GMX launched in early September 2021 as a decentralized perpetual exchange offering swaps and leveraged trading and made a big splash in the DeFi community.
If you haven’t heard of GMX, let us get you up to speed: the launch of GMX on Arbitrum was seen as a major DeFi milestone. In addition to proving Arbitrum as an effective Ethereum L2 scaling solution, GMX stood out for two main reasons:
- The first DEX and perpetual market to launch on the Arbitrum ecosystem.
- A shared liquidity pool system minimizes price impact on transactions of all sizes, without affecting the market price.
Within a month of launch, GMX grew its TVL to over $30 million, with an average of ~$1.4 million in daily transactions. GMX has evolved into a liquidity mining program, an NFT marketplace, and a yield farming platform. The continued growth brings it to TVL of more than 450 million dollars and has a 24-hour trading volume of $1 million at the time of writing.
The growth and adoption of GMX also created value for the GMX token. The GMX token market price on September 13, 2021 was $14.74. A month later it was $22.33. A year later, the rate is $46.27, and at the time of writing, the rate stands at $36.66. more than 200% price increase since launch.
Looking back, we can safely say that the launch of GMX on Arbitrum was a great success. The demand for a decentralized perpetual market on Arbitrum was and still is high.
But why did a perpetual market and shared liquidity pool system impact Arbitrum’s growth? And what does this have to do with Kinetix and Kava Chain?
Eternal propulsion
The evolution of DEXs and derivatives markets (such as perpetual swaps) in crypto provides builders with new tools to advance DeFi and provide users with early adoption incentives.
Kinetix Finance, a state-of-the-art v3 perpetual DEX, brings the same potential to Kava Chain as GMX brought to Arbitrum. The flywheel effect works like this: the launch of the first DEX and perpetual market protocol on an ecosystem creates positive market sentiment, which accelerates liquidity growth and user activity on the protocol and, by extension, its ecosystem.
GMX offered Arbitrum users the flexibility of perpetual swaps with no expiration date, attracting a larger base of seasoned and novice traders to the ecosystem, contributing to increased liquidity and activity.
This led to an increase in TVL, due to increased capital allocation within the Arbitrum ecosystem. The non-expiring nature of GMX’s perpetual contracts encouraged higher trading volumes among these new users, who could adjust their positions without being tied to contract expiration dates.
This increased activity improved Arbitrum’s overall liquidity and encouraged more people to onboard and participate in the Arbitrum ecosystem.
So why is Kinetix Finance ripe to experience the exact same flywheel effect?
The Kinetix v3 DEX and perpetual market
The Kinetix team builds on their previous successful experience with Quickswap, the largest DEX on Polygon in over three years, which was at its peak ~1.5 billion in TVL and ~1 billion in 24-hour trading volume.
For their next venture, they have decided to build on Kava Chain, a layer-1 blockchain that combines the speed and interoperability of Cosmos with the developer power of Ethereum.
Kinetix aims to be a one-stop DeFi hub, but its advanced tools also unlock advanced trading strategies that never existed in the Kava or Cosmos ecosystems.
At launch, Kinetix will be a v3 DEX (similar to Uniswap v3), making it the first decentralized trading platform with a shared liquidity system. But for power users, it will also have a perpetual swap market (based on QuickPerps, a GMX fork) for leveraged trading.
The Kinetix perpetual market gives advanced traders access to powerful trading strategies and benefits, including:
- Margin Trading: Trade with up to 50x leverage for bigger profits (or losses).
- Copy trading: Learn from the best by copying other traders’ trades.
- Hedging: Reduce risk by taking offsetting positions in various assets.
- Safer liquidations and better price execution: dynamic liquidation price, frequent price updates and more efficient keeper bots.
- No hidden spread: no markup on asset prices.
- Cross-use assets: Enter and exit positions with different assets.
- Intuitive UI: Easy to use interface for easy trading, with robust analysis charts.
- No slippage and zero-impact transactions: get the price you want when you place an order.
- Reduced liquidation risks: protection against scams, circuit breaker and dynamic liquidation price.
- Built-in protection against impermanent losses: Protect your liquidity providers’ positions against impermanent losses.
- Long and short positions: reduce volatility and balance the market.
- Improved price discovery for underlying assets: Traders can trade 24/7, leading to better liquidity and more accurate prices.
At launch, Kinetix will support $KAVA and $USDT, and more assets such as $wBTC and $wETH will be added soon.
Is Kinetix the next GMX?
While it’s impossible to catch lightning in a bottle, the Kinetix team’s previous experience with Quickswap and Quickperps (a GMX fork) has given them direct experience of what contributed to its success.
Kinetix is launching with the same two key factors as Quickswap: it is the first DEX with shared liquidity and the first perpetual swap market on the Kava Chain and Cosmos ecosystems. Only time will tell if the same outcomes will follow.
Ultimately, DeFi aims to transform global TradFi systems and bring financial inclusion, transparency and innovation to the world.
But you cannot simply ‘transform’ traditional financial systems.
Central banks, commercial banks and stock exchanges have an iron grip on the accounts, wallets and piggy banks of most people looking to save or build wealth. People trust the authority of the big TradFi brand names. They know how they work, feel safe and protected by old regulations and use them almost without thinking. They know no other way.
But despite TradFi’s tight grip on our finances, many scrappy swords, developers and early adopters are taking the risk and building or using state-of-the-art DeFi protocols like GMX and Kinetix to make this future a real possibility. Some find the risk-reward ratio worth it; some don’t.
With all the risks of building and deploying DeFi early, the reward – in addition to the potential financial benefit – is that the sum of all the activity and liquidity flowing from TradFi to DeFi shows the rest of the world what they are missing.
- To follow Kava chain And Kinetix on X (formerly Twitter) for the latest updates and announcements.