What Is dYdX?

Jul 12, 2022
6 min read

This blog post will cover:

  • About dYdX (DYDX)
  • Where did dYdX (DYDX) come from?
  • What are the advantages of dYdX (DYDX)?
  • What are the disadvantages of dYdX (DYDX)?
  • How to buy DYDX?

About dYdX (DYDX)

DYDX is a utility token of a decentralized crypto exchange dYdX. This ERC-20 token became available for purchase at the end of 2021. DYDX facilitates the operation of Layer 2, a solution that enables the exchange to facilitate an increased amount of transactions while having all the security of the chain it is built on.

DYDX is given as a reward for providing liquidity (7,5% of the initial token supply of 1 billion DYDX), trading (25%), including past trades (users who traded on dYdX since its launch received retroactive rewards based on their trading performance), and for staking a stablecoin USDC to a liquidity pool (2.5%).

Also, the more DYDX tokens users hold, the more significant the trading fee discount they receive.

As for spending DYDX on the platform, the token’s primary function is assisting users in dYdX’s governance. However, it is not enough to simply hold DYDX to be able to propose changes: users’ proposing power is determined by the amount of DYDX they own, staked, received as a delegatee, and the amount they delegated.

Where did dYdX (DYDX) come from?

dYdX was founded in 2017 and launched 2 years later, in 2019. The two main creators behind the project are the head of operations Zhuoxun Yin, and the CEO Antonio Juliano, a Princeton computer science graduate who entered the world of crypto in 2015 by working for none other than Coinbase.

The idea that then evolved into dYdX thanks to its founder Antonio Juliano, was simple: he saw the next step in the evolution of decentralized finance to be derivatives trading. It was clear to him that this feature will require a base layer to be built on, so dYdX became this foundation. It continues to support new products the team is creating, such as margin trading, Perpetuals (futures without an expiration date), and Hedgies NFTs.

What are the advantages of dYdX (DYDX)?

  • A token that works.
    There are multiple ways of gaining funds when using crypto depending on the project — rewards for mining, supporting nodes, providing liquidity, to name a few. dYdX users are quite lucky in this regard: it is enough to simply deposit into a dYdX account to start gaining interest. And this is on top of margin trading that makes trading higher volumes more accessible, and instant loans. There is no use denying now that crypto projects like dYdX are really stepping on the heels of fiat currency banks and exchanges. Once crypto earns enough trust with the general public, by proving that it is both more user-friendly and secure, traditional banks and exchanges as we know them will eventually become a thing of the past.
  • Trading made accessible.
    For many, trading remains an unattainable dream due to high deposit requirements. Thankfully, some trading platforms offer leverage, which can significantly increase potential profits. dYdX promotes margin trading as one of its key features, and there are several leverages available. However, traders need to keep in mind that leverage increases both possible gains and losses: positions created with leverage may close with loss faster than positions without it.

What are the disadvantages of dYdX (DYDX)?

  • Short-term success, long-term failure.
    dYdX used a highly successful move to attract new users: transaction mining. The more users traded on Layer 2, the more DYDX they received as a reward. The prospect of profit excited traders to such a degree that the exchange’s transaction volume hit USD 9 500 000 000 at one point. What could go wrong? However, dYdX distributed DYDX 3 800 000 of transaction mining rewards every 28 days, which increased the token’s liquidity but, unsurprisingly, also tanked its price and the number of active users. The fewer users, the fewer trading orders, and the fewer trading orders, the more difficult it is to actually trade on the platform. Adding alternative products and token uses can save the platform, but will dYdX be able to return to its former glory?
  • In the shadow of giants.
    There are multiple well-established cryptocurrency exchange platforms, and dYdX doesn’t have as much to offer compared to them. Of course, it was created with a focus on derivatives trading, and certainly found its devotees, but it is hard to survive on only one successful product. dYdX launched Testnet and Hedgies, NFT avatars for the exchange users. It remains to be seen how these new products will help dYdX compete with giants of the sphere.

How to buy DYDX?

Have you already made plans to take first place on the dYdX trading leaderboard? Welcome to go to the SimpleSwap homepage and follow the instructions if you decide to get some DYDX:

  • Choose the currency you want to exchange (e.g. BTC). Enter the amount you would like to swap.
  • Select DYDX in the second drop-down list. You will see the estimated amount that you will receive after the exchange.
  • Click the Exchange button.
  • Enter the Recipient's Address. DYDX will be sent to this address. Be careful and make sure you use the correct address.
  • Create the exchange.
  • You will see the Bitcoin deposit address. You need to transfer the necessary amount of BTC to this address to start the exchange. Then wait for DYDX tokens to reach your wallet.

Thank you for your time. Make sure to check out our articles about other cryptocurrencies!

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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