraged track by offering higher incentives such as Vela Finance. Only if there are innovative traders on this track, they may be able to challenge the leadership position of GMX in future. We encourage you to do your own research before investing.Join us to keep track of news: https://linktr.ee/coincuHaroldCoincu NewsTags: ArbitrumDeFiETHGLPGMXRisk-On VaultWBTC