Overview

dYdX is a decentralized derivatives exchange or can be known as Margin DEX.

dYdX allows users to borrow, lend and trade with up to x10 leverage.

dYdX is currently one of the DEX with the highest trading volume and liquidity on the market.

Market context

There is not much dispute about the future growth of DEX and DeFi in the crypto market. Given the decentralized nature of the entire market, DeFi and DEX will continue to become trends in the future. In 2020, the whole crypto market flourishes as DeFi and DEX, such as Uniswap/ Sushiswap, use AMMs, attracting a large amount of trading volume. However, there is another area that DEX has not touched: the DEX Margin.

In the previous article, BMV introduced several DEX that serve Margin, such as the Injective Protocol (INJ). Today, BMV mentions another leveraged DEX: dYdX, which will help everyone compare future leveraged platforms more precisely.

What is dYdX?

dYdX claims to be a decentralized trading platform that supports leveraged trading, spot trading, and lending/borrowing. Everything will be executed through smart contracts on the Ethereum blockchain, allowing users to transact without a third party.

What problem does dYdX solve?

As the cryptocurrency market becomes more extreme, derivatives/leveraged trading becomes an indispensable part. In the past, most traders only attached themselves with spot trading, and they were adversely affected if the market was in a downtrend. However, with the rise of derivatives exchanges, crypto investors can enter a short position and profit when the market drops.

Nonetheless, all cryptocurrency exchanges that allow derivatives are currently centralized. You can read the BMV article on the Injective Protocol again to enhance understanding.

Due to these restrictions, DEX exchanges like dYdX came into existence. Unlike Injective, dYdX is a platform that only focuses on trading and borrowing/lending. dYdX also does not have a native token like INJ. All you can find on their platform are two aspects: Trading and Lending.

Products.

1. Trading platform.

The dYdX trading platform is divided into three clear sections: Spot, Margin (same as Binance Margin) and Perpetuals (same as Binance Futures).

Glancing at the dYdX trading platform, it is clear that its trading pairs are relatively unattractive. Among dYdX Margin and Spot Trading, there are only transactions between ETH and stablecoins pairs. More specifically, dYdX supports transactions between ETH and DAI/USDC - 2 stablecoins operating based on the Ethereum platform.

In terms of derivatives trading, dYdX provides more transactions between BTC/USD and LINK/USD.

The unique feature of the dYdX derivatives platform is that they obtain the price based on Oracle technology directly from Chainlink. With this technology, prices on many exchanges will be immediately updated, minimizing wick and pump/dump prices like CEX.