esGMX

Escrowed GMX: a non-transferable reward token earned by staking GMX or supplying liquidity. It cannot be sold directly, but can be staked for further rewards or vested into ordinary, transferable GMX over time.

Definition

esGMX is a reward paid in a form you cannot immediately sell. It carries the economic rights of GMX while staked, but it is not transferable, and turning it into liquid GMX requires going through a vesting process.

Why the protocol issues it

To pay rewards without the immediate sell pressure that liquid emissions create. Rewards that cannot be dumped on the market the day they are received change the behaviour of the people receiving them, which is the point.

The effect on the recipient is a longer commitment than a headline yield figure suggests.

The two things you can do with it

Stake it, in which case it earns rewards much as staked GMX does, and stays escrowed.

Or vest it, which converts it into transferable GMX gradually over a set period. Vesting is the step where the real cost appears.

What vesting actually requires

Converting esGMX is not free of conditions. GMX requires an amount of GMX or liquidity tokens to be reserved for the duration of the vest, and that reserved balance is locked while the vest runs.

The practical consequence is that vesting reduces what you can do elsewhere. Capital that is reserved is not available, and if the reserve requirement is larger than you expected, the vest is a bigger commitment than the reward it releases.

Stopping a vest early is possible on GMX, but it forfeits the progress made on the withdrawn portion rather than returning it intact.

How to value it

Not at the GMX price. An esGMX balance is worth less than the same number of GMX, because it is illiquid, and because realising it requires locking other capital for a period. Yield figures that price esGMX rewards as if they were GMX overstate the return.

Where you will run into it

In GMX staking rewards, on the vesting screens, and in any APR breakdown that separates fee rewards from token emissions.