GMX Revenue Breakdown
(Originally published on June 29, 2022; Updated on July 1, 2022)
Last time, we introduced GMX and looked at its revenue growth. If you missed it, here’s the link to the article. This time, we’ll break down its revenue sources. If you are short on time, here’s the TL;DR:
Most revenue comes from traders.
On Avalanche, traders regularly contribute 60% - 80% of the revenue, swaps 20% - 30%, and GLP providers 10%. On Arbitrum, these numbers are 80% - 90%, 10% - 20%, and < 10%.
Traders’s revenue contribution is volatile on Avalanche, but is very stable on Arbitrum.
Let’s now dive into the details. First of all, let me remind you that GMX revenue consists of fees that can be broadly categorized into three groups:
Margin trading and liquidation fees. These fees come from traders.
Swaps fees. These fees come from every swap routed through the platform.
GLP minting and burning fees. These fees come from GLP liquidity providers.
Let’s look at the proportion of each group’s contribution on a weekly basis.
GMX - Avalanche
In week 1, 30% of the fees came from GLP providers due to large volume of GLP minting on the first day, which very likely came from early investors or the team to kick off the platform. For the remaining of the time, fees from GLP providers stayed at below 10% except for week 7 (Feb 14 - 20) and week 15 (Apr 11 - 17), where it was around 20%.
Swap fees hit 50% and 40% at week 19 and 20 (May 9 - 22), taking shares from traders. Starting at week 18 (May 2 - 8), swap fees regularly stayed around 30% or above, whereas before week 18, swap fees often stayed around 20%. Perhaps 30% is a good level for swap fees. If we begin to see swap fees exceed 40% or 50% week after week, we probably should worry because as the share of swap fees increases, the share of trading-induced fees decreases. After all, GMX is not just another DEX, and it’s building a business in leveraged trading!
The Pareto Principle tells us to expect 80% of the revenue to come from trading activities. But we see, from the figure above, there are almost as many 80%+ as there are 70% and 60%. There are even a few 50% and one 40%. Given the current bear market, one may wonder if a 30% or 20% will be around the corner.
GMX - Arbitrum
GMX opened shop on Arbitrum in week 35 of 2021, and during that first week, 40% of the fees came from GLP providers. Once again, it was a result of large amount of GLP minting within the first three days, which was most likely due to liquidity seeding from the team or early investors. Since then, this figure has dropped, first to 20%, and then to 10% and below. Most of the time, fees from GLP providers stayed below 10%.
Swap fees hit as high as 40% early on, but came down at 20% in week 42 of 2021. Afterwards, it stayed around 10% most of the time, with occasional visits to 20%.
Fees from trading related activities has stayed at 70% or above since week 41 of 2021, hitting 80% - 90% most of the time. This stability forms a stark contrast with the volatile behavior of the Avalanche side, making the Arbitrum side of business more attractive, especially in this bear market.
Bonus
The following tables list the top 10 contracts through which swaps happened, ranked by volume aggregated over 27 days (Avalanche) and 19 days (Arbitrum) respectively. It’s interesting to see 1inch has done slightly more volume than GMX’s native dex on Avalanche, but the latter has done 1.7 times volume of the former on Arbitrum.
Data & Code
Arbitrum Data (2021-08-31 ~ 2022-06-30) and Python Notebook
Avalanche Data (2022-01-06 ~ 2022-06-30) and Python Notebook
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