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Decentralized exchange (DEX) platform GMX has confirmed a whale of price manipulation that has been able to take advantage of its features – ‘Zero Price Impact’ and ‘Minimum Distribution’ with the launch of Avalanche Blockchain’ token – AVAX. In 2020.
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Background history analysis
The exploit was confirmed by the GMX team on Twitter on Sunday. Joshua Lim, Head of Origins at Genesis, analyzed the usage.
1/ ⚠ Do not get caught #GLP TOKENS! You are in danger of losing all your money #GMX!
Price manipulation allows a skilled trader to take all the liquidity out of GMX without any price impact.
? Someone made 1 million dollars by fraud #AVAX Price on GMX using this attack vector
why? ? pic.twitter.com/lJsboLK9QQ
– Duo Nine | YCC (@DU09BTC) September 18, 2022
Zero slippage (which is the difference between the trade’s expected price and the trade price) can occur with sufficiently large trades and cryptos with low liquidity by ‘opening large positions on the GMX’ AVAX/USD market’. Transferring to the DEX at a higher rate’ and thus making a profit.
Lim explained that this process was apparently repeated five times. His research says that each cycle transfers about 200,000 AVAX, which is $4-5 million per cycle, and ultimately makes over $500k in profit.
However, Lim says it’s not ‘exploitation’ per se, but that’s how his GMX career is designed.
Technical analyst Duo Nine pointed out the gap, which states, “If traders profit, liquidity providers lose.” GLP holders can lose all their money if traders exploit this vulnerability!”This is being exploited by the exploiter.
GMX announced that AVAX/USD will remain open, with $2 million on long positions and $1 million on short positions.
Many crypto analysts have blamed the ‘zero price impact’ policy and ‘minimum distribution policy’.
Impact on the market and investors
Due to this news, there is discomfort in the market. Some have clearly cited the DX Zig Zag Founder’s Podcast as citing concerns about the GMX exchange model and its long-term sustainability, saying that the right strategy and the right amount of trader can wipe out GLP shareholders.
While some Twitter users expressed concern about the exploit of the loophole and thus not using the ‘smart contract’, some mentioned that GMX should compensate GLP token holders.
The GMX token is currently valued at $41.34; It has increased by 2.51% in the last 24 hours.
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