Launched in early September 2021 as a decentralized perpetual exchange offering swaps and leveraged trading, GMX made a big splash in the DeFi community.
If you’ve never heard of GMX, let’s get you up to speed: GMX’s launch on Arbitrum was seen as a major DeFi milestone. In addition to proving Arbitrum to be 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 the price impact on trades of all sizes, without affecting the market price.
Within a month of launch, GMX grew its TVL to over $30 million, averaging ~$1.4 million in daily trades. GMX has evolved into a liquidity mining program, an NFT marketplace and a yield farming platform. The continued growth brings it to TVL of over $450 million and boasts a 24-hour trading volume of $1 million at the time of writing.
The growth and adoption of GMX also added value to 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 price stands at $46.27, and at the time of writing, the price stands at $36.66. more than 200% price increase since launch.
Looking back, we can safely say that the launch of GMX at 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 incentives for early adoption.
Kinetix Finance, a state-of-the-art v3 perpetual DEX, brings the same potential to Kava Chain that 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, accelerating 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 pool of seasoned and novice traders to the ecosystem, contributing to increased liquidity and activity.
This led to an increase in the TVL, due to increased capital allocation within the Arbitrum ecosystem. The non-expiring nature of GMX’s perpetual contracts drove higher trading volumes among these new users, who could adjust their positions without being bound by contract expiration dates.
This increased activity improved Arbitrum’s overall liquidity and encouraged more people to get on board and participate in the Arbitrum ecosystem.
So why is Kinetix Finance ripe for experiencing exactly the 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 is at its peak ~1.5 billion in TVL and ~1 billion in 24-hour trading volume.
For their next venture, they 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 strives 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 leverage up to 50x for bigger profits (or losses).
- Copy Trading: Learn from the best by copying other traders’ trades.
- Hedging: Reduce risk by taking offsetting positions in different assets.
- Safer liquidations and better price execution: dynamic liquidation price, frequent price updates and more efficient keeper bots.
- No Hidden Spread: No mark-up on asset prices.
- Cross-usable assets: Enter and exit positions with different assets.
- Intuitive UI: User-friendly interface for easy trading, with robust analysis charts.
- No Slippage and No Impact Transactions: Get the price you want when you place an order.
- Reduced liquidation risks: Scam protection, circuit breaker and dynamic liquidation price.
- Built-in protection against transient losses: Protect your liquidity providers’ positions against transient losses.
- Long and short positions: reduce volatility and balance the market.
- Improved price detection for underlying assets: Traders can trade 24/7, leading to better liquidity and more accurate prices.
Kinetix will support $KAVA and $USDT at launch, with more assets like $wBTC and $wETH coming soon.
Is Kinetix the next GMX?
While it is 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 launches with the same two key drivers as Quickswap: it is the first shared liquidity DEX 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 can’t just “transform” traditional financial systems.
Central banks, commercial banks and stock exchanges have an iron grip on the accounts, purses and piggy banks of most people who want 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 don’t know any other way.
But despite TradFi’s tight grip on our finances, many shoddy swordsmen, 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 using DeFi early, the reward – in addition to the potential financial gain – is that the aggregate of all activity and liquidity flowing from TradFi to DeFi shows the rest of the world what they are missing.
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