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ITSA DeFi insight — GMX on-chain perpetuals and GLP

The decentralized perpetual futures exchange GMX, formerly known as Gambit on Binance Smart Chain (BSC), is operational on Arbitrum and Avalanche. On BTC, ETH, LINK, UNI, and AVAX, traders can use leverage of up to 30x. GMX also provides spot trading on the same assets. The exchange uses Chainlink oracles to create dynamic pricing. Instead of using an AMM or orderbook model like other decentralized derivatives protocols, GMX has developed a novel strategy for encouraging and bootstrapping liquidity on its exchange. GLP, the protocol’s liquidity provider token, is used for this.

Authors: Christian Viehof, Valentin Kalinov

The GLP token, which is presented in the graphic below, is an index of assets that the exchange uses for swaps and leveraged trading. Any index asset may be deposited to create GLP, or any index asset may be redeemed by burning GLP. It is crucial to remember that GLP on Arbitrum and Avalanche cannot be transferred or used with one another. GLP holders receive escrowed GMX plus 70% of platform fees in the form of ETH tokens on Arbitrum, whereas they receive escrowed GMX plus 70% of platform fees in the form of AVAX tokens on Avalanche. Before being redeemed, minted GLP tokens must be kept for at least 15 minutes.


GMX composition chart
Figure 1: GLP Composition (source:

The GLP liquidity model is similar to protocol-owned liquidity (PoL) in that the protocol owns the collection of assets that liquidity providers have placed in exchange for GLP tokens and revenue from protocol fees.


How GMX/GLP earns money

The GLP pool is a multi-asset pool that enables trading as well as long/short and swap trading for its users. Market making, swap fees, and leverage trading generate liquidity provider (LP) fees for this pool, which are then returned to GMX and GLP holders.

GLP is a single-sided liquidity pool without impermanent loss that acts as a counterparty for users of the GMX protocol. This implies that GLP liquidity providers earn a profit when the traders of the GMX protocol lose and vice versa.


Traders Net PnL chart
Figure 2: Traders Net PnL (source:

GMX cumulative fees chart
Figure 3: Cumulative Fees (source:

GPL token performace chart
Figure 4: GLP Performance (source:

The APR earned by liquidity providers is divided into ETH APR or AVAX APR and Escrowed GMX APR.

AVAX GLP APR composition chart
Figure 5: AVAX GLP APR Composition (source:


While the ETH APR or AVAX APR are activity driven and depend on the trading of GMX users, the Escrowed GMX are a reward incentive that is paid out regardless of trader performance. Escrowed GMX can be vested and sold, or alternatively, they can be staked, providing an additional return.


Avax Escrowed GMX APR composition
Figure 6: AVAX Escrowed GMX APR Composition (source:

Rebalancing and price feeds

Once a week, GLP does a passive rebalance by updating asset prices to determine new target weights. GLP and swap minting and redemption fees are dynamically modified to provide LPs and traders with an incentive to move actual asset weights in the direction of desired weights.

Once a week, rebalancing enables GLP to maintain a healthy exposure without overtrading and scaling out of wins. Rebalancing can help GLP make money in volatile markets. The possibility exists that the market would turn bearish before rebalancing can occur, which would result in heavier losses for LPs because of a greater exposure to cryptocurrencies. Overall, the rebalancing strategy functions as a short-term cyclical adjustment of GLP, boosting exposure during bull markets and decreasing exposure during bear markets.

A major innovation in the way transactions are executed is the dual use of the GLP pool by GMX as the counterparty to traders and the oracle pricing mechanism. First off, because the conventional automated market maker (AMM)/order book methodology is not used, trades are performed with no slippage or market impact. This is also innovative for LPs because they are exempt from impermanent loss because of the oracle pricing system (not subjecting the LPs to the cost of price discovery via arbitrage).

Additionally, GMX’s aggregated oracle pricing system draws price feeds from FTX and Binance directly. Aggregating these feeds lowers the danger of liquidation from transient wicks. Looking at the intraday wicks on the Bitcoin sell-off on December 4th, we can see the GMX wick bottomed out 3.94% higher than FTX and 3.45% higher than Binance.


The classification of GMX according to the ITC

GMX Tokenbase Entry table
Figure 3: The GMX Tokenbase entry (Source:

Economic Purpose (EEP): GMX is listed as Governance Token (EEP22NT02) due to its governance functionality.

Industry Type (EIN): The issuer of GMX is active in the field of Decentralized Derivatives, Synthetic Assets and Insurance (EIN06DF03).

Technological Setup (TTS): GMX is an Other Application Layer Token (TTS42ZZ). The Class “Avalanche ERC-20 Standard Token” captures every Token that is implemented by means of the ERC-20 Standard on top of the Avalanche blockchain.

Legal Clam (LLC): GMX does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token (LLC31).

Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. GMX’s platform is built by a team of programmers and engineers that make up the core contributor community. Its Issuer Type is an Application Layer Protocol (LIT62AL).

Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information of the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). GMX qualifies as an Utility Token (REU52) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.


The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.


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Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.

Valentin Kalinov is an Executive Director at International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He has over five years of experience working at BlockchainHub Berlin in content creation and token analysis, as a project manager at the Research Institute for Cryptoeconomics at the Vienna University of Economics and token analyst at Token Kitchen. You can contact Valentin via and connect on Linkedin if you would like to further discuss ITSA e.V. or have any other open questions.


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