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Arbitrum Ecosystem
GMX
GMX is the biggest Arbitrum native protocol regarding market cap, TVL, and fees earned. In fact, GMX recently (for one day) surpassed Uniswap in daily fees to become the second-leading revenue-producing protocol, only behind Ethereum. GMX is a decentralized spot and perpetual futures exchange that functions on both the Arbitrum One layer 2 (L2) network and on the Avalanche blockchain network. The exchange lets users trade BTC, ETH, LINK, and a handful of other tokens with up to a max of 30.5x leverage. Users can also provide liquidity for the protocol and earn rewards in ETH or AVAX for staking GMX tokens.
Users can long or short assets, such as BTC, ETH, LINK, and UNI, with up to 50x leverage. GMX has seen a total trading volume of ~$69 billion, and 168,972 users have used the platform to date. Of the $90 million earned in fees, 70% of it goes to GLP (liquidity provider pool), and 30% goes to stakers of GMX tokens.
Trading in GMX is supported by its unique multi-asset pool. Because GMX is a decentralized platform, users must supply liquidity for market participants to trade on its platform instead of using a typical order book model. Users who supply liquidity receive a portion of the protocol’s fees.
This shared liquidity mechanism functions via GMX’s token ($GLP), which acts as an index of blue-chip cryptoassets. GLP accrues 70% of the platform’s generated fees. This shared liquidity model allows GMX to maintain a pool of all tradable assets on the platform and attract liquidity by incentivizing liquidity providers without creating inflationary token incentives. The GMX token is the protocol’s governance and utility token and can be staked to earn escrowed tokens (esGMX) as well as ETH or AVAX rewards. It also accrues 30% of the protocol's fees.
This shared liquidity model is unique to GMX in the world of derivatives protocols. Combined with the use of Chainlink’s price oracles, the benefit is that it allows trades to be executed with no slippage and zero price impact. The GMX platform has no order book, so trades can be at the current price given by Chainlink’s oracles’ price feeds. Theoretically, this also means infinite market depth on the protocol for traders. This is in contrast to the centralized exchange model, which requires individual firms to provide liquidity directly on the order book. This ultimately leads to more efficient price execution for trades.
Because centralized exchanges have to operate separately in each jurisdiction, this causes a lot of fragmentation across the various exchanges and can contribute to a worse user trading experience, including sub-par trade prices and spreads GMX solves this problem with its shared liquidity pool model where the liquidity is all in one spot, which is why GMX may one day be the superior decentralized option for active traders.
GLP holders maintain exposure to all of the below index assets and earn trading fees and rewards in the form of escrowed GMX tokens. GLP maintains a target 50/50 split of using crypto assets and stablecoin weighting within the index above. While there are target weights for each asset to make up this index, GMX maintains dynamic trading and borrowing fees to adjust the index weighting towards the shown target ratios. GLP holders also receive collateral rewards when a trader’s position is liquidated. In essence, profitable traders receive their earnings from the liquidity pool, while unprofitable traders pay the liquidity providers.
Vesta Finance
Vesta Finance is an overcollateralized debt platform that lets users borrow its native stablecoin ($VST) against their cryptoassets without selling them. VST is economically geared to maintain its value equal to $1 USD. Users can repay their loans anytime they want to get their collateral back.
Currently, users can borrow VST against assets such as ETH, renBTC, gOHM, GMX, DPX, and GLP. Right now, the total collateral locked in Vesta Finance is $22.87 million and a total of 11.2 million VST tokens have been minted.
VSTA is the governance token of Vesta Finance and it plays an important role in making the project decentralized. VSTA token holders can participate in governance forums, vote on proposals, participate in liquidity incentive programs, and earn VSTA.
Umami Finance
Umami Finance aims to bridge the gap between DeFi and traditional finance by creating DeFi products and distributing them to financial institutions through Umami Advisors (its Registered Investment Advisor).
Umami will soon launch a DeFi yield product, which will generate competitive yield on assets, such as USDC, ETH, and BTC.
Umami also has a native token ($UMAMI), which is the protocol’s fee-generating and governance token. UMAMI token holders can stake their tokens to receive a share of the Umami protocol’s revenue. It has a total fixed supply of 1 million tokens, out of which 650K are already in circulation.
Dopex
Dopex is a decentralized options protocol. It aims to become the maximum liquidity and minimal exposure options protocol in DeFi. It has products that suit the needs of option writers, traders, and liquidity providers.
Currently, the total value locked on Dopex is $18.84 million. The options market in traditional finance is subsutantial, while in DeFi, it’s still small and hasn’t yet gained traders’ attention.
Dopex has two main products:
- Option Pools : By providing base asset and quote asset liquidity for users who want to buy call and put options, respectively, option pools let users passively earn a yield.
- Single Staking Option Vaults (SSOVs: Users can receive a dividend on their staked assets and lock up tokens for a certain amount of time with SSOVs.
Users will be able to deposit assets into a contract, which will subsequently sell your deposits to buyers as call options with fixed strikes they choose for end-of-month expirations.
Dopex two tokens: $DPX and $rDPX
$DPX is a governance token that shares fees from pools, vaults, and wrappers.
$rDPX is the rebate token for option writers. It can be used to mint synthetic assets, such as stocks, indices, commodities, and more.
Arbitrum vs. Optimism Adoption
Below, you can see some important metrics showing the adoption of Arbitrum and Optimism.
TVL on Arbitrum is $958 million and $547 million on Optimism. After the recent FTX collapse, TVL on Optimism has dropped drastically. Daily transactions on Arbitrum and Optimism continue to rise with no signs of stopping. Daily transactions on Arbitrum remain almost twice that of daily transactions on Optimism. For example, on November 21st, 2022, 812K transactions were executed on Arbitrum, while 417K were executed on Optimism.
Active addresses and transactions on Arbitrum and Optimism. Source
Below are the estimated savings from the average transaction on Optimism and Arbitrum vs. L1 Ethereum fees. The large spike in savings for Arbitrum came after the Nitro upgrade and now saves users ~95% when compared to L1 Ethereum.
