Just like compound finance DyDx is also an ethereum based Decentralised finance exchange or DEX powerd by Ethereum smart contract.
It is an Open-source protocols for decentralized margin trading and derivatives and also one of the most powerful open trading platform for crypto assets.unlike other DEX here users can lend, borrow and manage their marginal trade position. One unique feature of any DEX environment is that you done need to do any KYC in order to approve for or lending or borrowing.
Dydx was founded in mid 2017 by an ex-Coinbase and Uber engineer, Antonio Juliano. Currently it is ranked 6 in the Defipulse ranking chart with a total value locked of 35 million in USD and about 105.17k in ETH. Also there is over 500 million dollar worth of assets being traded on this platform.In the ranking maker is on the top position followed by compound finance.
Before we dive into DYDX ecosystem it is necessary to know what is leverage and marginal trade
Leverage is the use of debt (borrowed capital) in order to undertake an investment or project.
Margin trading is a method of trading assets using the funds from third party or brokers. Hence it means increasing the size of assets through leverage.
What is Marginal trading in DYDX
Marginal trading is one of the most unique feature in DYDX platform.Margin trade in DYDX allows users to increased the exposure of their assets more than their disposal. There are two type of marginal trades in DYDX
- Isolated margin trade
- Cross margin trade
As the name implies Isolated margin trades means isolating a certain amount of trades on a specific leverage.Leverage determine the amount of margin deposit required and when any lequidation occurs the lost are capped by the isolated amount.with lsolated margin trade users can trade directly from wallet and is also useful for short term position.
In Cross magin trades all the assets on users account are utilised. Hence this method of trading is a bit risky but finds it very useful for most of the traders in Defi ecosystem.
Lending and borrowing on DYDX
Lending crypto assets on dYdX allows user to earn passive income automatically. Her in dydx lending any assets means lending our assets to other users and earning interest when they deposit. This is one of the risk free method as it ensure overcollateralisation with the borrower. Hence there is enough fund to pay the lender when a sudden drop in price occurs. Users can borrow asset until their collateralisation ration reach 125%. When it reach this benchmark they are not allowed to borrow until any deposit is made. One key feature of lending in DYDX is that there is no restriction on deposition and withdrawal can be done anytime.
Borrowing in dydx cannot be done bellow 125% collateralisation ratio. Any any account bellow 115 % collateralisation ratio will be liquidated. When an account fall bellow this liquidation threshold it became risky for any borrower. Hence in order to protect the lender the amount is lequidated. And when liquidation occurs users have to pay a 5% liquidation fee to make sure that the collateralisation is still active.
Trading in DYDX
The trading method in DYDX is pretty simple. And it doesnt require and sign up process
- Go to the dydx website.
- Select the process you want to perform either trading or lending or borrowing.
- The trading interface in dydx is very distinct and well layout.
- Users can see the market chart, order book, order form and market all in one go.
- In order to trade users have to connect its wallet account either metamask, ledger or coinbase.
- Deposit the desire asset amount.
- Click on margin trade option. Select the desire trading pairs
- Currently it supports ETH- DAI,DAI-USDC, and ETH-USDC trading pairs
- Then select the leverage percentage with a max of 5% and then placed the order.
Fee structure in DYDX
When it comes to fees structure Dydx is the most userfriendly and best exchange platform as it charges zero fees as compare to other paltform. But there had been a certain changes. Recently trading on DYDX did not charge any fees and all the gas cost are paid by them. But since the volumn goes up the gas cost also increases as a result they paid about 40,000$ for the gas cost. Hence they start charging fees from march 10, 2020 inorder to make up the cost.
The fee structure is according to the maker taker model. But in DYDX maker charge zero fees while taker charge some amount of fees. Also there is another taker fees fro those trading less than 0.5 ETH. It is mainly because fees for small transaction charges the same as that of large transaction.
DYDX team members and investors
The team is headed by Antonio juliano as the CEO and founder , zhuoxun yin as head of business operation and strategy with other 10 strong developement core member of which 5 are software engineer namely Brendon chou, Zhuoxun yin, phillip Goleberg, Everett Hu, Ashwini Nene, Sam weinberg and ken schiller. And 4 other as an advisor. All this team member are highly experince people who previously works for tech giants like Google, Uber, Bloomberg, Coinbase and NerdWallet to the table.
There lead investor partners includes Andreessen Horowitz, polychain capital, a16zcrypto, kindred+ ventures, craft etc
The achivement of DYDX within a short period of time is very encourgaing . Because of it simple and users friendly interface, trustless, liquidity,acessisibility and high security feature build under Ethereum smart contract and strick aduiting method dydx is mean for both beginners and intermediate and hence worth trying.
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