GMX <> MUX Collaboration

Leveraged trading is one of the fastest-growing domains in DeFi, and GMX absolutely dominates this space with great trading experience, deep liquidity depth and strong community. On the other hand, more than 20 leveraged trading protocols are available on various blockchains. However, as the protocols progress rapidly, the liquidity is scattered on different protocols, leading to underutilization. Also, there isn’t a native approach to utilize the cross-chain liquidity.

To help resolve the mentioned issues, MUX will launch the MUX Leveraged Trading Aggegrator, a sub-protocol in the MUX protocol suite. As one of the most prominent leveraged trading protocols, GMX is the first protocol with which the MUX Aggregrator integrates.

What will the MUX Aggregator bring to GMX?

When traders open positions on MUX, the Aggegrator will dynamically route positions to GMX. In this case, the MUX Aggregator is a separate entrance that will bring traders and volume to GMX. As a result, we estimate the aggregator can potentially help to increase the GLP pool liquidity utilization and protocol income.

What can traders do with the MUX Aggregator?

After integrating with GMX, traders will be able to open positions with sizes allowed by the GLP pool open interest caps, and MUX will be able to support a larger trading volume. In the near future, the MUX Aggregator will continue to integrate with trading protocols on different networks to diversify market options.

What are the next steps?

The main objective for the MUX Aggregator is to composite with GMX and allow traders from Arbitrum and Avalanche to trade on GMX through the aggregator. MUX protocol is continuously pursuing unifying liquidity and trading experiences across different networks to offer streamlined experiences.

For the next steps, we are planning to launch the cross-chain aggregation feature; traders from BNB Chain, Fantom and other potential newly deployed chains will be able to trade on GMX through the aggregator.

Proposal:

As traders will be enabled to trade on GMX through the MUX aggregator, we would like to propose launching co-marketing campaigns between the GMX and MUX community. The marketing campaigns can involve twitter threads & retweets, community AMAs and more forms.

Action:

  • Community votes to approve/disapprove the proposal.
  • If approved, the GMX and MUX community can launch co-marketing campaigns in different forms and push the collaboration forward based on open discussions.
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I like your ambitions.

A key question that comes to mind is, how does MUX manage the additional layers of risk that come with relying on crosschain bridges and contracts from multiple perp protocols? It feels like the amount of potential edge cases grows exponentially.

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I think this proposal is important. We need more UX development for all of us and MUX’s perp aggregator is a gud ux improvement. It also redirects users to the GMX protocol so i believe there is a win win situation here.

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Thanks. In the process of aggregating multiple underlying leveraged trading protocols, the MUX protocol suite handles the following features:1. Position Routing: Route position to suited liquidity sources on the UI level. Since this feature mainly involves the frontend, it does bring in additional smart contract risks or additional layers of risk that come with relying on crosschain bridges. The MUX Aggregator servers as a transfer station that direct traders’ positions to suited destinations.2. Leverage Boosting: The MUX aggregator can supply additional collateral to traders’ positions to raise the leverage and lower the maintenance margin rate. MUX face liquidation risks from for providing the leverage boosting funds, but these funds will be strictly capped for risks.
Learn More:3. Position Container: When traders open positions on underlying protocols through the MUX aggregator, the positions will be strictly isolated through container contracts, and this helps to sure the risks will be limited in a certain range

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How do you then deal with liquidations across different leveraged trading protocols with contracts that sit across various chains? Every leveraged trading protocol has their own logic for liquidation / margin call thresholds

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Currently the aggregator routes traders’ positions to underlying protocols in a waterfall style based on market, position size and user preferences.

After users select their preferred market and enter the size, the aggregator will indicate which liquidity source / underlying protocol will be used for this position. In the case, the liquidation metrics will follow the underlying protocol.

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How does it deal with bad debt at the underlying protocols?

Let’s say I open a $3M ETH long perp (OI, not volume) and it routes to GMX on arbitrum, a fork, and a fork-like perps protocol.

Your router splits up my order into 3 positions at each protocol.

What determines waterfall? Also what if fork 1 and fork 2 have debt seniority in your router logic to GMX and for whatever reason fork 1 & fork 2 both accrue bad debt on their protocols and need to liquidate my collateral which it sounds like is technically governed by your contracts, not those individual protocols?

My underlying question here is really around what risks does a perps aggregator introduce to underlying perps protocols (aka your liquidity venues)?

Because I don’t think this is as straightforward as a spot DEX AMM aggregator, for the simple fact that there is credit involved here and every perps (or leverage) protocol has their own risk management.

Yes 100%. Bridge risk and leverage risk are not additive here—they are multiplicative

In the current version, the aggregator won’t split the order to multiple positions; it will be 1 order and 1 position. What determines the waterfall are market, position size and user preferences:

  1. For markets that’s only available under the GLP pool, when users select these markets on the aggregator, the positions will be routed to GMX.
  2. When traders open a position that only the GLP pool cap allows, this position will be routed to GMX.
  3. If a user disable other liquidity sources on the aggregator and only allows GMX, all positions will be routed to GMX.

For underlying protocols like GMX where there is no counterparty risks for traders, the risk for having bad debt is relatively low. If protocols with counterparty risks (likely the ones with single-token pools) are aggregated in the future, there will be indication on the aggregator informing users about the potential risks, and traders can act accordingly. If they don’t prefer to use certain underlying protocol for risk concerns, they can turn certain liquidity sources off, and the positions won’t be routed there.
For underlaying protocols that originally have such risks, the aggregator can’t help to eliminate these risks, but it will inform users and allow users to disable related protocols as liquidity sources.

In terms of the question “what risks does a perps aggregator introduce to underlying perps protocols,” my personal answer is it doesn’t introduce new risks. The aggregator is potentially a transfer station that direct traders’ positions to suited destinations.

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Thank you that is very helpful.

And on the smart contract risk front, what incremental risks are introduced here to end users? What approvals do the MUX contracts require on the part of users?

Nothing is really stopping you per se from aggregating GMX. Your proposal is specifically for a co-marketing campaign. Again, nothing is stopping you from marketing your own aggregator and also marketing GMX as one of your liquidity venues, so I think your ask of the community here is really “can GMX also market us?”

I don’t feel like I have enough information to say “yes” or “no” here given 1) haven’t read your docs, 2) I’m not sure if you’ve been audited from either a contract standpoint or a credit risk management standpoint, 3) I still feel very uneasy about the idea of leveraged trading aggregation especially cross-chain, and 4) I don’t see any details here for what a co-marketing campaign would entail.

A few tweets from blueberries? Some threadoor dropping an explainer thread? Us using our own treasury for performance and brand marketing? Something else?

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No problem! On the smart contract risk side, if traders open positions under the MUX native pool (MUXLP pool), token approvals are required when users try to use certain assets as collateral. For positions that will be routed to GMX, then related approvals will be required by GMX (traders can complete these approvals on the MUX Aggregator frontend).

And yeah we are currently working on marketing campaigns, and we sincerely want to increase the exposure in the broader trader community.

For the docs (not sure if posting links is allowed by the forum rules), here is the link if you are interested: Overview - MUX
For audits, the MUX Leveraged Trading Protocol smart contracts have been audited:
MUX Protocol - CertiK Security Leaderboard
The MUX Aggregator smart contracts audit is currently in progress

Agreed that leveraged trading aggregation can be uneasy to execute since it involves many metrics & mechanisms differences between each protocol on the market. For cross-chain related risks, the current MUX aggregator doesn’t have much of them, since both liquidity and users’ collateral won’t be bridged; all aggregated positions (GMX positions) activities take place on Arbitrum at this stage.

For co-marketing campaign, I think tweets from blueberries or AMAs can be great. We are starting to see the Aggregator directing volume to GMX already; on Dec 17th, $18M volume on GMX came from the MUX aggregator. These are definitely baby steps, but personally I would believe that as we gradually expand the exposure, the MUX aggregator can become a composable entrance that bring consistent trading volume to GMX.

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love this whole dialogue here - the initiative and transparent comms from MUX folks and strong questions and security focus from gmx community :slight_smile:

Assuming GMX team understands and is comfy with questions they’ve asked, I think co-marketing is definitely a net positive here for all involved - I see it as a step removed from full-fledged token-swap proposals that have been happening with projects like BTRFLY and STFX.

MUX team has been shipping high quality product and UX, is already deployed on many chains and has Polygon, OP, ZKS deployments coming soon as well. All these could serve as very performant distribution channel(s) for underlying GMX protocol - as net-new access points with high quality UX across bunch of chains with lots of users. Ofc KPIs to track here would users and ultimately net-new volume brought to GMX - last one super easy to track on MUX dashboard rn. Can also take some of the pressure off of GMX team to deploy across other chains while roadmap priority stays focused on shipping synths and X4.

A focused joint-marketing effort seems like low / no cost and relatively high reward from GMX POV - would definitely be in favor assuming team is comfy with answers to their own key questions

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Thanks for sharing those links. Will read through!

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big yes. i think it will really help the project.

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good work! This benefits both communities

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I was wondering the other day if anything came out of this proposal so far? Very much in favour, especially with the interest of more chains (BNBchain, Polygon).

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