In this edition, we’re getting you up to speed on MUX protocol, a leveraged trading platform that also integrates GMX V1 & V2 to aggregate trades.
With an Arbitrum grant proposal on the table, it may be well worth your time to see how MUX has performed recently, what their next plans are, and how they plan to use any allocated $ARB…
Stay alert in the markets ⬇
Background on MUX
MUX Protocol is a leveraged trading platform on Arbitrum, Avalanche, BNB Smart Chain, Fantom, and Optimism.
Mux Protocol is a leverage trading DEX plus aggregator, offering one of the first widely adopted trading aggregators in the sector.
It has integrated with GMX V1, V2, and the Mux native pool, providing deep aggregated liquidity from these sources.
It offers 60+ markets with diverse leverage options ranging from 1x to 150x.
On-chain perps trading is a hot sector, but liquidity and markets are fragmented across different networks due to each having its own liquidity pool.
The trading experiences between different projects also differ due to varying fee metrics and setups.
This observation led to the idea of a unified entrance for on-chain traders, accessing most liquidity, streamlined trading experience, and optimal trading costs.
After developing the native Mux trading platform, the team integrated GMX and other platforms to build the initial version of the DEX aggregator.
Mux Protocol provides unified liquidity across platforms, so traders don't have to worry about choosing a specific protocol.
They benefit from features like boosted leverage up to 100x and access to a wide range of markets including crypto, blue chip markets, long-tail markets, Forex, and potentially more exotic pairs.
The aim is to onboard not just web3 native traders, but traders from a broader domain into the space.
Mux Protocol: Aggregating Perps and Organic Growth
Dumbird explains that one feature of Mux that is related to aggregated liquidity. When traders open a position through the Mux aggregator, it dynamically allocates the position to a designated liquidity source based on several factors like market, position size, available liquidity, trading costs, and user preferences.
For instance, if a trader wants to open an $ETH position, the aggregator checks which source can support it and may prioritize sources with deep liquidity or better pricing over the native MUX protocol.
The liquidity routing feature ensures traders access the best liquidity and trading fees.
Another feature is the aggregated position where a user's position might be split among different protocols to maximize order size and get the best fees.
Other features include liquidity and price optimization and leverage boosting on GMX, where native Mux leverage can be increased up to 100x with a better liquidation price.
Beyond these, Mux also offers features like TP/SL orders for all integrated protocols and automatic pool selections.
History of MUX
While Mux protocol has been live for one year, they began their journey about four years ago in 2019, making them one of the early builders in the decentralized perpetuals space.
Around three to four years ago, the main challenge in onboarding users was the user experience due to the speed and high fees of the chain.
At that time, layer-2 solutions weren't as popular.
Around two years ago, with the rise in popularity of layer-2, fees and speeds improved, shifting the focus to liquidity as the main concern.
Major traders, who might represent a small percentage of total users but contribute to a significant portion of the trading volume, require a large liquidity pool.
With the fragmentation of layer-2 solutions, this became a challenge, leading to the inception of aggregators like Mux.
Options trading is not straightforward due to its non-linear nature.
While perpetual trading might be easier to understand, derivatives as a whole demand significant financial knowledge to grasp the risks and potential liquidations.
Without incentives, Mux has seen over 15 billion in organic volume across all integrated protocols.
After the aggregator launch in December 2022, there was a significant increase in volume by March 2023, especially due to the USDC depeg incident.
The rise in volume is reflected in the native MCB token price
MUX Protocol's Growth & Future in Arbitrum
By focusing on market needs and providing necessary features, MUX saw their accumulated volume jump from $5 billion to over $15 billion within six months.
The profits from these pools also increased.
More volume means more fees & revenue for MUX
The native pool's TVL grew substantially, and their daily active users gradually increased, now ranging between 300 to 500 per day.
Future of MUX
The project's upcoming plans include major product updates based on current observations of the protocol's gaps. These updates revolve around the trading side and liquidity side.
On the trading side, they intend to support long-tail assets and improve trading experiences.
On the liquidity side, there will be a new liquidity pool and a tranch-style setup for the existing Mux LP pool.
Their aim is to cater to varying risk exposures of LPs.
They're also planning to onboard more perpetual trading protocols to the aggregator after optimizing their current systems.
The team’s main goal is to bring in more organic traders. The current volume of access is only 1-2% of centralized exchanges.
MUX Relationship with Arbitrum
A significant barrier when it comes to MUX and DeFi, in general, is the higher trading fees compared to centralized exchanges.
Due to costs, the team says that fees can't be reduced too much at present.
However, they're applying for a short-term Arbitrum incentive grant to reduce trading fees for all integrated protocols, potentially making them even lower than centralized exchange rates.
MUX plans to utilize 55% of the grant to lower the trading fees to 0% for all integrated protocols.
The remaining 45% of the grant would be used to incentivize MUX native LPs.
Mux began gaining traction around March, which Arbitrum sees as achieving product-market fit.
Mux protocol is one of the largest delegates in the Arbitrum DAO and they have been actively involved in the Arbitrum governance.
With concerns around wash trading, the Arbitrum team has expressed support for MUX’s focus on organic growth.
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