By James Davis
The DeFi (Decentralized Finance) space is growing rapidly, with projects like dYdX leading the way in terms of innovation. The decentralized trading platform offers users a seamless way to swap their tokens while giving them an opportunity to earn passively through its lending feature. To learn more about dYdX, continue reading this guide.
dYdX Defined
dYdX is a leading decentralized exchange (DEX) that offers several services, such as leverage trading, lending, and borrowing. It allows both experienced and beginner traders to trade supported crypto assets without completing the Know-Your-Customer process or even creating an account. dYdX V1 was built on the Ethereum blockchain. However, the DEX’s V4 is now on the Cosmos network.
dYdX Origin and Its Team
Coinbase ex-software engineer Antonio Juliano developed dYdX in 2017. His primary objective was to build a trading platform that would let traders have authority over their trades. As mentioned earlier, the DEX was first built on Ethereum. However, the blockchain’s high gas fee and inability to process transactions quickly forced Juliano to migrate his project to the StarkEx network in late 2020. In June 2022, dYdX announced plans to migrate to Cosmos.
dYdX operations are overseen by the dYdX Foundation, which comprises several prominent crypto players like Markus Spillman, Arthur Cheong, and Rebecca Rettig.
Funding
dYdX is backed by popular crypto investors like Wintermute, Paradigm, Polychain Capital, Andreessen Horowitz, and Three Arrows Capital. The decentralized exchange raised over $2.1 million from Polychain Capital and Andreessen Horowitz in a 2017 funding round. In 2019, dYdX raised $10.5 million and then $10 million in January 2021. It recently received $60 million from Paradigm.
How dYdX Works
dYdX is powered by smart contracts that let users swap crypto assets without the help of intermediaries. As a non-custodial trading platform, traders have control over their digital assets while trading.
In this guide, we will teach you how to trade on dYdX’s StarkEx-based version because the DEX has yet to go live on Cosmos. A recent announcement from dYdX indicated that the exchange will launch on the Cosmos blockchain before the end of this September.
Here is how you can start using dYdX:
Step 1: Visit dydx.exchange
Step 2: Connect your crypto wallet, preferably MetaMask.
Step 3: Confirm the ownership of the crypto wallet to access dYdX features.
Step 4: Use your Stark key and Vault ID to deposit funds.
Step 5: Visit the “Trade” section to start trading. You can place trades using several order types like Market and limit.
Step 6: Set a stop loss and take profit, then choose leverage before opening a short or long position.
Step 7: Monitor your profit and loss under the “Portfolio” section.
Features of dYdX
Both experienced and beginner traders find dYdX features useful. Here are the top ones:
Decentralized Exchange
As mentioned earlier, the dYdX Foundation manages the DEX. However, this foundation doesn’t have control over the trading activity on dYdX, meaning traders are able to carry out peer-to-peer transactions through the platform’s P2P structure.
Also, because traders retain ownership of their assets while trading on the dYdX exchange, cases of hacks are greatly reduced.
Perpetual Swaps
dYdX supports perpetual swaps. But what are they? They’re derivative instruments that function like futures contracts, although they don’t have an expiry date. This gives traders a chance to keep their trade positions open for longer to exploit any possible opportunities.
Leverage Trading
Do you want to open huge market positions? You can do that on dYdX. The DEX allows users to borrow funds to boost their holdings. However, although you stand to profit massively when trades go as predicted, you also stand to lose significantly if trades go the other way.
Lending and Borrowing
Besides trading, dYdX offers crypto loans. This means users can borrow cryptocurrencies to invest in other DeFi projects to diversify their portfolios. Moreover, they can become lenders, allowing them to earn interest.
Conclusion
People who love having total authority over their crypto assets will find dYdX a great trading platform. Along with trading, the DEX allows you to maximize your profits by becoming a lender. However, doing your research before you start using the exchange is advisable.