dYdX

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Discover dYdX's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is dYdX?

dYdX (DYDX) is a decentralized exchange (DEX) that allows users to trade perpetual swaps, a type of derivative, without intermediaries. It initially operated on the Ethereum blockchain using StarkWare's zero-knowledge proofs but has transitioned to its own blockchain within the Cosmos ecosystem. The DYDX token serves as a governance token, rewards stakers for securing the network, and enables community-driven governance.

How is dYdX used?

dYdX (DYDX) is a decentralized exchange (DEX) that allows users to trade perpetual contracts, which are financial instruments that derive their value from an underlying asset without expiration dates. Here's how it is used:

  1. Trading Perpetuals: dYdX offers perpetual trading options for over 35 popular cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin. Users can trade perpetual contracts with up to 20x leverage, providing a high degree of flexibility and control over their positions.

  2. Layer 2 Trading: The platform utilizes StarkWare's zero-knowledge proofs to create a more secure, decentralized, and privacy-focused environment. This allows for efficient and scalable trading on Layer 2, which is built on top of the Ethereum blockchain.

  3. Governance and Staking: dYdX has a governance token called DYDX, which is used for community voting and governance initiatives. Users can earn DYDX tokens through trading activities and stake their existing crypto holdings to earn yield in DYDX. This token also allows users to reduce trading and market making fees based on their token holdings.

  1. Non-Custodial Trading: dYdX operates as a non-custodial exchange, meaning users maintain complete control over their assets. This is achieved through the use of trustless protocols and smart contracts on the Ethereum blockchain.

  2. Accessing the Platform: To use dYdX, users need to set up a compatible DeFi wallet such as MetaMask, Coinbase Wallet, or Ledger. They must also fund their wallet with Ether (ETH) to pay for gas fees. The platform can be accessed through the desktop application or the dYdX iOS app.

Overall, dYdX provides a decentralized and secure environment for trading perpetual contracts, offering users a high degree of control and flexibility over their trading activities.

How do I store dYdX?

To store dYdX (DYDX) tokens, you can use various wallet options. Here are some methods:

  1. Keplr Wallet: You can onboard to Keplr and set up a wallet to store and stake DYDX tokens. This involves exporting your secret phrase from the bridge interface and importing it into Keplr.

  2. Ledger Hardware Wallet: As an ERC-20 token, DYDX can be held in a Ledger hardware wallet. You can attach the wallet to MetaMask or MyEtherWallet to view your tokens.

  3. MetaMask: MetaMask is a popular browser extension that supports DYDX. You can connect your Ledger or Trezor hardware wallet through MetaMask to access your tokens.

  1. WalletConnect: dYdX supports WalletConnect, which allows you to connect various mobile wallets. You can use WalletConnect to link your wallet to dYdX.

  2. Coinbase Wallet: The Coinbase Wallet mobile application also supports DYDX. You can access dYdX through the app or use WalletLink to connect your wallet.

  3. imToken: imToken is another mobile wallet that works with dYdX. You can access dYdX directly through the imToken app.

Remember to follow the specific setup and security guidelines for each wallet option to ensure the safe storage of your DYDX tokens.

How to buy dYdX?

To buy dYdX (DYDX) tokens, follow these steps:

  1. Choose a Cryptocurrency Exchange: Select a reputable exchange that supports dYdX (DYDX) trading, such as Binance, KuCoin, CoinEx, Kraken, Bybit, gate.io, or MEXC. Ensure the exchange accepts customers from your country and compare fees, security features, and supported currencies before making a decision.

  2. Create an Account: Register a free account on the chosen exchange by providing personal information, including your name and email address. You may need to complete Know Your Customer (KYC) verification to increase withdrawal limits and unlock additional features.

  3. Add Funds: Deposit funds into your exchange account using a supported payment method such as credit/debit cards, bank transfers, or third-party payment channels. The specific options available may vary depending on your location and the exchange.

  1. Place a Buy Order: Navigate to the dYdX (DYDX) trading page and place a buy order at the current market price. You can set a limit order if you prefer a specific price. Confirm your order within the given time frame, as prices may fluctuate.

  2. Store Your Tokens: Once you have purchased dYdX (DYDX), you can store them in your exchange wallet or transfer them to a personal crypto wallet for added security. You can also use the tokens for trading or staking on the exchange.

Remember to stay informed about market risks and price volatility, and only invest in products you are familiar with and understand the associated risks.

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History of dYdX

dYdX, a decentralized trading platform, was founded in August 2017 by Antonio Juliano, a former software engineer at Coinbase and Uber. Juliano aimed to create an open-source, community-governed derivatives exchange that would allow users to own their trades and eventually the exchange itself. The protocol was initially launched on the Ethereum blockchain, supporting lending, borrowing, and margin trading.

Early Challenges and Evolution

The initial version of dYdX used Ethereum smart contracts to power spot and margin trades. However, Ethereum's network congestion and high gas fees led to slow and expensive transactions. To address these issues, dYdX migrated to StarkWare's layer-2 network called StarkEx in August 2020. This move enabled faster transactions and lower fees.

Layer-2 and Beyond

The layer-2 product was launched to the public in April 2021, and since then, dYdX has launched 30 markets on the layer-2 network, generating over $100 billion in trading volume. The platform currently utilizes StarkWare's layer-2 scaling solution, which provides faster transactions and lower fees. Additionally, dYdX has announced plans to move to a new ecosystem, Cosmos, to further enhance its trading experience.

Governance and Token

In August 2021, the dYdX Foundation was established to deploy governance smart contracts and issue the dYdX governance token. The foundation supports community research, educates investors, and manages the dYdX community treasury. The dYdX token has a market capitalization of $404.88 million as of April 27, 2023, making it one of the most liquid derivatives trading platforms on Ethereum.

Funding and Development

dYdX has received significant backing from well-known investors, including Andreessen Horowitz, Polychain Capital, Three Arrows Capital, Wintermute, and Paradigm. The protocol has successfully raised funds in several rounds, with the latest being a Series C round in June 2021, led by Paradigm, which raised $65 million.

Current Status

Today, dYdX is a leading decentralized exchange that supports perpetual trading, offering users high leverage and a wide range of cryptocurrency trading pairs. The platform continues to evolve, focusing on fully decentralized and open-source components, ensuring users retain full custody of their assets.

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How dYdX works

dYdX is a decentralized exchange (DEX) that operates on the Ethereum blockchain, allowing users to trade crypto assets without intermediaries. Here's a detailed overview of how it works:

Smart Contracts and Layer 2 Scaling

dYdX uses smart contracts to facilitate trading, ensuring that all transactions are secure, transparent, and tamper-proof. To improve scalability and reduce fees, dYdX migrated to StarkWare's Layer 2 scaling solution, which employs Zero-Knowledge (ZK) rollups. This technology enables faster transactions while maintaining the security of the Ethereum blockchain.

Trading Engine and Order Book

The trading engine operates off-chain, utilizing an off-chain matching engine and order book. This setup enhances transaction speed and efficiency. The order book is maintained on the Ethereum blockchain, ensuring transparency and public visibility.

User Control and Governance

dYdX is structured as a non-custodial exchange, giving users complete control over their funds while trading. Users can connect their wallets, such as MetaMask, Ledger, or Trust Wallet, to access the platform. The DYDX token, the native governance token, allows holders to participate in community governance, staking, and trading fee reductions.

Trading Options and Leverage

dYdX offers perpetual trading options, which allow users to trade with leverage of up to 20x. The platform supports various pairs, including BTC-USD, ETH-USD, and more. Users can select order types, such as limit or market orders, and set leverage, take profit, and stop loss parameters.

Fees and Rewards

dYdX charges fees for trading, which are distributed to validators and stakers. The platform also offers rewards to users who contribute to liquidity and platform development. Additionally, holding DYDX tokens grants trading fee discounts proportional to the token balance.

Security and Risk Management

dYdX incorporates multiple layers of security, including smart contract audits and an insurance fund that protects against losses due to unforeseen events. The platform emphasizes self-custody and risk minimization, allowing users to withdraw funds without restrictions at any time.

Future Developments

dYdX is planning to launch V4, which will transform the derivatives protocol into a standalone interoperable blockchain based on Cosmos SDK and Tendermint proof-of-stake consensus algorithm. This upgrade aims to increase user adoption and awareness, with a $5.5 million growth fund program.

In summary, dYdX operates as a decentralized exchange that leverages smart contracts, Layer 2 scaling, and off-chain trading engines to provide users with a secure, transparent, and efficient trading experience.

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dYdX's strengths

dYdX (DYDX) has several strengths that make it a popular decentralized exchange (DEX) for crypto users:

  • Decentralization and Transparency: dYdX promises complete decentralization and greater transparency compared to traditional financial services, ensuring that users have full control over their funds at all times.
  • No Direct Gas Fees: The platform uses a Layer 2 solution based on zk-rollup technology, which processes transactions off-chain, significantly reducing gas fees for users.
  • Low Fees for Average Traders: dYdX offers a fee structure that includes no trading fees for users with monthly trading volumes under $100,000, making it more accessible to average traders.
  • Lower Collateralization: The platform provides better collateralization conditions for lending and borrowing compared to many market competitors.
  • Dynamic Interest Rate for Lending: Users can earn interest from lending their assets, with the interest rate determined by supply and demand, offering a dynamic and potentially more rewarding experience.
  • Governance Token: The DYDX token allows holders to participate in community governance, staking, and trading fee reductions, incentivizing users to engage with the platform.
  • Scalability: dYdX's Layer 2 solution, built on StarkWare's StarkEx scalability engine, significantly increases trade settlement capacity while maintaining security based on the Ethereum blockchain, allowing for lower gas costs and trading fees.
  • Security: dYdX has a strong security record, with no reported instances of user funds being at risk, and it continues to focus on decentralizing its technology stack and handing over more control to users.

These strengths make dYdX an attractive option for users seeking a decentralized, cost-effective, and secure trading experience.

dYdX's risks

dYdX (DYDX) faces several risks that traders and users should be aware of:

  1. Liquidation Risks: When using leverage, positions can be liquidated if the price moves against the trader. For example, with 20x leverage, a 5% price movement against the trader can result in liquidation.

  2. Dynamic Interest Rates: The interest rates on lending are determined by supply and demand, which can change quickly and negatively affect lenders.

  3. Limited Assets and Trading Pairs: Although the platform is expanding, it currently supports a limited number of assets and trading pairs for swaps and margin trading.

  1. Smart Contract Attacks: There is a risk of smart contract attacks, which can compromise the security of the platform.

  2. Exchange Solvency: The exchange is at risk of becoming under-collateralized due to unprofitable liquidations, which can impact its solvency.

  3. Other Events: dYdX is also exposed to other risks such as market fluctuations and unforeseen events that can impact its operations.

To mitigate these risks, dYdX provides tools such as stop limits, trailing stops, and a risk calculator to help traders manage their exposure and minimize the probability of liquidation.

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Did dYdX raise funds?

Yes, the crypto dYdX (DYDX) has raised funds through several fundraising rounds. Here are the details:

  • Seed Round (September 2017): dYdX raised $2 million in a seed round co-led by Andreessen Horowitz and Polychain Capital.
  • Series A Round (July 2018): The company raised $10 million in a Series A round co-led by a16z and Polychain Capital.
  • Series B Round (January 2021): dYdX raised $10 million in a Series B funding round led by Three Arrows Capital.
  • Series C Round (June 2021): The company raised $65 million in a Series C funding round led by Paradigm, bringing the total funding to $87 million.

These fundraising rounds have supported the development and growth of dYdX, a decentralized derivatives exchange that combines the security of a decentralized exchange with the speed and usability of a centralized exchange.

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dYdX’s team

  • Antonio Juliano: Founder of dYdX, stepped down as CEO and transitioned to Chairman and President.
  • Ivo Crnkovic-Rubsamen: Took over as CEO after Antonio Juliano stepped down.
  • Taylor Robinson: Employee at dYdX.
  • Adam Fraser: Employee at dYdX.
  • Gian Raciti: Employee at dYdX.
  • Bryce Neal: Employee at dYdX.

Whalee AI

The fundamental analysis assistant for crypto value investors.

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