Hey folks, today I’m going to be talking about another low marketcap gem, $VRTX, the native token of Vertex Protocol, which arguably might be the most underrated and least talked about perpDEX out there. In a nutshell, Vertex is a bit of a hybrid protocol that’s a combination between a centralized and decentralized perpDEX which offers users several unique advantages above its other competitors. Additionally, with a native token that has barely $50 million in marketcap, and considering that it has almost retraced back all the way to TGE, makes $VRTX for me a very interesting investment prospect:
Let’s dive into it shall we?
The initial reason why Vertex caught my attention is because it was the only top 10 protocol on Arbitrum in terms of fee generation that I never heard of:
Peaking my curiosity, I thought that this anomaly warranted further digging, yet what I found was not only a confirmation that Vertex has been making quite a lot of money, but that the $25k figure for the last 24-hour period was relatively low — on average the Vertex has typically been printing around more than $50k per day:
Another statistic that blew my mind was that compared to all PerpDEXes across all chains Vertex has the the second highest cumulative total trading volume, right behind GMX — the biggest OG PerpDEX of them all:
The significance of this statistic is further amplified when you look at the Volume/TVL ratio (2.79 to GMX’s 0.16), which indicates that despite a relatively low level of liquidity, people are still going over to Vertex to do a LOT of trading…but why?
Coming off the heels of the FTX collapse, the team at Vertex intentionally crafted a PerpDex that gives you all the advantages of normally trading on a CEX, but giving users the ability to maintain control of their assets as well.
On Vertex, (like GMX) there is a completely on-chain AMM yet it has an off-chain orderbook, which they call a “sequencer.” If you’ve ever used a trading bot that plugs in via API through a CEX, in a similar fashion there is a Vertex API that connects and executes transactions directly to the off-chain orderbook — all the while allowing you to maintain control of your assets.
Before you start screaming at the sky for the mere mention of anything going off-chain, the importance of being able to have something like Vertex’s sequencer can’t be understated because it provides some few key advantages:
One-click trading — Because the orders go off-chain, Vertex allows you to sign just one approval for an entire trading session:
To note, this feature is optional so you could technically default to having to sign/approve all transactions if you really wanted to. However opposed to all the approvals and executions that are mandatory on DeFi platforms, this means that you can opt for essentially no waiting time for an approval to go through as you’re trying to execute an order, creating greater efficiency and more importantly, greater speeds. Speaking of greater speeds…
Super fast speeds — One of the major advantages with CEXes are that their transactions aren’t being done through smart contracts, therefore they can potentially be executed at quicker speeds. Through an off-line sequencer, Vertex is reportedly able to produce speeds comparable to the best CEXes like Binance or Coinbase.
Sandwich attack protection — I’ve written about sandwich attacks before, but in a nutshell, when your proposed transaction is publicly available through a transparent mempool, sandwich attackers can front run your trade and possibly exploit your trade through whatever slippage is available.
(https://b2binpay.com/en/what-is-a-defi-sandwich-attack/)
Having none of that information being transparent on-chain can prevent you from getting sandwiched, just like on a CEX.
Despite the fact that Vertex provides you many of the same advantages you’ve have being on a CEX, Vertex also retains the key things that we love about the blockchain. These include…
Settlements on-chain — Even though the orderbook may be off-chain, conversely the settlements for each trade is conducted on-chain through smart contracts. Because they’re all on-chain, there’s a great deal of transparency of how/what assets are being transacted to whom and to where — something that was starkly opaque (allegedly even to SBF himself) on FTX.
Self-Custody — Just as you were interacting with any typical DeFi protocol, your funds are held by smart contracts, not with centralized entities. In other words, in order for these funds to be released from these smart contracts, the wallet owner has to manually approve and sign the transaction.
As I alluded to before, $VRTX is the native token for the Vertex platform, which can be staked, thus giving you a “voVRTX Score” which determines what share of the reward pool you may be earning:
As you can see in the graphic above, your score can gain multipliers depending on how long you’ve staked, thus incentivizing people to stake their $VRTX for longer if possible.
50% Revenue Share — Due to the multiplier effect, this means that not all stakers are going to get their own proportional part of the reward pie, which in Vertex’s case is 50% of the entire platforms revenue. If you’re familiar with GMX forks, on most perpDEXes there’s a dedicated revenue share split between $GMX and $GLP (a liquidity supply token) — both together totaling greater than 50%. (In the case of GMX.io, $GMX holders earn 30% of platform fees and $GLP holders earn 70% of platform fees).
Despite this difference, as you can see in the graphic above, the average APR is approximately 48.69% across all $VRTX stakers, which is significantly higher than $GMX’s 7.60% and $GLP’s 15.39% (at time of writing). Additionally unlike many GMX forks where you might be accruing an escrowed version of the platform token, Vertex is able to circumvent some of its token dilution by paying out rewards in $USDC instead of more $VRTX.
Tokenomics— According to folks in discord, the speculated seed price of $VRTX is around 8.5 cents, which makes the current price (at time of writing) about a 3x from TGE. $VRTX also has a capped total supply of 1,000,000,000 tokens, with 10% of the total supply that was released during the initial token phase on 11/8/2023, and with the rest to be released over the course of the following 5 years:
As you can see in the breakdown above, by far the biggest allocation is towards “Ongoing Incentives” which is primarily from Vertex’s Trade and Earn Program. (In case if you’re interested, they have a much more detailed distribution schedule here.) Just like it sounds, $VRTX are given as rewards for those who are either trading and/or providing liquidity on the platform.
Year 1 may be the most profitable for users: Once again if you take a look at the token distribution schedule, by far the heaviest concentration of tokens distributed is for ‘Year 1" (10.43% of total supply). Apart from Year 1 being the largest emission of $VRTX, Trade and Earn participants can currently double dip with added $ARB incentives:
The total sum of 3 million $ARB tokens are technically given out as incentives for rebates for any taker fees that were incurred, but it’s still pretty awesome to see that the incentives are going on for their 10th week.
14-day unlock period : If you’re planning only holding on to your $VRTX for the short term, I’d recommend not staking your $VRTX on the the platform as there’s designated 14-day unlock period which starts from the time you request to unstake it. This isn’t actually that uncommon among PerpDexes as they’re trying to limit quick and dramatic fluctuations in liquidity as well as promote long-term staking, but definitely a hindrance if you need immediate access to your tokens.
Even with only a revenue share of 50%, Vertex still offers much more attractive returns than many other GMX forks: As I mentioned before, $GMX holders earn 30% of platform fees and $GLP holders earn 70% of platform fees, which totals to 100% — a figure which on the surface level seems much more attractive than Vertex’s 50%. However, due to the significant disparity in Volume/TVL ratio, unless you’re a whale, on platforms like GMX you’ll be earning a significantly much smaller piece of that 70% or 30% pie.
Referral Program: Similar to many other perpDEXes, Vertex also has it’s own referral program, but its one where both you and the referee can benefit — the referee gets a 10% rewards boost and the referrer get’s 10% worth of their rewards.
Once again, $VRTX is a relatively small marketcap coin, meaning that there is significant potential for price appreciation, and conversely a significant potential to get rekt. Regardless of the risks, it’s clear that Vertex is offering a product that crypto really needs — the convenience of a centralized exchange mixed with all the transparent protections of DeFi. Seeing as we’re still really early on this one, personally I’ll be very interested to see how fickle traders are when it comes to trading, and whether or not they’ll flock to other competitors like Hyperliquid (also a great platform) instead.
Interested in trying Vertex out? If so, consider supporting this blog and using my referral link where you can get a 10% rewards boost when you trade: https://app.vertexprotocol.com?referral=1UvUrTrvbo
And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!
