Bacon, Lettuce and Tomato: The Future of Financial Education and Marketing is Analogous
GLP stands for GMX-Liquidity Pool (token), however the “token” is typically silent. This token functions as a receipt (token) to claim a share of the underlying assets within the liquidity pool. However, the token itself is not a liquidity pool - it’s a token - which is transferrable and represents claimable value on the underlying assets (e.g. wBTC, wETH, USDC, etc.) within the liquidity pool. Distinguishing between the liquidity pool itself and the token representing claim on the underlying assets within the liquidity pool is important to understanding how BMX improves capital efficiency for liquidity providers beyond what the traditional GMX model allows for, which will be discussed in more detail later.
We also understand education and marketing are incredibly important to scale. We intend to focus heavily on them, which is another reason we chose BLT as a naming convention. Who doesn’t love a BLT? There are numerous analogous marketing opportunities to draw from between a liquidity pool and a bacon-lettuce-tomato (BLT) sandwich, and we believe analogous references will function as educational supports toward improved understanding of the concepts and mechanics behind BMX.
For example, a BLT sandwich is similar to a liquidity pool in composition, as various assets are combined to form the sandwich. The same is true for a liquidity pool on BMX; it is formed by combining various bluechip assets like wETH, wBTC and USDC. Each individual asset can be measured by weight, which we express as a percentage of the total liquidity pool composition. Sounds a bit complicated to explain to someone less-or-unfamiliar with DeFi or liquidity pools in general, right? The same can be applied to a BLT sandwich. Here is an example of the power of analogous marketing: Imagine your favorite BLT sandwich on a plate in front of you. The bacon is still sizzling. The lettuce is crisp. The tomato is juicy. Wait! Before you eat it, let's weigh it. Place your BLT sandwich on a scale and imagine it weighed 1-pound. Next let’s separate all of the ingredients and weigh them separately. The Bacon weighed 0.30 pounds; we can say that Bacon makes up 30% of the total weight of the BLT sandwich. Lettuce weighed 0.10 pounds and makes up 10% of the BLT. Tomato weighed 0.10 pounds and makes up 10% of the BLT. Bread weighed 0.50 pounds and makes up 50% of the BLT. Together, all of the ingredients equal the total weight of the sandwich. The same measurements can be applied to assets in BMX’s liquidity pool. Assume the total weight of the BMX liquidity pool is 1. Each asset has its own weight within the pool: wETH weighs 0.40 or 40% of the BMX liquidity pool. wBTC weighs 0.10 or 10% of the BLP. USDC weighs 0.50 or 50% of the BLP. Alright, I’m following…but why should we know this?
It is important to understand the weight of each asset within the liquidity pool to draw inferences on levels of risk exposure. The same is true for a BLT sandwich. If your BLT weighed 1-pound and your bacon weighed 0.75 or 75% of the entire weight of the sandwich, that BLT sandwich is overexposed to unhealthy fats and likely presents an increased risk of heart attack compared to a more well-balanced BLT sandwich. But, not always. While the amount of an ingredient can increase or decrease your risk, so too can the quality of your ingredients.
For example, in comparing the two BLT sandwiches above, if the heavier allocation of bacon (0.75-pounds) is high quality and lean while the BLT sandwich with less bacon (0.25-pound) is poor quality and extremely fatty, the risk exposure could be significantly higher in the latter due to the poor quality and fattiness despite there being less bacon overall. The same line of questioning can be applied to assets within a liquidity pool. For example, having 50% of the liquidity pool as stablecoins could seem imbalanced, however, it is generally intentional, to reduce risk of volatility in the liquidity pool token (BLT) and provide traders adequate liquidity for short-positions. However, stablecoins are not always stable nor are they always of high quality! To asses quality within assets, a few factors to consider are the asset’s issuer, total value locked, total token holders, percent of tokens held by any one wallet, bridge reliances, backing, etc. Asset weight and asset quality are only two factors of many to consider when analyzing a liquidity pool and continued discussion around these topics is needed in the market.
BMX believes analogous marketing will support users’ knowledge and understanding of how decentralized perpetual trading platforms function and the dynamics of liquidity assets. Information is power and helping spread and share information in easily digestible formats is our focus. BMX looks forward to onboarding the next generation of DeFi users and in supporting migration of CEX users to on-chain. Are you hungry yet? What’s on the menu? Two items: BLT or wrapped-BLT.