GMX Protocol Internals

How GMX works in 90 seconds

GMX replaces the order book most perp exchanges run with a single multi-asset pool that quotes both spot swaps and leverage. On V1 that pool is GLP, an index token whose basket targets roughly 35% ETH, 25% BTC, 20% USDC, 10% USDT, and the remainder in approved alts on Arbitrum. Anyone can mint GLP by depositing one of the index assets; mint and redeem are priced off Chainlink, and the contract charges a dynamic 0.2-0.8% fee that rewards deposits that move the basket toward its target weights. Once minted, GLP earns 70% of all protocol fees in ETH on Arbitrum and AVAX on Avalanche, while the remaining 30% streams to staked GMX.

Trading is keeper-driven rather than book-driven. A trader posts collateral, picks a side and leverage up to 100, and the contract opens a virtual position priced at the Chainlink oracle plus the protocol's FastPriceFeed snapshot. There is no order book, so execution sees zero slippage at the quoted price; the cost is the 0.1% open and 0.1% close fee plus a borrow fee charged hourly at roughly utilization 0.01% per hour on the larger side of open interest. When the oracle crosses the position's liquidation threshold - collateral less than 1% of size after fees - a keeper calls liquidatePosition and the protocol seizes the remaining collateral.

GMX V2 keeps the same trade UX but replaces GLP with isolated GM pools, one per market such as GM-ETH/USD or GM-BTC/USD. Each market computes a price-impact fee that scales with how the trade shifts long/short open-interest imbalance: trades that improve balance get a rebate, trades that worsen imbalance pay extra. V2 also adds a funding-style rebate so the heavier side of the market pays the lighter side per hour, and an auto-deleveraging (ADL) backstop that force-closes a slice of the most-profitable positions if pool liabilities ever threaten solvency.

Key concepts

GLP basket and mint pricing

GLP is a single ERC-20 backed by a basket of ETH, BTC, USDC, USDT, and a handful of approved alts. The contract publishes target weights and charges a dynamic mint/redeem fee in the 0.2-0.8% band - lower for assets that are currently underweight, higher for assets that are already over target. This turns every mint into a soft rebalancer and means GLP's NAV is the dollar value of the basket divided by total supply, not a stable rate.

Position open, close, and borrow fees

Every position pays a flat 0.1% open fee and 0.1% close fee against notional, so a $10,000 position costs $20 round-trip before any holding cost. On top of that, the protocol charges a borrow fee on the larger side of open interest at roughly utilization 0.01% per hour. Both fees are deducted from the trader's collateral, and 70% of the proceeds are distributed to GLP in the index asset that secured the trade.

Liquidation rule and keeper flow

GMX V1 liquidates a position when remaining collateral after fees and accrued borrow falls below 1% of position size. The liquidation price for a long is Entry (1 ? (Collateral ? Fees) / Position Size); for a short the sign flips. Keeper bots watch Chainlink plus the protocol's FastPriceFeed, and the first keeper to call liquidatePosition collects a fixed liquidation fee from the residual collateral while the remainder returns to the trader's wallet.

GM pools and price impact (V2)

V2 replaces the single GLP basket with isolated GM pools, one per market. Each pool quotes an impact fee derived from the long/short OI imbalance: trades that improve balance get a rebate, trades that widen the imbalance pay extra. This lets V2 keep zero-slippage execution at the mid-oracle price while still protecting LPs from one-sided flow without needing a real order book or external market maker.

Auto-deleveraging (ADL)

If the most-profitable open positions in a GM market grow large enough that the pool can no longer guarantee payout, the protocol force-closes a pro-rata slice of those winners at the current oracle price. ADL is rare under normal conditions and only fires after impact fees and the V2 funding-style rebate have failed to mean-revert open interest. It is the explicit safety valve that keeps each isolated pool solvent without an insurance fund socializing across markets.

Fee distribution to GLP and staked GMX

All swap, position, borrow, and liquidation fees are split 70% to GLP and 30% to staked GMX - paid in ETH on Arbitrum and AVAX on Avalanche, not in the protocol token. Stakers also earn esGMX (escrowed GMX) emissions that vest over one year. Because rewards are paid in the index asset, GLP and GMX yield is naked exposure to perp fee volume, not a token-emission farm.

Why GMX matters

As of April 2026, GMX is consistently among the top on-chain perpetual venues by open interest with both V1 (GLP) and V2 (GM pools) live across Arbitrum and Avalanche. Its design is the reference point for pool-based perps: a single liquidity layer that quotes leverage at the oracle mid, with LPs taking the other side of trader flow rather than market makers running quotes. That model is what made it possible to run a billion-dollar perp business without an off-chain matching engine, and it is the architectural ancestor of Jupiter Perps, Gains Network's gToken vaults, and most Solana perp DEX designs.

For LPs, GLP and GM are one of the few yield products in DeFi where the cash flow is paid in ETH and BTC instead of an inflationary governance token. The tradeoff is that LPs are structurally short trader skill - when a cohort of traders is sharply right about a directional move, GLP eats the loss directly. The V2 split into isolated GM markets and the introduction of impact fees and funding-style rebates were both responses to that asymmetry, and they make GMX the most-studied case of how oracle-priced AMMs evolve once they have real adversarial flow.

Frequently asked questions

What does GLP actually hold and why does the basket matter?

GLP is a single LP token that represents pro-rata ownership of a multi-asset index - typically around 35% ETH, 25% BTC, 20% USDC, 10% USDT, and ~10% in approved alts on Arbitrum. The mix is the counterparty to every GMX V1 trade, so GLP holders are net long whatever the basket overweights and net short whatever the trader cohort buys. Mint and redeem use Chainlink prices, and the protocol charges a dynamic 0.2-0.8% fee that subsidizes anyone rebalancing toward the target weights.

How are fees split between GLP, GMX stakers, and the treasury?

Trading fees flow on a 70/30 split: 70% to GLP holders paid in ETH on Arbitrum or AVAX on Avalanche, and 30% to staked GMX in the same native asset. Position open and close each cost 0.1% of notional (a 0.2% round-trip), swaps cost 0.2-0.8% depending on basket imbalance, and borrow fees accrue hourly at roughly utilization 0.01% per hour. There is no protocol cut on top - every fee dollar ends up with GLP, GMX stakers, or esGMX vesting buyers.

How does GMX liquidate a position without an order book?

GMX V1 liquidates when remaining collateral falls below 1% of position size after subtracting open and close fees plus accrued borrow. The liquidation price for a long is Entry (1 ? (Collateral ? Fees) / Position Size); for a short the sign flips. Keeper bots watch Chainlink and the protocol's FastPriceFeed; when either crosses the threshold the keeper calls liquidatePosition, the position is force-closed at the oracle price, and any remaining collateral is sent back to the trader minus the liquidation fee.

What changed in GMX V2 with GM pools and impact fees?

V2 replaces the single GLP basket with isolated GM pools - one pool per market like GM-ETH/USD or GM-BTC/USD - so risk no longer pools across all assets. Each market charges an impact fee that scales with how much the trade pushes the long/short open-interest imbalance. Trades that improve balance receive a rebate; trades that worsen it pay extra, which lets V2 quote a wider book without hard-coded spreads while still protecting LPs from one-sided directional flow.

What is auto-deleveraging and when does it fire?

Auto-deleveraging (ADL) is GMX's last-resort solvency tool. If the most-profitable open positions in a market collectively exceed the pool's ability to pay them out, the protocol forcibly closes a slice of those winners pro-rata so the remaining basket stays solvent. ADL is rare under normal conditions and only fires after borrow fees, funding-style rebates in V2, and impact fees have failed to mean-revert open interest. Traders on the wrong side of a violent move can find part of their position closed at the mark price even before they hit liquidation.

How do borrow fees and V2 funding rebates work?

GMX charges a borrow fee on the larger side of open interest at roughly utilization 0.01% per hour, paid every hour from the trader's collateral to the pool. V2 also runs a funding-style rebate: when longs and shorts are imbalanced, the heavier side pays the lighter side a per-hour rate that scales with the imbalance. The combined effect mimics centralized-exchange funding while still routing through the GM pool, and it lets the same market trade without an order book or external maker.

How big is GMX as of April 2026 and where does it run?

As of April 2026, GMX runs in production on Arbitrum and Avalanche with both V1 (GLP) and V2 (GM pools) live, and is consistently among the top three on-chain perp venues by open interest. Fees are paid in ETH and AVAX rather than the protocol token, which is why the GMX market-cap to fee ratio gets tracked closely as a proxy for the broader on-chain perp economy.

Related reading

• GLP vault mechanics - walk through the basket weights, mint and redeem pricing, and how trader PnL flows back to GLP holders.
• GMX perpetual swaps - see leverage, liquidation prices, the borrow-fee schedule, and the full position lifecycle from open to close.
• GM pools and V2 design - compare isolated GM markets to the legacy GLP basket and step through impact fees plus auto-deleveraging.
• Perpetual DEX primitives - zoom out to how funding rate, mark-vs-index, and liquidation work across every venue, not just GMX.
• Impermanent loss calculator - useful for comparing GLP's directional exposure to a traditional 50/50 LP position before depositing.