Arbitrum, one of the most popular Ethereum Layer-2 scaling solutions successfully launched the Nitro upgrade last week. While the release brings many significant improvements, the native Arbitrum token is not among them.
As investors waited for Arbitrum to launch its own token, the GMX exchange, one of the few native projects built on Arbitrum, became a popular DeFi exchange.
Arbitrum is based on a type of data compression technique in which multiple blockchain transactions are aggregated into a single transaction to save processing time and fees. The Nitro upgrade improves the user experience for app developers, reduces network fees, and speeds up transactions.
The upgrade can reduce protocol fees by up to 27% as it compresses data sent to the Ethereum mainnet for authentication.
The future is brighter, faster and cheaper, now that Arbitrum One is fully upgraded to the Nitro stack. 💙x🚀
This includes… 🧵https://t.co/oIQOnv6pMm
— Arbitrum (@arbitrum) August 31, 2022
In addition, developers can compile code in standard languages instead of using previously designed software.
Arbitrum still faces strong competition in its Ethereum Layer 2 Optimism alternative. Optimism has a native token, while Arbitrum relies on using the protocol to earn revenue.
As a result, investors interested in Arbitrum turned to the GMX exchange, a decentralized exchange.
The Arbitrum network is back up after the Nitro upgrade. Trading and swaps can now be done as usual.
— GMX 🫐 (@GMX_IO) August 31, 2022
GMX allows users to leverage transactions up to 30 times, and the exchange has seen significant trading volume in recent months. In daily fee revenue, GMX currently trails only some of the largest cryptocurrency protocols such as Uniswap, Aave, and Synthetix.
GMX runs on both Arbitrum and Avalanche, a multi-chain smart contract platform created to launch decentralized applications (dApps).
The GMX exchange operates using two separate tokens: GMX and GLP. GMX is used for administrative purposes when accumulating 30% of network fees; GLP accumulates 70% of the network fee and is the liquidity provider’s token. Users can only withdraw GLP on the GMX network by depositing liquidity into liquidity pools.
However, this makes the performance of GLP dependent on the share of assets in the tank. GMX will increase in correlation with Arbitrum’s network growth. With over 2.5 billion total value locked, Arbitrum has quickly become the top Layer-2 in terms of volume on Ethereum for users looking for faster transactions and lower network fees.