Trends in the Perpetual DEX World

Among Perpetual DEXs, there are over 30 operating in the crypto world, with a total trading volume exceeding 260 billion USD. While this is a substantial figure, it pales in comparison with Centralized Exchanges (CEXs), where the largest exchange, Binance, can generate over 9 billion USD in trading volume in a single day.

Over 1.9 million traders are already trading in the decentralized world, which is a good base for future growth.

In April 2023, trading volumes remained above 1 billion USD, likely due to the U.S. crackdown on Centralized Exchanges (CEXs) like Coinbase, Binance, or Kraken in March 2023. This significantly benefited Perpetual DEXs, as evidenced by this high daily volume. However, after the situation stabilized, the daily trading volume returned to lower levels and seldom crossed the 1 billion USD threshold again.

It is worth noting that perpetual DEX dYdX is playing its own game in this space, with trading volumes far exceeding the overall market. Its peak volumes have reached as high as 3 billion USD per day, though it generally fluctuates between 800 million and 1 billion USD.

Based on market volume, it is evident that GMX protocol is gradually losing its dominance, having been overtaken by protocols like HMX and Polynomial. In April 2023, Polynomial had a 0.3% share of the overall trading volume, and now in September 2023, it has surged to 43.8%. Similarly, HMX, which only began trading in July 2023, has seen its trading volume skyrocket to 21.6% in just two months.

GMX benefits the most from executed trades, maintaining its long-term dominance in terms of the highest collected fees. Following closely behind is Polynomial, which has been experiencing an increase in trading volume recently.

The number of active users ranges from 2,000 to 7,000 daily. Here, GMX clearly dominates, maintaining the highest number of active users despite having a smaller trading volume. Interestingly, while Polynomial only has a few tens of active users daily, its trading volume on certain days can be up to 8 times higher than that of GMX.

Perpetual DEXs are not as widely used as their centralized counterparts, but that doesn't mean they don't have a significant impact on the cryptocurrency market. Although the trading volume on these decentralized platforms is not as high, the transactions that do occur can be very influential, especially in the context of the bitcoin (BTC) market.

One of the most interesting examples of this impact is a recent large price movement in BTC. When the price of BTC dropped from 29,000 to 26,000 USD within just a few days, there was a massive liquidation of long positions on Perpetual DEXs. This rapid movement triggered liquidations totaling 123,260,000 USD, a figure that cannot be ignored.

In that recent market shake-up, the most affected users were on Kwenta, where positions worth 41,770,000 USD were liquidated. GMX came in second with 31,130,000 USD and Mux was third with 30,200,000 USD.

This phenomenon shows that although Perpetual DEXs are not as popular as centralized exchanges, they still play a key role in market dynamics. Their influence on market movements, particularly during volatile periods, should not be underestimated.

Main players and promising projects

Among the dominant players in the Perpetual DEX space, GMX and dYdX stand out. GMX has been on the market since August 2021 and has garnered the attention of many traders and investors in that time. On the other hand, dYdX, which has been on the market since February 2021, is known for its robust platform and a wide array of trading tools.

Both platforms have a strong user base, which is an important indicator of their reliability and popularity within the crypto community. GMX focuses on providing highly liquid markets and innovative financial products, while dYdX offers various derivatives and leveraged trading options, making them both attractive to different types of traders.

Then, there are smaller, promising projects like Polynomial Protocol, HMX, Kwenta, and Mux Protocol, all of which are aiming to challenge these two giants and dethrone them.

These platforms emerged between 2022 and 2023 and are steadily gaining more users, with their trading volumes growing in a remarkable manner.

dYdX

dYdX is a decentralized trading platform built on Ethereum that allows users to engage in lending, borrowing, and betting on future prices of popular cryptocurrencies. The protocol offers tools for margin trading and derivatives. dYdX utilizes its own native token, DYDX. As of August 14, 2023, the V2 testnet of the new dYdX chain is in operation, built on the Cosmos SDK and utilizing the Tendermint Proof of Stake consensus protocol.

dYdX typically records more than 1,000 users per week, but it has struggled to maintain those numbers in the past month. This decline is likely due to the launch of their testnet for their own blockchain, which has led to a migration of users to this test network. Specifically, the first week of July 2023 saw a significant drop to 645 weekly users, representing a dramatic weekly decline. However, the following week, the user count returned to its normal level, exceeding 1,000 once again.

The same trend can be observed in the weekly trading volume, which saw a sharp drop at the beginning of July 2023 from 10 billion USD to 5 billion USD. This volume then gradually recovered the following week, climbing back up to 7 billion USD.

GMX

GMX is a decentralized trading platform running on the Arbitrum and Avalanche blockchains, with a focus on minimizing the risks associated with liquidations. The platform uses aggregated, high-quality price feeds to determine when position liquidations should occur, thereby protecting positions from temporary price fluctuations. GMX also offers the ability to enter and exit positions with minimal spreads and low price impact, allowing for optimal pricing without additional costs. GMX launched its V2 version on August 4, 2023, enhancing the security of the protocol and adjusting the fee mechanism. The V2 version is running in beta on both blockchains on which GMX operates and will gradually replace V1.

GMX has been performing well, particularly since April 2023 when people began migrating to DEXs due to the threat of regulation on CEXs. GMX consistently sees over 1,000 active users weekly, which is a great result. However, what stands out most is that GMX has the highest TVL, suggesting that this protocol is primarily chosen by more experienced, frequent users.

GMX appears to have been affected by a seasonal vacation trend, as trading volume has been low since the beginning of July 2023. Even the gradual deployment and introduction of V2 hasn't significantly boosted activity. However, this doesn't necessarily mean that the protocol is in decline. Over the past month, it has still processed a trading volume of 1.36 billion USD.

Polynomial Protocol

Polynomial Protocol is a decentralized derivatives trading platform powered by the Synthetix protocol and operating on L2 Optimism. Users have the opportunity to earn sustainable yields or hedge against divergent losses using various options strategies. The protocol encourages trading within its ecosystem through various competitions.

Polynomial doesn't boast a large TVL (Total Value Locked), with amounts only in the millions since trading began. The most interesting development with this protocol, however, came at the start of June when the Trading Season competition was launched. This led to a radical increase in trading volume, reaching figures of up to 300 million USD per day. For such a small protocol, this is an impressive performance.

If we compare its trading volume with GMX, which is one of the largest Perpetual DEXs, we see that Polynomial's monthly volume has actually surpassed that of GMX. This is quite remarkable given the size and history of each platform.

Interestingly, the number of active users on this platform hasn't increased significantly. This could be one of the consequences of the ongoing regulatory debates in the USA concerning CEXs. Larger players may be migrating to DEXs with substantial sums of money, contributing to the high trading volumes.

HMX

HMX Protocol is a decentralized platform for trading perpetual contracts that supports cross-margin collateralization and multi-asset collateralization. The platform offers up to 1,000x leverage across four key asset classes: forex, cryptocurrencies, stocks, and commodities.

HMX utilizes its own native token, HMX, which serves as a governance token with a total fixed supply of 10,000,000 tokens. The protocol operates on the L2 Arbitrum layer and is known for its high leverage efficiency and wide range of supported assets.

At the beginning of June 2023, HMX launched its liquidity staking with the HLP token, which attracted new liquidity into the protocol and led to an increase in the overall trading volume.

HLP is a token that users receive after depositing their USDC into the HLP vault. These assets serve as liquidity for traders utilizing leverage on the HMX platform. Each HLP token represents a share of ownership in the assets stored in the HLP vault.

As of August 28, 2023, HMX has been performing very well, with a 24-hour trading volume in the tens of millions of USD. Just two months ago, this figure was in the hundreds of thousands, or the low millions. This represents a significant uptick in activity and indicates strong growth for the platform.

It is evident that their strategy of implementing low fees and offering high-leverage positions is paying off, as users are transferring their assets to this platform. The significant increase in trading volume and liquidity suggests that HMX has successfully attracted a growing user base of people who are looking for these specific features.

Kwenta

Kwenta is a decentralized platform specializing in derivatives trading, offering opportunities to trade with perpetual futures and options on the Optimism layer. It allows users to gain exposure to a wide range of assets, whether on-chain or in the real world. With its native KWENTA token, users can participate in decision-making regarding the future direction of the protocol. Additionally, they have the option to stake this token and earn rewards.

In terms of liquidity, Kwenta utilizes the Synthetix debt pool, a large liquidity pool that ensures traders have the necessary liquidity at any price for executing trades. Prices are determined by decentralized Chainlink oracles and the platform also offers the ability to trade with commodities, forex, and cryptocurrencies, providing a diverse range of options for users.

Although Kwenta is a much smaller protocol than GMX, the trading volume that flows through it has been enormous in recent months. In April 2023, Kwenta launched Smart Margin V2, and in June 2023, they implemented a minor upgrade that brings trading advantages to its users by offering advanced order types and a revamped user interface/UX for futures. In many ways, it outperforms its competitors by enhancing transaction efficiency and supporting unique strategies. This upgrade has significantly contributed to the massive trading volume we are currently seeing on the platform.

Kwenta maintains a decent level of daily user activity, with the number of active users in the hundreds. While this may not be as high as some of the larger platforms, it is a respectable figure, especially considering the specialized nature of the platform and the high volumes it manages.

When compared to GMX, Kwenta produces a high trading volume despite having fewer active users. This could lend credence to the idea that, following the upgrade to V2 Smart Margin, the platform is being sought out by truly experienced traders in the crypto world as a high trading volume with a relatively lower number of users suggests that they are likely to be larger, more sophisticated market participants.

Mux Protocol

Mux Protocol is a decentralized derivatives trading platform deployed on multiple blockchain networks, including BNB Smart Chain, Avalanche, Arbitrum, Optimism, and Fantom. The platform offers up to 100x leverage and is known for its ability to dynamically route positions to suitable trading protocols based on market conditions, position size, and user preferences. One of the unique aspects of Mux Protocol is its shared multi-chain liquidity mechanism and built-in contract aggregator.

Mux Protocol has four key tokens: MCB, MUX, veMUX, and MUXLP. The MCB token is the primary token that users can lock to obtain veMUX, granting them entitlement to revenues and rewards in MUX. The MUX token is a reward token that can be staked or vested into MCB. The veMUX token is a governance token that users acquire by locking MCB or MUX. The MUXLP token is a liquidity provider token that can be staked for income and rewards. This complex tokenomics supports various user strategies and decentralized governance.

While Mux operates on multiple chains, it has its largest share and user base on the Arbitrum blockchain.

Mux Protocol recently integrated liquidity from GMX and GNS protocols, representing a significant step in its progressive strategy to increase overall liquidity on the platform. This integration not only boosted the available financial resources for trading, but also attracted a broader spectrum of users who are already familiar with these two protocols. The move could potentially lead to more trading activity and greater adoption of the Mux Protocol, thereby enhancing its competitive position in the decentralized derivatives market.

Innovations that are shaping the future

The rapidly evolving landscape of DeFi and derivative trading platforms is fueled by continuous innovation. New features, governance models, and scalability solutions are being developed to meet the demands of a diverse and growing user base.

Among the most significant upcoming innovations is dYdX's plan to launch its own blockchain, which could offer numerous advantages for traders and users. This could result in lower fees and expanded staking options, making the platform more attractive and efficient.

GMX V2

GMX V2, which is currently running in beta on the Arbitrum and Avalanche blockchains, introduces several significant improvements and features. These include new trading assets like SOL, XRP, LTC, and DOGE. Users can also utilize multiple types of collateral for their trading positions. Additional benefits include faster execution speeds and lower slippage, thanks to a new oracle system. The exchange fees between crypto assets are also now lower, ranging between 0.05% and 0.07%.

These enhancements collectively contribute to a more efficient, user-friendly, and competitive trading experience on the GMX platform. By addressing issues such as asset variety, execution speed, and fees, GMX V2 aims to attract and retain traders, while also positioning itself as a top choice for decentralized derivatives trading.

Polynomial

Polynomial has launched two competitions called Trading Season and OP Season, which have attracted a considerable amount of new capital to the platform.

• Trading Season was launched on July 4, 2023, and will last for two months. This unique product aims to improve trading activities while rewarding traders with weekly prizes. Unlike traditional one-off competitions, it offers consistent rewards for outstanding performance. Traders who participate can earn up to a 30% increased reward in OP coin and exclusive NFTs (Non-Fungible Tokens)

• ‍OP Season is a 20-week event during which 300,000 OP coins will be distributed weekly to traders on Synthetix perps. Participants in OP Season can expect significant rewards that can be used to boost their trading on Polynomial

These competitions introduce an element of gamification into the trading experience, which can be highly motivating for traders. The rewards not only provide immediate financial incentives but also create a sense of community and engagement, fostering a more dynamic and competitive environment.

HMX

HMX has launched its Leverage Market Making with HLP tokens, which are designed to provide liquidity for traders. The HLP Vault is built on the foundation of GMX's GLP token and allows users to become market makers on both HMX and GMX platforms. Users who deposit assets into the HLP Vault earn yields from GMX as well as additional returns from fees generated on HMX.

The HMX token is built on the OFT (Omnichain Fungible Token) standard, which supports Layer Zero. This means that as HMX expands from Arbitrum to other blockchains, it will be able to move and transfer liquidity between these blockchains without the use of third-party bridges.

This innovation is particularly noteworthy as it addresses some of the most pressing issues in DeFi, including liquidity and interoperability. By allowing for the seamless movement of liquidity across different blockchains, HMX is positioned to play a significant role in the broader DeFi ecosystem.

Kwenta

Kwenta launched its Smart Margin V2 (SMV2) on April 19, 2023. This new system offers advanced order types and an entirely new user interface for trading perpetual contracts on the Synthetix platform. The system also allows integration with external protocols such as Aave, Uniswap and Lyra, opening up new possibilities for traders.

In July 2023, Kwenta updated the Staking V2 mechanism, introducing several additional features and structural changes. These new features include the ability to transfer escrow records, a cooling-off period for unstaking, and support for contract integrators. In this way, Kwenta is gradually bringing updates to all services, which allows it to keep growing.

These developments indicate that Kwenta is actively innovating to offer a more user-friendly and feature-rich platform in an effort to attract and retain traders in the ever-evolving decentralized funding landscape.

Mux protocol

Mux protocol employs a broker module that monitors overall liquidity and margin-specific trading liquidity. When a trader places an order, the broker assesses liquidity across networks to fill the order if possible. This approach enhances capital efficiency across all networks without the need to move pooled assets.

In July, two new innovations were introduced:

• ‍GMX Leverage Boosting is a feature of OG MUX, which allows MUX traders to amplify their leverage effect for their GMX trades up to 100x. To facilitate this, MUXLP lends additional collateral to the trader's position‍

• Aggregated positions enable a single trade to tap into trading liquidity from both the GLP Pool and MUXLP. This shared (or aggregated) liquidity allows MUX traders to enjoy lower trading costs, and also enhances the utilization of MUXLP's liquidity

These advancements underscore MUX's commitment to providing sophisticated trading solutions, streamlining operations, and offering traders enhanced flexibility and capital efficiency.