dYdX

Derivatives

dYdX is a leading decentralized exchange that supports spot, margin and perpetuals trading.

Risk Rating
Good
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
dYdX is the largest decentralized exchange that supports spot, margin and perpetuals trading with extremely low gas fees as it is built upon StarkEx, a ZK-rollup scaling solution for Ethereum.
What we like less
Decentralization is a concern as the platform is restricted to non-US users and currently users a centralized order book.
What it means for you
Offers you an amazing trading platform with more advanced trading features. Trading fees are also free if you trade less than $100K per month.

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Information
Exploit/Hacks
None
Info
  • Website
  • Token: DYDX
  • Tags: Derivatives
Key Metrics
  • TVL: $304.3M (Rank #43)
  • TVL Ranking by Derivatives: #2
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $304.28M
Risk Assessment
Good
Protocol Code Quality
  • Code reviewed by several experienced auditors including OpenZeppelin and PeckShield
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2021; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Requires members of a DAO to vote on-chain for approving contract upgrades
  • Timelock is at least 48hrs, which provides users with sufficient time to exit if any malicious upgrades are approved
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • This protocol is susceptible to risks related to decentralized derivatives, such as LPs serving as the counterparty for all platform traders
Things to know about dYdX

How dYdX works

dYdX is a decentralized exchange (DEX) that provides users with perpetuals, margin and spot trading, as well as lending and borrowing. The platform uses off-chain order books with on-chain settlement and enables traders to short-sell tokens, increase exposure by longing with leverage, or earn interest on deposited tokens. Each asset on the exchange has a global lending pool with interest rates determined by supply and demand. Borrowers who wish to borrow must first overcollateralize the loan by depositing assets with a collateralization ratio of 125%. dYdX utilizes two types of margin trading on its platform: isolated margin and cross-margin. Isolated margin allows the user to leverage one asset, while cross-margin utilizes all the assets in the user's account to take a position. Trader can leverage up to 5x on dYdX.

How dYdX makes money

The trading platform generates revenue from two types of orders: Maker and Taker orders. Maker orders are orders that don't immediately fill and stay on the order book; these orders add depth and liquidity to the order book. Taker orders are orders that immediately fill existing Maker orders and thus remove liquidity from the order book. The fees vary based on different volume tiers from ther user's last 30-day trading volume with low volume traders incurring higher fees. dYdX also takes 5% of all interest payments from borrower to fund a protocol insurance pool.

How you make money on dYdX

There are three main earning opportunities on dYdX. First is the Trading Rewards rebate program which pays 25% of the total token supply (250M) to active traders over time base on a combination of trading fees paid and open interest during each 28-day epoch. The second program is staking USDC in the liquidity staking pool to earn DYDX; this program rewards 2.5% of the total supply (25M) over time. Lastly, DYDX token holders also indirectly benefit from trading and volume-based discounts based on how much DYDX is held in their accounts.

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