Do you know the GLP token of the GMX protocol is about to facilitate an opportunity with the best stablecoin interest rates on Arbitrum?

GLP holders will be able to use their token to mint a new magical stablecoin, mUSD, that’ll give them juicy double-digit gains—all on autopilot.

This article will tell you how mUSD will achieve it!

But first, let’s do some housekeeping on the GMX protocol and its underlying GLP token since it will back the mUSD stablecoin.

The GMX Protocol

GMX, if you don’t know, is the largest DEX and derivate platform on the Arbitrum network.

The protocol has amassed over $600 million worth of crypto assets on the date of writing this article.

[Image Source: DeFi Llama]

GMX has integrated with several other blue-chip protocols, such as Chainlink, Redstone, Dopex, TraDAO, etc., to provide users with low-latency oracles, liquidation protection, leverage options, analytics tools, and a lot more.

The protocol has collected over $200 million in fees from around 4 million transactions.

[Image Source: DeFi Llama]

The fees collected are given out to the holders of GMX’s two underlying tokens: GLP and GMX.

GMX is the utility and governance token that accrues 30% of the platform’s generated fees.

GLP is the liquidity provider token that accrues 70% of the platform’s generated fees.

Since Meta Protocol’s mUSD stablecoin will be backed by the GLP, it’s essential to see the past performance of this token.

GLP Token’s Track Record

The GLP token has been successful in maintaining its price stability over the past year despite the bearish sentiment across the entire crypto market.

[Image Source: Zerion]

And most importantly, since the GMX protocol has maintained steady liquidity over a long period, it has consistently offered GLP holders a stable APY.

[Image Source: DeFi Llama]

Over the last six months, GMX has been observed to give GLP holders a consistent APY of 20%.

Not only that, each mUSD is backed by at least $1.5 worth of GLP tokens serving as collateral. In other words, the value of the underlying collateral is always greater than the value of the mUSD.

All these factors make GLP a safe and stable collateral in helping mUSD maintain its peg to the US Dollar.

Plus, to maintain its peg with the USD, Meta Protocol has mechanisms and systems in place that you do not find in other yield-bearing stablecoins.

Take MIM of Abracadabra for instance:

If the value of the ibTKNS, the token which serves as collateral to back MIM stablecoin, drops below a certain threshold, users may face liquidation and lose their collateral.

Moreover, if the interest rate of the ibTKNS falls below the borrowing rate of MIM, users may end up paying more than they earn.

But when it comes to mUSD, users can sell their liquidated position of collateralized GLP tokens if their collateral rate falls below the safe limit.

Meta protocol facilities an arbitrage opportunity for its users when the mUSD price deviates from its $1 peg. Users can take advantage of the price discrepancy and profit while helping restore the mUSD price to normal.