What is dYdX?
Based on the Ethereum ecosystem, dYdX is one of the decentralized exchanges (DEX) the most famous. The platform uses the overlay StarkNet to offer ultra-fast and cheap transactions while benefiting from security of the Ethereum blockchain.
Founded in 2017 and launched in 2019, dYdX allows you to traders cryptocurrencies with derivatives (including perpetual futures contracts). The volume on the platform is often greater than 1 billion of dollars, and at the time of writing you can exchange more than 37 tokens.
It was decided in 2022 that v4 of dYdX will migrate to its own blockchain based on Cosmos (ATOM). The team says that after studying the various current networks, Cosmos presented itself as the ideal solution to develop the best protocol. decentralized.
Finally DYDX is the native token of the exchange. Issued in August 2021serves it as a sign of management but also of reward.
By using dYdX, you can trade in the same way as on a centralized exchange such as Binance or Bybit.
The biggest difference is that with dYdX you trade with your own purse and yours private keys. These are not owned by decentralized platforms that could use them in dishonest ways, as happened with FTX recently. It’s you there hold your money, not the exchange.
Also, since dYdX goes through the overshell StarkNetthe platform charges a fee minimal to its users and benefits from an execution speed comparable to the best current solutions.
To get started, simply go to the exchange’s official site. Once there, plug in your purse (purse). The most common is Metamaskit is quite easy to use and allows you to connect to several different blockchains. As you can see below, you can choose others.
Once your wallet is connected, you will need to go through two steps:
- The first is to verify that you are the owner of this wallet.
- The second is to allow the dYdX protocol to interact with your funds.
Finally, dYdX will offer you to to archive liquidity. Before you use the funds you have on your wallet, you must actually deposit them into one smart contract on the protocol. The funds will of course remain in your wallet and it will be possible to withdraw at any time by dYdX.
You can make this deposit with more than 11 coins various including USDC, DAI, USDT and ETH for example. If you deposit more than 500 USD as a new user, the Ethereum transaction fees will be offered to you. For the next payments it will be above $1,000.
Once these steps are completed, you can already start trading! It is not necessary to prove your identity by filling out one KYC (know your customer) as in CEX. The process is significantly faster on DEXs.
The functions of dYdX
By using the dYdX platform, you will benefit from several features that we will explain to you now.
Trading in derivatives
At dYdX you can shop derivative contracts of cryptocurrencies. In contrast to Spot trading, you will not directly hold the tokens, but rather bet on their value. This will allow you to Long (buying tokens in the hope that their price will increase), but above all Shorts (selling tokens shortly in the hope that their price will drop), which you cannot do in Spot.
To do this, just go to “transaction” and you will find an interface similar to any you have ever used. You will be able to buy or sell with orders at marketin limit and even in stop.
By opening an order at marketwill you be considered a “takes” as you take liquidity from the market. On the contrary with orders bordersyou bring liquidity to the market and you will therefore be considered a “Maker”.
As you can see below, the fees vary depending on your profile, but they remain minimal compared to centralized exchanges. In addition, these costs will be reduced depending on your DYDX token holding level, from 100 tokens. The same if you have NFTs Hedgies (collection created by dYdX).
Namely, unlike most DEXs that use a MUST (automated market maker), dYdX uses a trading system on order book.
Derivatives trading also allows the use ofleverage effects. With these you can open trades with a higher amount than you actually commit. In fact, you increase your position size by loan money: with a leverage effect of 10 for example, you can bet 100 euros and open the same position as if you actually had 1,000 Euro.
This tool works like magic, but that’s about it devastating: if the price rises you will win 10 times morebut if it falls, you will also lose 10 times more. This is why it is advisable to start trading without leverage, or even virtually.
Trading on dYdX also exposes you to rewards. All users can receive native token rewards, which will be proportional to “its fees paid divided by the total fees paid by all merchants during that era.” (dYdX).
You must know that an era lasts 28 days and that in the end it is more than 2.87 million of DYDX tokens being distributed. Traders can claim their reward 7 days after the end of each epoch.
In the relevant tab you can participate in competitions organized on the platform. You will be competing with other dealers over a period of 7 days or of course one day. Depending on your earnings and your ranking, you will then be rewarded with NFT Hedgies.
Finally, if you have DYDX tokens, you will be able to participate management of the protocol. You will be able to suggest changes or to vote for other participants. If you don’t want to vote yourself, simply do so to delegate at another address.
What are the differences between a CEX and a DEX?
Now that you understand what the dYdX platform is for, let’s see more precisely what differences between centralized exchanges and decentralized exchanges. For this, what better than a comparative table:
|Tokens available||The choice is limited to exchange selection||Often several options|
|Funds (Private Keys)||Held by the stock exchange||Owned by users|
|KYC||Often decisive||Often not necessary|
|Availability||User friendly||More complex for beginners|
|Performance||Governed by a centralized organization||Backed by Blockchain and smart contracts|
|Market making||Order book||AMM – Automated Market Maker (except exception like dYdX)|
What is StarkNet?
Developed by the company StarkWareStarkNet is one layer 2 of Ethereum from the family of ZK rollups. Its role is to increase the throughput of its parent blockchain while reducing transaction fees.
In short, rollups are able to perform hundreds off-chain transactions (at layer 2) before being sent back to the main chain to be there taken.
While you benefit from the security of Ethereum, it is thanks to this protocol that dYdX can offer such high throughput at minimal cost.