The Ultimate Due Diligence Report on GMX Token

1. Executive Summary

Overview of the GMX token and its unique value proposition.

GMX stands as a beacon in the decentralized finance landscape, anchoring a platform for spot and perpetual contract trading that distinguishes itself within the crypto derivatives arena. Delve into the salient aspects of GMX:

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Decentralized Trading:

Championing economical swap fees and trades without price impact, GMX empowers traders with up to 30x leverage.

Multi-Asset Liquidity Pool: The GLP, a versatile liquidity pool, underpins trading and dispenses rewards through market making, swap fees, leverage trading, and asset rebalancing.

Dual-Token Framework: Within the GMX ecosystem, two pivotal tokens emerge: the GMX Token, which steers governance, and the GLP Token, which infuses liquidity into trading operations.

Sustainable Tokenomics: To avoid inflationary pressures, GMX’s tokenomics eschew the prevalent ‘farm and dump’ incentives.

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Automated Market Maker (AMM): GMX’s AMM paradigm facilitates trading against a diverse token pool, guaranteeing a counterparty for every trade, contingent on ample liquidity.

These attributes are meticulously crafted to elevate GMX to the forefront of the crypto derivatives sector, fostering robust value growth for token holders and liquidity contributors, with ETH as the unit of account. Initially launched on Arbitrum in September 2021, the platform subsequently expanded to Avalanche in early 2022.

A brief summary of the investment opportunity:

GMX’s ey benefits include easy and secure access without registration, cost-effective trading, earning potential through staking, and high-leverage options for advanced trading strategies. It’s designed to overcome common crypto exchange challenges, offering a distinctive and sustainable economic model for institutional investors interested in crypto.

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2. GMX Overview

Mission and Vision: GMX's long-term objectives.

GMX aims to transform the crypto derivatives market with a decentralized platform featuring low fees, no trade impact, and high leverage. Their vision is to lead in this space, offering significant returns to token holders and liquidity providers, with a sustainable economic model. They’re focused on resolving centralized exchanges’ liquidity problems using their AMM for seamless trading.

Problem Statement: Challenges or gaps GMX aims to address.

GMX seeks to address the challenges of high fees, limited liquidity, and regulatory hurdles in the crypto derivatives market by offering a decentralized platform with low-cost trades, an innovative liquidity solution, and no mandatory registration, catering to both retail and institutional traders.

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Solution: How the GMX  proposes to solve these problems.

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GMX proposes three key solutions to enhance its decentralized exchange:

• Isolated Markets: To allow liquidity providers to focus on specific assets, reducing risk.

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Chainlink Oracles: For efficient, secure price feeds, preventing front-running.

• Fee Adjustments: Lower trading fees and new fee structures to ensure fair market conditions.

• These updates are designed to boost GMX’s efficiency, safety, and user experience, solidifying its standing in the DeFi space.

3. Technology and Product

Technical Architecture: Overview of the blockchain and other technologies used in GMX 

GMX integrates blockchain technology to offer a decentralized trading platform on Arbitrum and Avalanche networks. It features a GLP liquidity pool with various assets, a native GMX token for utility and governance, Chainlink Oracles for price accuracy, and a user-friendly trading interface with up to 50x leverage. This setup allows users to trade while maintaining asset custody, mirroring centralized exchanges’ efficiency with decentralized security.

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Product Offering:  Description of  the product or service, including its development stage.

GMX distinguishes itself with a capital-efficient approach, leveraging a unified multi-asset pool, the GLP, which encompasses stablecoins and major cryptocurrencies such as Bitcoin and Ether. This pool is the backbone for all trading activities on the platform.

In terms of development, GMX has reached a mature stage, having launched multiple products since its inception in September 2021. The platform’s total value locked (TVL) has surged, particularly post the FTX collapse in 2022, which prompted a shift towards decentralized trading options.

Moreover, GMX employs a two-token system, where GLP tokens provide liquidity for trades and GMX tokens serve governance purposes. The platform’s revenue streams include fees from swaps, leveraged trading, liquidations, and the GLP tokens’ minting and redemption processes.

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Innovation: How GMX innovates or improves upon existing solutions.

GMX is revolutionizing the decentralized finance (DeFi) landscape with its advanced perpetual exchange on Arbitrum and Avalanche. By harnessing Chainlink’s cutting-edge low-latency oracles, GMX enhances trading performance and security, outpacing traditional DeFi solutions. This innovation is crucial for derivatives trading, where speed and data accuracy are paramount.

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As a hub of innovation, GMX collaborates with various partners to foster agile and adaptable project development, ensuring the prioritization of groundbreaking platforms.

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The launch of GMX v2 marks a significant leap forward, targeting increased operational efficiency, minimized risk, and an improved user experience. This upgrade underscores GMX’s dedication to elevating the standards of DeFi derivatives exchanges.

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GMX Roadmap: Development milestones, past achievements, and future goals.

Past Achievements:

Launch on Arbitrum and Avalanche: GMX is live on both these networks, allowing users to trade top cryptocurrencies with leverage directly from their wallets.

Utility and Governance Token: GMX token serves as the utility and governance token, accruing a significant percentage of fees generated from the markets.

Liquidity Provider Tokens: GM and GLP tokens were introduced to provide liquidity for GMX V2 and V1 markets, respectively, with attractive APRs.

Future Goals:

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Expansion of Services:

GMX aims to expand its services, potentially including more cryptocurrencies and financial instruments.

Network Growth: Plans to grow the user base and increase the open interest across supported networks.

Ecosystem Development: Continuous development of the ecosystem to provide a better trading experience and additional features

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4. Market Analysis of GMX

Target Market: Size, demographics, and behavior of the potential market.

GMX’s potential clientele is a reflection of the broader, ever-expanding cryptocurrency community. Below is a streamlined summary:

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Market Size:

With a global user base in the millions, the cryptocurrency sector continues to flourish. GMX’s considerable market cap suggests a vast audience for its offerings.

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Demographics:

The crypto demographic skews younger, with millennials making up a large segment. These individuals are often at the forefront of tech adoption.

While user incomes are diverse, there’s a noticeable lean towards those with higher earnings or a vested interest in tech and finance.

Behavior:

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The crypto community prizes the core tenets of decentralization, including its inherent transparency and security.

Investment strategies tend to be conservative, influenced by historical market fluctuations.

GMX appeals to an international market, mirroring the borderless essence of digital currencies.

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Grasping these elements is key to crafting marketing initiatives and products that resonate with GMX’s intended market. Keeping pace with the constant evolution of market trends and consumer habits is vital for maintaining relevance in the cryptocurrency domain.

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Competitive Landscape: Analysis of competitors and GMX position in the market.

Within the dynamic realm of decentralized finance (DeFi), GMX carves out a notable niche in the domain of perpetual exchanges. Here’s a streamlined analysis:

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Market Rivals:

Lynx.finance: specialized in 100x leverage perps, gassless trades and fully non custodial. You can also use EUROs and TST to go long and short on bitcoin, ETH and BNB

ZKX: Specializes in decentralized perpetual futures and hosts a DEX on St…

Vertex Protocol: Delivers DeFi solutions using Terra’s stablecoins and runs a decentralized forex platform.

Fxdx Exchange: A decentralized derivatives exchange that provides perpetual futures trading facilities.

Primex Finance: Facilitates leveraged spot trading on decentralized exchanges through a non-custodial prime brokerage model.

Baekdu Technologies: Concentrates on blockchain innovations within the DeFi space, offering various applications.

dYdX: Offers sophisticated financial instruments in crypto, including a perpetual contracts trading platform.

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GMX’s Strategic Position:

Renowned for its decentralized perpetual exchange, GMX enables the trading of leading cryptocurrencies such as BTC, ETH, AVAX with leverage options up to 50x, accessible directly via wallet.

It prides itself on a substantial trading volume and open interest, reflecting a robust market stance.

The platform is designed to mitigate liquidation risks and optimize cost-efficiency with minimal spreads and low price impact.

The GMX token plays a dual role, serving as both a utility and governance asset, while also capturing a share of the market fees, bolstering its financial structure.

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Market Trends: Current and anticipated trends that could affect GMX 

The DeFi sector is in a state of constant flux, with a variety of emerging and prospective trends poised to shape GMX’s path forward:

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Present Dynamics:

Elevated Protocol Charges: GMX has witnessed a notable uptick in protocol fees, at times surpassing Uniswap’s daily figures.

Steadfastness Amidst Market Downturns: The DeFi ecosystem has demonstrated robustness in the face of a bear market, with an increasing emphasis on self-custody and permissionless frameworks.

Progressive Technological Breakthroughs: The transition of Ethereum to a proof-of-stake consensus mechanism has markedly curtailed energy consumption, underscoring the sector’s versatility.

Future Projections:

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Interoperability via Cross-Chain Solutions: Advancements in cross-chain interoperability are anticipated to facilitate asset trading across diverse blockchain ecosystems, potentially broadening GMX’s operational scope.

Regulatory Clarity: The burgeoning demand for more definitive regulatory guidelines in the cryptocurrency domain could foster greater market assurance and equilibrium.

Expansion of DeFi Insurance: With the maturation of the market, there’s an expected increase in the demand for DeFi insurance solutions, providing a safeguard against vulnerabilities inherent in smart contracts.

These trends indicate that GMX’s future will be characterized by its capacity for adaptation and innovation, which are crucial for sustaining and advancing its position in the market.

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5. Team and Advisors.

Backgrounds: Experience and expertise of GMX founding team and key members.

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The core team and principal advisors of the GMX token boast a rich tapestry of expertise in both the technological and financial realms, fostering the platform’s cutting-edge stance in the decentralized finance (DeFi) landscape. Highlighted below are the key contributors:

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At the helm is Karsten Schramm, the visionary founder of GMX, whose previous leadership roles have been instrumental in charting the strategic course of the company.

GMX was brought to life by a group of anonymous visionaries, championing the principles of decentralization. They established GMX as a decentralized spot and perpetual exchange operating on the Arbitrum and Avalanche networks.

The multisignature wallet linked to GMX is under the stewardship of Krunal Amin, the brain behind UniDex, and Benjamin Simon, a co-founder at Stealth Crypto. Their profound insights into DeFi and cryptocurrency trading infrastructures greatly enhance GMX’s value proposition.

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An enigmatic developer, known simply as ‘X’ on Twitter, is a pivotal member of the development team, driving forward the platform’s technological progress.

This amalgamation of DeFi acumen and a trailblazing mindset regarding liquidity and trading solutions has solidified GMX’s status as a distinguished entity in the crypto exchange arena. The team’s proficiency in devising and overseeing technology-driven financial mechanisms is crucial to the evolution of GMX’s distinctive offerings, including minimal swap fees, trades without price impact, and the innovative GLP liquidity pool.

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GMX Advisory Board: Influence and contribution of the advisors.

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The GMX tokens Advisory Board is a vital part of the project, offering guidance and expertise that significantly contribute to its success. The advisors provide strategic insights, industry knowledge, and valuable connections, thereby influencing the project's direction, ensuring regulatory compliance, and boosting the GMX tokens' market credibility. The advisors' diverse backgrounds and experiences enrich the project, enabling it to navigate challenges, capitalize on opportunities, and build a robust foundation for the GMX token ecosystem.

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Team Structure: Effectiveness of the team's organization and

Communication.

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The GMX team's effectiveness is attributed to their clear organizational structure and communication strategies. The team's distribution of 250,000 GMX tokens over two years, with 10,000 esGMX per month for referral rewards, demonstrates their strategic planning. The team's focus on product market-fit and network effects is evident in their expansion to new layer 1 chains, which serves as a positive catalyst for GMX. The team's commitment to transparency is shown through their bi-weekly program updates on the GMX forum thread and their provision of complete transparency for their incentive program via Dune Spells and/or Dashboards. These strategies have significantly contributed to the project's success and growth.

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6. GMX Tokenomics and Financials

GMX Utility: The purpose and use cases for GMX token.

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The GMX token serves as a utility and governance token, empowering token holders to vote on proposals that shape the exchange's future direction. It enables individuals with a cryptocurrency wallet to access transparent decentralized exchange services, including perpetual swap and spot exchange platforms. Users can stake GMX tokens to earn a portion of GMX’s protocol fees and enjoy additional incentives. The token features a floor price fund in ETH and GLP, which expands through GMX/ETH liquidity provided and owned by the protocol, as well as funds obtained through Olympus bonds. The GMX token has a linear distribution of 250,000 tokens over two years, with 10,000 esGMX per month allocated for referral rewards. The token's addresses are 

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0xfc5A1A6EB076a2C7aD06eD22C90d7E710E35ad0a (Arbitrum) 

and 

0x62edc0692BD897D2295872a9FFCac5425011c661 (Avalanche).

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Staked GMX tokens receive three types of rewards:

Escrowed GMX Multiplier Points ETH / AVAX Rewards, with 30% of fees generated from swaps and leverage trading transformed into ETH / AVAX and distributed to staked GMX tokens. The floor price fund ensures GLP liquidity and provides a consistent ETH reward stream for all staked GMX tokens. The token has a maximum supply of 13.25 million GMX tokens, with minting beyond this limit subject to a 28-day timelock and governed by a community vote.

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GMX Distribution: Allocation of tokens (e.g., team, advisors, public sale).

The GMX token distribution consists of 250,000 tokens for contributors and an additional 6 million GMX tokens allocated for XVIX and Gambit migration. The token has a maximum supply of 13.25 million GMX tokens, featuring a deflationary tokenomic model. The distribution includes 15.09% (2.000.000 $GMX) allocated to the Floor Price Fund, which grows through GMX/ETH liquidity provided and owned by the protocol and funds from Olympus bonds. The GMX team, recognized for their work on XVIX and Gambit, remains anonymous but has a clear track record. The token encourages user engagement by offering rewards through staking, with 30% of protocol fees generated from swaps and leverage trading transformed into ETH/AVAX and distributed to staked GMX tokens. The token's value is subject to macroeconomic factors such as interest rates, inflation rates, regulatory systems, and GMX-related news.

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Financial Model: Revenue streams, cost structure, and profitability projections.

The GMX protocol generates revenue through various streams, including market making fees, swap fees, leverage trading, and asset rebalancing, which are subsequently redistributed to liquidity providers as rewards. The protocol's cost structure is not explicitly detailed, but it is known to distribute a portion of fees to liquidity providers, incentivizing their participation and enhancing the ecosystem's liquidity. The profitability projections of GMX tokens are subject to macroeconomic factors such as interest rates, inflation rates, regulatory systems, and updates or news related to the GMX protocol.

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Here’s a summary of GMX’s funding history, investors, and current valuation:

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Funding History:

GMX has been listed on CoinGlass, which provides historical funding rate data and analysis for various cryptocurrency perpetual contracts1.

Investors:

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GMX is a branch of United Internet AG, a listed company with a market cap of $5 billion. It’s one of the world’s most successful email providers, with data centers in Europe and the US2.

Current Valuation:

As of the latest data, GMX’s live price is around $46.19 USD with a market cap of approximately $383 million USD3.

Please note that these figures are subject to change as they are influenced by market conditions and investor activities. For the most current information, it’s recommended to check the latest updates on financial platforms.

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SOURCES:

1 coinglass.com

2 crunchbase.com

3 coinmarketcap.com

4 pitchbook.com

5 securities.io

6 tradingview.com

7 coingecko.com

8 coindesk.com

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7. GMX Community and Ecosystem

Community Engagement: Size, growth, and engagement levels of the Community.

The GMX community forms a crucial part of a decentralized perpetual exchange ecosystem facilitating the trading of cryptocurrencies such as BTC, ETH, and AVAX, offering leverage options. Community engagement plays a pivotal role, closely linked to the platform's performance and user base, leveraging features like reduced liquidation risks and cost-effective transactions. This ecosystem thrives on three tokens: GMX, GM, and GLP, each serving distinct roles and benefits within the platform.

Assessing the health and activity of the GMX community necessitates trackin metrics like size, growth, and engagement levels. While specific figures for GMX may not be readily available, the broader global community engagement platform market is witnessing substantial expansion, projected to grow at a CAGR of 16.3% from 2023 to 2033. This growth is primarily fueled by businesses increasingly adopting community engagement strategies to enhance marketing efforts and foster customer loyalty.

For the latest and most comprehensive insights into the GMX community and ecosystem, including details on size and engagement levels, it is advisable to consult official GMX communication channels or recent market analyses dedicated to GMX.

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Partnerships: Strategic alliances and partnerships.

The GMX community has strategically partnered with Tata Communications, other DeFi projects like Dopex, Chainlink for low-latency oracles, and InsurAce.io for DeFi insurance to expand its ecosystem, enhance security, and drive growth. These alliances enable global B2B services, innovative product introductions, improved data security, and smart contract insurance, while legal support ensures tax efficiency and compliance. These partnerships collectively bolster GMX's development, innovation, and security within the DeFi sector.

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Network Effects: The project's strategy for achieving and benefiting from network effects.

GMX capitalizes on network effects to grow its ecosystem, security, and user base (>480,000 with $176B volume). GMX's architecture on Arbitrum and Avalanche supports high-speed transactions and cross-chain compatibility. Funding sources include a development treasury, token sales, and investments. 

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The roadmap emphasizes security, synthetic markets, and new chain deployments. Partnerships bring benefits like governance power and innovation, but also risks like exploits. GMX V2 enhances user experience, solidifying its position in the DEX vs. CEX perpetuals market, contributing to GMX's growth and security in the DeFi space.

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8. Risks and Challenges

Market Risks: Exposure to market volatility and competitive threats.

The GMX network faces market risks, competitive threats, and technical challenges. Market risks include exposure to market volatility, with GMX V2 traders experiencing a net loss of 40,000 USD within two weeks of operation. The shared pool model's performance in a full bull market is uncertain, and GMX's zero-sum game nature means there will always be trading winners and losers. GMX's team is composed of fully anonymous contributors, raising concerns about accountability and governance. Technical risks include oracle failures and exploits, particularly for volatile, less liquid assets. Despite these challenges, GMX has implemented measures to mitigate risks and continues to grow its ecosystem, enhance security, and promote growth in the DeFi space.

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Technical Risks: Potential technical hurdles in development or deployment.

The GMX network faces technical risks related to its oracle pricing approach, which can pose direct risks to traders, especially for volatile, less liquid assets. An oracle exploit was realized during the AVAX exploit in September 2022, demonstrating the potential risks associated with GMX's oracle pricing approach. GMX's smart contracts have been audited by reputable firms, but the anonymity of the team raises concerns about accountability and governance, particularly if something were to go wrong. Despite these challenges, GMX continues to grow its ecosystem, enhance security, and promote growth in the DeFi space.

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Regulatory Risks: Legal challenges that could impact the project's viability

The GMX network is a decentralized perpetual exchange platform on Arbitrum and Avalanche, offering risk management tools via the GMX GLP Risk Hub. GMX V2, with a TVL of $20M and daily trading volume of $23M, has been in operation for two weeks, but traders are experiencing net losses. GMX's zero-sum game nature and the shared pool model's performance in a bull market are uncertain. The team is anonymous, raising concerns about accountability and governance. Technical risks include oracle failures and exploits, while legal challenges related to automated systems and new technologies could impact GMX's viability. Staying informed about evolving regulations and ensuring compliance is crucial for the project's sustainability and growth.

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Other Risks: Any other potential risks not covered above.

GMX's team is composed of fully anonymous contributors, raising concerns about accountability and governance, particularly if something were to go wrong. Technical risks include oracle failures and exploits, particularly for volatile, less liquid assets. Legal challenges could significantly impact GMX's viability, especially concerning regulatory divergence and jurisdictional challenges related to automated systems and new technologies. Diverging regulatory approaches across jurisdictions could complicate compliance and risk management, requiring reassessment of current practices. Despite these challenges, GMX continues to grow its ecosystem, enhance security, and promote growth in the DeFi space.

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9. GMX SWOT Analysis:

Strengths: Internal factors that give the project an advantage.

GMX is a decentralized spot and perpetual exchange with a robust business model, incentivizing stakers with fee revenues and offering a unique value proposition for cryptocurrency investors. The native GMX token functions as a governance, utility, and value-accrual token, while the GLP liquidity pool allows users to mint GLP tokens and earn fees without impermanent loss. GMX v2 introduces isolated markets, addressing limitations of v1 and offering benefits such as zero-slippage trading and executing trades at the market price determined by low-latency Chainlink oracles. These strengths position GMX as a strong player in the crypto derivatives field.

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Weaknesses: Internal limitations or areas for improvement.

GMX token has internal weaknesses such as limited use cases due to non-Turing-complete scripting, security vulnerabilities highlighted by a white hat hacker, and inefficient capital allocation in liquidity pools. While GMX v2 aims to address existing issues and maintain market dominance, it must continuously improve its fee scheme and address limitations to stay ahead of competitors and enhance its growth potential.

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Opportunities: External factors that the project could exploit to its advantage.

GMX can capitalize on the growing DeFi trend and demand for high-performance DEXs with features like perpetual contracts, leverage trading, and yield farming. By offering a user-friendly interface and integrating popular tools, GMX can attract a wider range of traders, including institutional ones. Leveraging its Chainlink partnership, GMX can enhance reliability and user confidence. By expanding to other blockchains and exploring synthetic assets, GMX can increase its user base and trading volume. By addressing limitations and continuously improving its fee scheme and user experience, GMX can enhance its competitiveness and growth potential in the DeFi space.

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Threats: External challenges that could pose risks to the project.

GMX faces external threats that could impact its performance and growth. These threats include regulatory changes, competition, security risks, market volatility, and user experience challenges. To mitigate these threats, GMX can leverage opportunities such as expanding to other blockchains and exploring synthetic assets, continuously improving its fee scheme and user experience, and prioritizing security measures to protect users and their assets. GMX can also improve its user experience by offering a user-friendly interface and integrating popular tools, which can attract a wider range of traders, including institutional traders seeking professional trading options. Additionally, GMX can capitalize on the growing trend of decentralized finance and the increasing demand for high-performance decentralized exchanges that offer features such as perpetual contracts, leverage trading, and yield farming.

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10. How GMX works with TheStandard.io

Possible collateral type:

TheStandard.io protocol allows users to use GMX as collateral to borrow EUROs and, in the future, USDs at a 0% interest rate, with no custodial risk involved.

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Conclusion and viability score

Final assessment and Score

GMX is a promising decentralized exchange with potential for growth and innovation in the DeFi space, but it must continuously improve to stay competitive and address external threats. The GMX token has a mixed market performance, with a price range of $40-$46 USD, an all-time high of $91.07 USD, and a market cap of $383 million USD. The viability score of a cryptocurrency like GMX can be subjective, and factors such as market trends, technology, team, and community support should be considered when assessing its viability