The collapse of centralized giants like FTX and ongoing regulatory scrutiny facing Binance have shifted investor focus toward decentralized alternatives—particularly on-chain perpetual futures exchanges. Unlike platforms that rely on token emissions to drive growth, leading decentralized exchanges (DEXs) generate real revenue from trading fees, giving them stronger fundamentals. This shift has made on-chain derivatives protocols a compelling investment theme in 2025, especially during bear market cycles when sustainability matters more than hype.
Since the start of the year, the top three tokens in this sector have significantly outperformed Ethereum. Among them, dYdX and GMX stand out as leaders in trading volume and innovation. Both are undergoing major protocol upgrades—dYdX with its transition to a Cosmos-based appchain and GMX with its V2 overhaul—that could redefine their economic models and long-term competitiveness.
This article dives into the latest developments shaping these two powerhouses, their upcoming catalysts, and why they’re attracting increasing attention from traders and investors alike.
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dYdX: Upgrading From Incentivized Growth to Sustainable Economics
Why dYdX Stands Out
- $DYDX token up 120% YTD, outpacing Ethereum’s 58% gain.
- Largest on-chain perpetual exchange by trading volume, 3–4x higher than GMX.
- Built on StarkEx (an Ethereum L2), offering fast order matching with decentralized security.
- Backed by top-tier investors including a16z and Paradigm.
Despite solid infrastructure and strong adoption, $DYDX has historically struggled with price performance due to its flawed tokenomics. For years, user growth was fueled by generous token incentives rather than organic demand. Crucially, trading fees were not redistributed to token holders, creating a misalignment between protocol revenue and holder value.
Compare this to GMX, where 30% of fees flow directly to $GMX stakers—an equity-like return model that has proven attractive to long-term investors.
The Road to V4: A Fundamental Overhaul
To fix these structural issues, dYdX announced a major shift in 2022: leaving Ethereum’s Layer 2 ecosystem to launch its own appchain on Cosmos. This move enables full control over governance, scalability, and token economics.
The upcoming V4 upgrade, expected in Q3 2025, introduces transformative changes:
- Fee distribution to validators (miners): A portion of trading fees will go to network participants who secure the chain.
- Staking requirement for validators: To become a validator, users must stake $DYDX tokens.
These updates effectively turn $DYDX into a yield-bearing asset—linking token value directly to protocol revenue. According to Token Terminal estimates, dYdX generates around **$110 million in annualized revenue based on last 30 days’ data—yet its current market cap sits near $400 million**, suggesting significant upside potential if fee sharing is implemented transparently.
However, execution risk remains high. The V4 rollout has already been delayed multiple times—from an initial 2022 target to Q2 2025, now pushed to September. Additionally, over 100 million unvested $DYDX tokens are set to unlock by December 2025, increasing circulating supply from 250 million to 400 million. This could create downward pressure unless demand grows proportionally.
Still, the transition represents one of the most ambitious re-architectures in DeFi history—and if successful, could reposition dYdX as a truly sustainable, income-generating protocol.
GMX: Building Resilience Through Innovation
Key Highlights
- $GMX up 89% YTD, also beating ETH’s performance.
- Top by market cap among on-chain perpetual DEXs; second in volume after dYdX.
- Operates on Arbitrum with a dual-token model: $GMX** (governance & fee share) and **$GLP (liquidity provider token acting as counterparty).
GMX rose to prominence during the bear market by offering reliable infrastructure and a unique mechanism: instead of relying on order books, it uses a pool-based system where GLP holders serve as the counterparty to traders. In return, they earn 70% of trading fees, while $GMX stakers receive 30%.
But this model isn’t without flaws—and GMX is addressing them head-on with its V2 upgrade.
GMX V2: Fixing Design Limitations
Challenges in V1
- Limited tradable assets: Only tokens included in the GLP basket can be traded.
- Concentration risk: Since GLP pools multiple assets (ETH, BTC, stablecoins), a sharp drop or manipulation in one asset can negatively impact the entire pool’s value.
V2 Improvements
- Isolated counterparty pools: Each tradable asset will have its own dedicated liquidity pool, reducing cross-asset risk.
- Expanded asset support: New tokens—especially smaller-cap assets not yet listed on Binance Futures—can be added more easily.
- Improved capital efficiency and safety: By decoupling risks across assets, GMX enhances both user trust and platform resilience.
These changes allow GMX to scale sustainably while maintaining decentralization—a critical edge over centralized competitors.
Strategic Use of Arbitrum Airdrop Funds
GMX’s treasury recently received 8 million ARB tokens (~$10 million at current prices) from Arbitrum’s airdrop. This windfall presents strategic opportunities:
- Distribute ARB rewards to $GMX or $GLP stakers
- Fund ecosystem grants for developers building integrations
- Invest in cross-chain expansion or new product lines
While final decisions are still under governance discussion, the team has consistently prioritized organic growth over short-term incentives. Similar strategies have worked well for other protocols on Avalanche and Optimism, where official grants helped bootstrap liquidity and attract users.
Given GMX’s track record of rapid development and prudent management, effective deployment of these funds could accelerate its path toward becoming the dominant decentralized derivatives platform.
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Frequently Asked Questions (FAQ)
Q: What makes on-chain perpetual exchanges different from centralized ones?
A: On-chain platforms operate transparently via smart contracts, eliminating custody risk. Users retain control of funds, and all trades are settled on blockchain—making them more secure and resistant to manipulation.
Q: Why are dYdX and GMX outperforming Ethereum in 2025?
A: Both generate consistent revenue from trading fees, which investors value highly in uncertain markets. Their upcoming upgrades also introduce yield mechanisms tied directly to $DYDX and $GMX tokens—creating stronger economic moats.
Q: Is dYdX’s move to Cosmos risky?
A: Yes—building a new blockchain brings technical and adoption challenges. However, it gives dYdX full autonomy over upgrades, tokenomics, and validator incentives, which may pay off long-term if executed well.
Q: How does GMX’s GLP work?
A: GLP is a diversified liquidity pool that acts as the counterparty to traders. When users open leveraged positions on GMX, GLP absorbs the opposite side of the trade and earns fees proportionally.
Q: Can small-cap tokens be traded on GMX V2?
A: Yes—V2’s isolated pools make it easier to list new assets without risking the entire system. This opens the door for early access to emerging projects before they hit major CEXs.
Q: When will dYdX V4 launch?
A: The latest timeline points to Q3 2025 (around September), though delays have occurred before. Watch official announcements for testnet launches and mainnet milestones.
On-chain derivatives are maturing fast. With dYdX rebuilding its foundation and GMX refining its architecture, both protocols are positioning themselves for long-term dominance.
As real revenue becomes the benchmark for value in DeFi, these platforms offer some of the clearest paths to sustainable growth—and investor returns.
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