GMX proposed the X4 plan last year, an important part of which is the new trading model PVP AMM. Since GMX turned to the development of synthetic assets, X4 was temporarily shelved. Recently, LionDEX appeared again, claiming to have realized PVP AMM, and the flames of war are suddenly in sight. This article will bring you a detailed interpretation of PVP AMM, and give you an early glimpse of the next generation of Perp DEX.
The core meaning of PVP AMM lies in:
Trader puts chips as margin in a pool
Those who "relatively" earn more will get more chips, and those who "relatively" earn less will lose money
The core of the so-called PVP lies in the word "relative". If GMX was originally a bet between GLP and Trader, then PVP is a bet between Traders.
GMX's X4 documentation gives an example, and we use it as a starting point to analyze:
Alice minted 1000 GD and opened a long position worth $10k with 1k USDC as a margin
Bob uses 2k USDC as a margin, mints 2000 GD and opens a short order worth $20k
There are now 3 k USDC / 3 k GD in the LP Pool, where 1 GD = $1
If ETH goes up 5% and both close their positions, then Alice will have 1.5k GD and Bob will have 1k GD
There are now 3 k USDC / 2.5 k GD in the LP Pool, where 1 GD = $ 1.2
Let's analyze the logic of the calculation, and we can see that the profit and loss are reflected in the number of GDs, that is:
Alice: 1000+$ 10000* 5% /$ 1 = 1500 GD
Bob: 2000-$ 20000* 5% /$ 1 = 1000 GD
New GD Supply = Alice +Bob = 2500 GD
New GD Price = 3 k USDC/ 2500 = $ 1.2
It can be summarized that its core formula is as follows:
New GD Supply = GD Supply + Trader PnL/GD price
New GD Price = TVL/New GD Supply
The expression is:
The total chips in the pool remain unchanged
Trader's total profit and loss is reflected in the GD supply
GD price is inversely proportional to supply
That is to say, PVP traders are a whole, and the overall profit means that the Trader PnL is positive, which will drive the supply of GD to rise and the price to fall. You need to earn more than the whole to really make money on the U-based basis.
The advantages of PVP AMM are:
Pure Alpha trading, you don’t need to think too much about the market, just be stronger than the market
No need for additional LP, traders can play by themselves
To solve the so-called unilateral market problem, if you all open in one direction, you will not make money anyway
tweetstweetsThe above-mentioned problem is not big, but in a bear market, due to the drop in GLP price, the psychological pressure will still be greater:
What challenges will PVP AMM face:
Cold start: You need enough traders to have a good trading experience, the chicken-and-egg problem
Threshold of use: The complex mechanism makes it difficult for users to understand. You buy more ETH and then the price of ETH rises. As a result, you lose money instead. Users need to be educated to avoid misunderstandings
And LionDEX, a project that claims to have realized PVP AMM, seems to have mainly done 4 things:
Implemented the PVP AMM planned for GMX X4
LP superimposed GLP to do it (USDC in the X4 example), earning two income
Made an insurance module to reduce the risk of liquidation and improve the high-leverage user experience
Created a set of economic models to promote transactions and solve the chicken-and-egg problem
One of the two challenges in PVP AMM has been taken care of, and we still need to see how it can lower the threshold of use and educate users well.
At present, GMX is turning to the development of synthetic assets, and the development of X4 has not yet started. There is a long vacuum period in this area, and there will be opportunities for new projects. It's just a mule or a horse, but it still has to be pulled out for a little while. It will release a public beta soon, and we can just observe the effect of its public beta.
This also shows that since X, the founder of GMX, is a developer who likes to share design ideas very much, the first realization of X's design has become a way of the DEX Perp track, and future competition in this area will further improve the track intensity of competition.
All in all, if the current model of GMX is that there is a "banker" GLP, traders rely on correct judgment to make money from the dealer; then PVP AMM does not have the existence of a dealer, or everyone is a dealer, and traders rely on the dealer Make money in the hands of other traders. This transaction mode is substantially different from CEX PERP, and it is a real DeFi native mode. It is expected that there will be more and more such cases in the near future.
