Gains makes splash in derivatives niche on Arbitrum

Crypto derivatives exchange Gains Network has recorded $1.6 billion in trading volume on the Arbitrum blockchain one month after launch. Initially deployed on the Polygon network, Gains Network runs gTrade, a decentralized margin trading protocol. 

The Gains platform enables users to trade financial derivatives of various assets, including crypto tokens, U.S. stocks, and indices through smart contract-based trades. Since it has launched on Arbitrum,  Gains’ gTrade has generated about $1.1 million in fees on Arbitrum, distributed to those who stake the platform's native token, GNS. 

GTrade has been driving significant activity on both the Arbitrum blockchain and the Polygon network, where it was first launched in late 2021. On the Polygon sidechain network alone, it has processed more than $23 billion worth of trading volume since October 2021.

To further drive activity, Gains Network recently launched a trading competition offering $100,000 in rewards for traders, which may have contributed to the recent spike in volume.

The GNS token was trading at $6.27 at 10 a.m. EST, up 11.5% over the past 24 hours, according to CoinGecko data. The token has seen a 40% increase over the past week, with a market capitalization of $173 million.

GNS chart by CoinGecko

Gains Network's rise on the Arbitrum blockchain is particularly noteworthy as the network serves as a Layer 2 scaling solution for Ethereum, providing faster and cheaper transactions while maintaining the security and composability of the Ethereum network.

The platform has attracted significant user activity, particularly in the realm of derivatives trading protocols. With the rise of Gains, Arbitrum now has two popular derivative trading protocols. GMX was the first and has so far led the niche on the network.

Dwindling volumes 

The uptick in trading on the Gains Network comes as decentralized and centralized derivatives trading volumes have plummeted.

Decentralized trading volumes fell to about $44 billion last month from more than $107 billion in November, according to The Block's data. Volumes have reached about $50 billion this month, well below the $180 billion registered in January 2022.

As for centralized derivatives, the picture is much the same. Bitcoin futures volumes plummeted to $386.6 billion in December, down 39% month-on-month. Volumes recovered somewhat this month and are currently above $580 billion, still well below last year when volumes reached $1.4 trillion in January.

The landscape is similar for ether futures and options as well. The drop in volumes wasn't limited to the derivatives market, with spot volumes on centralized exchanges also declining. A possible explanation for the fall-off in centralized activity may have been the collapse of FTX in November, Carlos Gonzalez, a research analyst at 21.co, told The Block. 

Meanwhile, the ratio of decentralized to centralized exchange spot trade volume has increased to 14% from 12.7% last month.