GMX Prepares $44 Million Fund to Compensate Affected GLP Holders

GMX Compensation Plan Unveiled: $44 Million to Repay Arbitrum V1 Hack Losses

In a major move to restore user trust and repair financial damage from a high-profile exploit, decentralized exchange GMX has rolled out a $44 million compensation plan for Liquidity Provider (GLP) holders impacted by the July Arbitrum V1 hack. The plan, approved through a community Snapshot vote, will be distributed in GLV — the Liquidity Vault tokens from GMX’s V2 infrastructure — along with additional retention incentives to encourage long-term participation.

The announcement, made via the company’s official X (formerly Twitter) account, marks a significant milestone in the platform’s recovery efforts following one of its most severe security incidents to date.

Source: X

Background: How the Exploit Unfolded

On July 9, GMX’s V1 GLP pool on Arbitrum was targeted in a cyber exploit that exposed a critical vulnerability in the protocol’s design. The breach resulted in the loss of approximately $42 million in assets, predominantly denominated in ETH, WBTC, and stablecoins.

While the event sent shockwaves through the DeFi community, GMX’s swift response helped mitigate further damage. Within hours of the attack, the protocol reached out to the perpetrator with an unusual but increasingly common blockchain security tactic: a white-hat bounty offer. The hacker was promised 10% of the stolen funds in exchange for returning the remaining 90%.

Remarkably, the exploiter agreed. Millions of dollars’ worth of ETH and stablecoins were returned, allowing GMX to recover a significant portion of the compromised funds. This cooperative resolution enabled the protocol to pivot quickly toward designing a robust compensation framework.

The $44 Million Repayment Structure

The GMX compensation plan sets aside $44 million for affected GLP holders, with payouts issued in GLV tokens from the platform’s V2 Liquidity Vaults. These tokens are designed to be yield-optimizing, meaning holders can benefit from additional returns while they hold their compensation.

Key elements of the plan include:

• Primary Compensation Pool: The majority of the $44 million will go directly to eligible GLP holders who had assets in the Arbitrum V1 pool at the time of the exploit.

• Retention Incentives: An extra $500,000 incentive pool has been created for users who keep their allocated GLV tokens for at least three months without selling or transferring. This bonus is designed to stabilize the ecosystem during the recovery period.

• DAO Treasury Contribution: An additional $2 million from the GMX DAO Treasury will support the compensation effort, signaling the project’s commitment to community restitution.

• Token Composition: GLV token allocations are structured with an approximate composition of 25% WBTC, 25% ETH, and 50% stablecoins to maintain a balanced and less volatile portfolio for recipients.

The claim process is live, allowing affected users to access their allocations through the official GMX interface. Once redemptions are fully enabled, any remaining coins can be sold or transferred after a standard 10-day waiting period.

How to Claim Your Compensation

Eligible users can claim their GLV tokens and potential retention bonuses through the GMX platform. The process is designed to be straightforward:

1. Access the GMX Official Website and connect your wallet.

2. Verify Eligibility using on-chain data to confirm your GLP holdings during the affected period.

3. Claim GLV Tokens allocated to your account from the compensation pool.

4. Opt into the Retention Program if you wish to hold your tokens for three months to secure the $500,000 in bonus incentives.

5. Redeem or Hold Tokens once the 10-day post-redemption period is completed.

For users interested in maximizing returns, the yield-optimizing design of the Liquidity Vaults offers an opportunity to generate additional income beyond the initial compensation value.

Beyond the Hack: GMX’s Continued Strength

Despite the severity of the exploit, GMX’s core exchange operations remained stable throughout the incident. Trading volumes and liquidity metrics have continued to show resilience, a sign that the community and broader DeFi market maintain confidence in the protocol’s long-term vision.

As of the latest data:

• Total Trading Volume: $315 billion since inception

• Open Interest: Over $294 million

• Trusted Users: More than 718,000 active participants

The DAO has also announced ongoing work on recovery solutions for other decentralized finance protocols that integrated GLP, with token redemption expected to resume within 10 days.

Lessons Learned and Security Upgrades

The July exploit served as a wake-up call for DeFi platforms on the Arbitrum network and beyond. In response, GMX has taken steps to strengthen its infrastructure, including:

• Transitioning from V1 to V2 Liquidity Vaults with enhanced security features and risk management controls.

• Conducting multiple external audits to ensure vulnerabilities are addressed before deployment.

• Expanding internal security teams and investing in real-time monitoring systems to detect and mitigate threats more quickly.

By leveraging the lessons from the incident, GMX aims to set a new industry standard for transparency, accountability, and user protection in decentralized trading.

Potential Impact on Token Price and Market Sentiment

While the initial reaction to the exploit saw GMX’s token price fall by as much as 28%, the market has partially recovered, with capitalization now exceeding $600 million. The announcement of the compensation plan has helped restore investor confidence, potentially paving the way for further price stability and growth.

Analysts suggest that the retention incentives, coupled with the yield potential of GLV tokens, could encourage more users to remain engaged with the platform rather than liquidating their holdings. This could have a stabilizing effect on liquidity and help maintain a healthy on-chain trading environment.

A Model for Crisis Response in DeFi

GMX’s handling of the Arbitrum V1 exploit — from negotiating with the attacker to rolling out a comprehensive compensation plan — could serve as a case study for other DeFi projects navigating security breaches. The combination of rapid incident response, community-driven decision-making, and structured restitution has allowed the protocol to recover much of its lost reputation.

While no platform is immune to risk in the evolving world of decentralized finance, proactive governance and transparent communication can make the difference between a temporary setback and a terminal crisis.

The Road Ahead

With V1 now paused, GMX is focusing on refining and expanding its V2 infrastructure, which promises improved scalability, security, and liquidity optimization. The DAO continues to explore strategic partnerships and integrations to broaden its DeFi footprint and ensure long-term sustainability.

For GLP holders and new users alike, the next few months will be a critical test of GMX’s ability to deliver on its promises while maintaining a safe and profitable trading environment.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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