dYdX – DYDX
The dYdX crypto exchange was founded by a former software engineer at Coinbase and offers its users different services, such as: margin trading, perpetual contract, spot trading, leveraged trading and lending. By using ZK rollup technology, dYdX settles perpetual contracts with reduced gas and trading costs in a decentralized way.
dYdX is a non-custodial Decentralized Exchange – DEX, meaning the platform offers crypto trading services where you remain in full control of your funds at all times. There are no central intermediaries who hold your private keys. Your funds are secured by smart contracts at all times.
The dYdX Exchange offers lending, borrowing and trading on margin and is powered by Ethereum Smart Contracts. Unlike most popular crypto exchanges, Know Your Customer – KYC procedure is not required here. Making it attractive for anyone who wants to trade on margin but does not want to use central entities.
In the beginning of 2020, perpetual trading was introduced, with margins from 5x leverage, up to 25x leverage.
Just like centralized exchanges, dYdX offers functionalities such as order books and limit orders and it uses off-chain order books with on-chain settlement. This means expensive gas costs of the Ethereum mainnet are avoided while trading.
The dYdX protocol uses Starkware’s StarkEX scaling engine and its ZK rollup technology to settle perpetual contracts with reduced gas and trading costs and reduced minimum order sizes.
ZK-rollups stands for Zero-Knowledge rollups. It is a Layer 2 scalability solution that allows blockchains to validate transactions faster while also ensuring that gas fees remain minimal. Zk-rollups manage to perform better than traditional Layer 1 blockchains like Ethereum because they combine on and off-chain processes.
This review of dYdX – DYDX was created for informational purposes. This article is not intended for promotion.
Many crypto tokens are listed on the dYdX Exchange, such as ETH, BTC, LINK, DOT, AVAX, SOL and so on. To view its entire listings, please refer to the official website.
Antonio Juliano founded the dYdX Foundation in 2017, of which the headquarters is situated in Zug, Zwitserland.
The team behind the decentralized exchange consists out of 49 other members, each with their experience as developer.
For more information about dYdX’s protocol, please refer to the dYdX whitepaper.
Margin trading is one of the most unique features of the dYdX platform. It allows users to increase exposure to underlying cryptocurrency.
dYdX features 2 types of Margin Mechanisms:
Isolated margin trading means isolating a certain amount of money on trading with specific leverage. A leverage determines the amount of margin deposit required and when a liquidation occurs, the losses are stopped at the isolated amount.
All open positions are used as collateral. This method is more risky because when a position is liquidated, everything will be sacrificed.
Lending crypto assets on dYdX allows the user to earn passive income. When lending, users make their crypto available to other users and will therefore receive a percentage of loan money.
This method is more risk-free, as the borrowing users must ensure that they have more funds available than they wish to borrow. Therefore, there are enough funds to pay the lender when a sudden drop in price value occurs.
Borrowing crypto assets on dYdX is possible for users until their security ratio reaches 125%. When this benchmark is reached, users are no longer allowed to borrow until a down payment is made. Borrowing is impossible below 125% collateralization ratio and any account with a collateral ratio below 115% will be liquidated.
An important feature of borrowing in dYdX is that there is no restriction on depositing and withdrawing at any time.
To protect the lender, the amount is liquidated. When this takes place, users pay a 5% liquidation fee to make sure that the collateral is still active.
DYDX is dYdX’s native and governance token, meaning DYDX tokens can be used to vote on future developments, decisions and partnerships. DYDX is an ERC-20 token issued to serve dYdX’s long-term vision of decentralization.
Being a governance token, DYDX gives owners the right to propose and vote on changes to the Layer 2 protocol, either by direct voting or by delegation. Users trading on the dYdX Layer 2 Protocol platform will benefit from a discount on trading fees based on the size of their DYDX holdings.
dYdX encourages people to keep holding strong onto their token and rewards them with:
The mining reward is for users who trade on the Layer 2 protocol of the dYdX platform, and investors who use this platform for the long term. The amount of the reward will depend on the activity of the users, which is based on different levels. The retroactive mining reward is now available to claim as the limitation on initial transfer is over.
The trading reward will encourage cryptocurrency traders to get involved with the dYdX Layer 2 protocol. Any trader under the dYdX Layer 2 protocol is eligible to receive the reward. However, the amount of the reward depends on trading activity, volume and other factors. Active traders with more than 10,000 tokens will receive a 15% discount on all trading fees.
The liquidity provider reward is available to active Ethereum address holders who maintain a minimum 5% maker volume in their previous time period. Users will receive the reward after 25 days, and this process will remain valid for the next five years. The purpose of offering this reward is to boost DYDX’s long-term liquidity.
There are no fees for deposits or withdrawals on dYdX. However, the user is responsible for the gas costs of the deposit/withdrawal transaction, which are paid to Ethereum miners.
The initial delivery of DYDX tokens is subject to a 5-year distribution period. Half of it will be distributed through a rewards mechanism for staking, providing liquidity, retrospective milestone completion, and trading on the platform. These rewards will become liquid every 28 days.
A maximum supply of 1 billion DYDX tokens will be handed over over the next five years in several phases, as shown below:
50% goes to the community of which:
50% goes to the core contributors of which:
What dYdX has achieved within a short period of time is very encouraging. Because of its simple and user-friendly interface, trust, liquidity, accessibility and high security features built on Ethereum smart contracts, its a reputable decentralized margin exchange and suitable for margin traders.
Also, the new perpetual contract is built on the Layer 2 network, wich makes perpetual contracts trading truly decentralized and less expensive with gascosts. In addition, users can avoid potential risks of centralized exchanges.
The decentralized exchange dYdX focuses mainly on the DeFi industry and offers five core services: margin trading, perpetual contract, spot trading, leveraged trading and lending. Users only need an Ethereum wallet to initiate these transactions. No KYC is required for any transaction through the dYdX platform. Still, the company behind the protocol, dYdX Trading Inc., is overseen by the U.S. Security and Exchange Commission.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.