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 tell you: The launch of GMX on Arbitrum was seen as a major DeFi milestone. In addition to proving Arbitrum to be an effective Ethereum L2 scaling solution, GMX stands out for two big reasons:
- The first DEX and perpetual market to launch on the Arbitrum ecosystem.
- A shared liquidity pool system minimizes price impact on trades of all sizes without affecting market value.
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 produce farming platform. Its continued growth places it at a 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 has also increased the value of the GMX token. The GMX token market cap on September 13, 2021 was $14.74. A month later, it was $22.33. A year later, it’s $46.27, and at the time of writing, it sits at $36.66 – over 200% price appreciation since launch.
Looking back, it is safe to say that the launch of GMX on Arbitrum was a huge success. The demand for a decentralized perpetual market on Arbitrum was and is still high.
But why did a perpetual market and shared liquidity pool system influence the development of Arbitrum? And what does this have to do with kinetics and kava chains?
The development of DEXs and derivatives markets (such as perpetual swaps) in crypto provides new tools for builders to advance DeFi and incentivize users to quickly adopt.
Kinetics Finance, a state-of-the-art v3 Perpetual DEX, brings to Kava Chain the same capabilities 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, which accelerates liquidity growth and user activity on the protocol and, by extension, on its ecosystem.
GMX offered Arbitrum users the flexibility of perpetual swaps without expiration, so it attracted a large group of experienced and novice traders to the ecosystem, contributing to greater liquidity and activity.
This resulted in a jump in TVL, which reflects increased capital allocation within the Arbitrum ecosystem. The non-expiring nature of GMX’s perpetual contracts prompted higher trading volumes among these new users, who could adjust their positions without being tied to contract expiration dates.
This increased activity increases the overall liquidity of Arbitrum and encourages more people to join and participate in the Arbitrum ecosystem.
So why is Kinetics Finance set to experience the same flywheel effect?
Kinetics v3 DEX and Continuous Markets
The Kinetics team is building on their previous successful experience with QuickSwap, the largest DEX on Polygon for over 3 years, which at its peak had ~1.5 billion in TVL and ~1 billion in 24h trading volume.
For their next venture, they have decided to build on the Kava Chain, a layer-1 blockchain that combines the speed and interoperability of Cosmos with the developer power of Ethereum.
Kinetics aims to be a one-stop DeFi hub, but its advanced tools also unlock sophisticated trading strategies that never existed on the Kava or Cosmos ecosystems.
At launch, Kinetics will be a v3 DEX (similar to Uniswap v3), becoming the first decentralized trading venue with a shared liquidity system. But for power users, it will also have a perpetual swaps market (based on QuickPerps, a GMX fork) for leveraged trading.
Kinetics Continuous Markets gives advanced traders access to powerful trading strategies and advantages, including:
- Margin Trading: Trade with up to 50x leverage for increased profits (or losses).
- Copy Trading: Learn from the best by copying the trades of other traders.
- Hedging: Reduce risk by taking offsetting positions in various assets.
- Safe liquidation and better price execution: Dynamic liquidation prices, frequent price updates, and a more efficient Keeper bot.
- No hidden spread: No markup on asset prices.
- Cross-usable assets: Enter and exit positions with different assets.
- Intuitive UI: User friendly interface for easy trading with robust analytics charts.
- No slippage and zero-impact trading: Get the price you want when you place an order.
- Low liquidation risk: Scam wick protection, circuit breaker, and dynamic liquidation value.
- Built-in Temporary Loss Protection: Protect your Liquidity Provider positions from temporary losses.
- Long and short positions: reduce volatility and balance the market.
- Better price discovery for underlying assets: Traders can trade 24/7, allowing for better liquidity and more accurate pricing.
At launch, Kinetics will support $KAVA and $USDT, with more assets like $wBTC and $wETH to be added soon.
Is Kinetics the next GMX?
Although it’s impossible to capture lightning in a bottle, the Kinetics team’s past experience with QuickSwap and QuickPerps (a GMX fork) has given them firsthand experience contributing to its success.
Kinetics is launching with the same two key factors that QuickSwap had: it is the first shared liquidity DEX and the first perpetual swaps market on the Kava Chain and Cosmos ecosystem. Only time will tell if the same results will come.
At the end of the day, DeFi seeks to transform the global TradeFi system and bring financial inclusion, transparency, and innovation to the world.
But one cannot simply ‘convert’ traditional financial systems.
The accounts, wallets and piggy banks of most people looking to save or create wealth are held tightly by central banks, commercial banks and stock exchanges. People trust the authority of the big Tradefy brand names. They know how they work, feel safe and protected by the old rules, and use them almost without thinking. They don’t know any other way.
But despite TradeFi’s tight grip on our finances, many unsuspecting devs, developers and early adopters are taking risks and building or using cutting-edge DeFi protocols like GMX and Kinetics to make this future a real possibility. Some people find the risk-to-reward ratio worthwhile; Nothing.
With all the risk of creating and using DeFi early, the reward, in addition to the potential financial gain, is that the sum total of all the activity and liquidity flowing from TradeFi to DeFi shows the rest of the world what they are missing out on.
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