Thread by @capital_ti

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Why is @GMX_IO called a gambling machine? What is the difference between the order book represented by @dYdX and the pool represented by GMX? #DeFi

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The first question, why do many people call GMX a gambling machine? Why didn't dydx break out with GMX in 2022? Why can only GMX break out in 2022 among the many on-chain protocols?

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In the general environment of 2022, everyone knows that #BTC and #ETH have fallen by 75% from their highs, and SPX has fallen by a maximum of 27% from highs.

The trading volume of DEX such as @Uniswap has dropped from an average of 2 billion per day in November 2021 to an average of 300 million per day. Why can GMX go up steadily no matter in terms of transaction volume, OI or price? And why is there only GMX?

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Compared with others such as cex and dydx, OI and Volume have decreased, why? Why is this common sense.

Regardless of the bull market or bear market, what LPs or market makers earn is not the money of the gamblers, but the money of the counterparty.

Only the platform earns fees as more people trade generate more fees, and the less users in the bear market will naturally earn less.

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I think this is a result of both the growth of trading users and GLP, and it may even be the result of GLP’s increased willingness to provide liquidity which in turn leads to an increase in trading users.

Specifically, gambling protocol often performs better in a bear market, because there are no hot spots in a bear market and everyone gambles; while in a bull market, there are many hot spots and more interesting things, and the enthusiasm for gambling will decrease.

So what is a gambling machine? For example, the Gains project party said bluntly that the project party will always make money and users will always lose. So what can everyone do when there are few hot spots in the market? Bet. What is the upper limit of the bet? GLP chant.

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Why can GLP grow against the trend? Because GLP not only acts as a market maker to earn losses from users, but also can get the fees generously distributed by GMX.

This is what @dYdX does not give a dime, and the initial of dydx, such as transaction mining, market maker mining, will only continue to decrease in the past two years as the price of dydx continues to decrease.

So where is the solution path for dydx? I think that in V4 in 2023, for example, the agreement will no longer taking fees, and changing to a #POS public chain etc.

If there are more gamblers, the corresponding LP income will also increase (handling fee + user profit and loss), because it happens that GMX will distribute the handling fee income to GLP,

and the increase in GLP will lead to an increase in the transaction volume that can be accommodated, forming a positive cycle.

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So where does the willingness of trading users to trade in GMX come from? From the fact that oracle quotes a large amount without slippage, the trading experience is smooth, which is beyond the experience of CEX and dydx. This is why people call it the GMX gambling machine.

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So the reason why GMX can be popular in the bear market? Because GLP can earn enough income, can market makers earn enough income in cex or dydx?

No, because the handling fee is not distributed to market makers. Both LP users have the advantage of participating in GMX, so GMX behaves like this in a bear market.

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The second question, what is the difference between the order book represented by dydx and the oracle pool represented by GMX?

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The order book must be matched 1:1 to offset most of the positions. Users can bet against other users & market makers, and the offset part is manifested as price fluctuations, which in turn leads to user profits and losses.

But GMX is different. GMX can’t eliminate a large number of positions. It’s not a 1:1 match. There must be an offset between long and short positions, and the offset cannot be expressed as price fluctuations.

It must be digested by GLP and directly expressed as profit and loss, that is, GLP loses users Earn, or GLP earns and users lose.

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This is also the double-edged sword of GLP. Although GLP is to earn money for long-term user losses and returns, it needs to hedge for itself under a few extreme market conditions, such as the situation where everyone is shorting and doing right thing when Luna goes to zero

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What is the specific reason? The order book can have pricing power, even if it does not have pricing power, it can be smoothed out. The pool that uses the oracle machine has no pricing power and can only be the receiver of the price.

@Uniswap is a pool that does not use the oracle machine, and Uni has pricing power.

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So the most obvious reason why it can be called a gambling machine is that @GMX_IO uses an oracle machine to make it a gambling machine. The oracle allows the party receiving price to digest the price by itself, but does not use the oracle machine to influence the price.