Overview of the Derivative DEX Track: Will it Dominate the Next Bull Market?

Derivative DEX Track Overview: Dominating the Next Bull Market?

Original author: MooMs, encrypted KOL. Translated by: Felix, BlockingNews

Currently, over 97% of the trading volume for derivatives is executed on CEX. Derivatives DEX only accounts for 2.72% of the total trading volume, so there is huge growth potential for Derivatives DEX, which may dominate the next bull market. This article contains information about the Derivatives DEX sector.

• Head projects

• Fee structure comparison

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• Indicator comparison

• Growth potential

• The most promising Derivatives DEX

Head Projects

GMX

GMX allows users to trade on the GLP pool, providing zero-slippage spot and margin trading. GLP is the funding pool for GMX, including BTC, ETH, UNI, LINK, and four stablecoins. The huge advantage of this model is its composability; some protocols start creating investment products that use GLP and its profits to generate additional income.

Listed assets

Cryptocurrency: up to 50x leverage

Token Economics

• Supply: 8,813,076

• XVIX and Gambit Migration: 45.3% (Note: The anonymous team behind GMX previously developed two other protocols, XVIX and Gambit)

• Floor Price Fund: 15.1%

• Reserve: 15.1%

• Liquidity: 15.1%:

• Presale rounds: 7.6%

• Marketing and partners: 1.9%

Although the platform only offers four currency pairs, the GMX V2 introduced synthetic markets that offer a variety of new currency pairs, including stocks and forex. In addition, it introduces isolated pools and lower fees to provide a better trading experience for users.

Gains Network

Gains provides a trading platform with multiple asset classes and high leverage. The platform utilizes the gDAI treasury as a counterparty, with the amount of DAI constantly changing.

When traders win, they receive a bonus from the treasury.

When traders lose, their losses are stored in the treasury.

Similar to GMX, Gains’ model has high composability, allowing other protocols to integrate gDAI and build products on top of it.

Listed Assets

• Cryptocurrency: Up to 150x leverage

• Commodities: Up to 150x/250x leverage

• Forex: Up to 1000x leverage

Token Economics

• Total Supply: 1 billion

• Initial Supply: 38.5 million

• Developers: 5%

• Governance: 5%

• Circulating Supply: 90%

No seed round, no venture capital, no token lockup.

dYdX

dYdX is the first derivatives trading platform, offering leveraged trading (up to 20x) for 36 cryptocurrency pairs. dYdX is the only platform that uses an off-chain order book, sacrificing decentralization for increased liquidity depth. However, the team is working to release v4 as soon as possible. dYdX v4 will be released on Cosmos and aims to make the protocol fully decentralized. The new version will also introduce a highly anticipated feature: revenue sharing. DYDX stakers will earn a certain percentage of platform revenue.

Token Economics

• Total Supply: 10 billion

• Investors: 27.7%

• Trading Rewards: 20.2%

• Employees and Advisors: 15.3%

• Airdrop: 5%

• Liquidity Providers Rewards: 7.5%

• Future Employees: 7.0%

• Treasury: 16.2%

• Liquidity Staking Pool: 0.6%

• Security Staking Pool: 0.5%

Kwenta

Kwenta is a decentralized derivatives trading platform that offers perpetual futures and options trading on Optimism. Currently, the platform offers over 42 pairs of cryptocurrencies, forex, and commodities, with leverage of up to 50x.

Kwenta has partnered with Synthetix, which provides the underlying protocol for managing liquidity and directly offering Perps. This partnership allows Kwenta to focus on user experience and interface design while Synthetix focuses on liquidity mechanisms.

Like dYdX and GMX, Synthetix will release a new version of the platform in September. The new version has been in development for over a year and will offer features such as permissionless markets, full-margin mode, and multi-collateral staking.

Token Economics

• Total Supply: 1 million

• Synthetix stakers: 30%

• Synthetix + early Kwenta traders: 5%

• Investors: 5%

• Community Development Fund: 25%

• Core Contributors: 15%

• Kwenta Treasury: 20%

Level Finance

Level will launch in December 2022, offering spot and margin trading (up to 50x) on BTC, ETH, and BNB. Level has garnered significant attention for its “Loyalty Program,” which rewards traders with 16,000 LVL per day. Much of the platform’s trading volume and fees come from this program, and users can earn annual interest rates ranging from 85% to 206% on their assets through three-tiered modes. Miners can choose whether to deposit assets into lower-risk pools and earn lower annual interest rates, and vice versa.

Token Economics

• Total Supply: 50 million

• Liquidity Providers: 36%

• Community Incentives: 34%

• Team: 20%

• DAO: 10%

MUX Protocol

MUX Protocol is a perpetual DEX deployed on five chains, providing traders with deep liquidity and up to 100x leverage.

The two main features are:

• Leverage trading: Users trade with MUXLP, which is the same model used by the GMX and GLP pools.

• Aggregator: Choose the most suitable liquidity path to minimize the trading price and liquidity depth of various Perp DEXs.

Token economics

The protocol involves four tokens:

• MCB: the main token of the protocol

• MUX: non-transferable token obtained by pledging veMUX or MUXLP

• veMUX: governance token

• MUXLP: liquidity provider token

Now we have discussed six major protocols and their key features, let’s explore the current situation of the derivatives industry.

Fee structure comparison

Trading fee (opening/closing): dYdX has the lowest trading fee, 0 to 0.05% (based on transaction size); MUX is second, at 0.08%; GMX and Level are both 0.1%.

Funding rate: dYdX is 0.01% every 8 hours; GMX and Level are up to 0.01% per hour; GNS, Kwenta, and MUX are all dynamic.

Metric comparison

Currently, dYdX offers the best trading platform with the highest liquidity and lowest trading fees, occupying 64.4% of the market share among the top 6 DEXs. However, dYdX’s model does not allow them to list synthetic products like other protocols, so its competitors can take advantage of this to capture market share.

As mentioned earlier, dYdX is working to launch a fully decentralized platform with a revenue-sharing mechanism, so it is expected to gain more user support in the coming months.

On the other hand, GMX currently has the highest fees, but they are working to address this issue. Interestingly, GMX’s trading volume is about one-fifth of dYdX’s, but generates about twice the fees.

Similar situations also occur on Level and GNS, with Level generating about twice the fees as GNS despite having the same trading volume.

Growth Potential

According to the metrics, Level Finance is the most undervalued platform. Additionally, Level Finance has the best token economics, with LVL + LGO providing strong incentives.

GMX can also be considered undervalued, as it is the third-ranked protocol (excluding public chains) in terms of generated fees (year-to-date), and ranks only 79th by market capitalization.

MUX has the best TVL/Volume ratio, indicating high capital efficiency.

GNS and Kwenta are excellent choices for the next bull market, as they generate high revenue and have medium-low market caps.

Finally, dYdX is the safest choice, as it is a leader in this category with top-tier capital support and its upcoming new release should incentivize users to hold the DYDX token.

Most Promising Derivatives DEXes

Below are the top DEXes entering the market in the next few months, which may have a significant market share in the future.

• Lexer Markets

• El Dorado Exchange

• Tribe 3

• nftperp.xyz

• NEX_Protocol

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