dYdX is a tool for people who hopefully know what they are doing. Trading something as volatile and explosive as crypto with leverage can go very well but also very bad. To be able to do this, the trading exchange needs to be working well, react on time and have enough liquidity.
dYdX does something well as it is one of the largest decentralised exchanges by trading volume. It’s not just a normal decentralised exchange, but one that allows users to trade leverage and perpetuals. If you are not familiar with these terms, I recommend having a look at this great summary here.
Leverage generally refers to borrowing money to invest and the financial industry has evolved this simple concept into much more complex ways to bet on the movement of an asset. Perpetuals, the thing dYdX advertises on their website, is a special way to trade futures contracts that do not expire.
This is how dYdX does it:
To evaluate the token, we don’t need to fully understand the concept. It’s enough to know that this is an advanced form of trading with leverage used mainly by professionals and other people that know what they are doing.
On the product design side, dYdX operates in a hybrid model where parts are run on-chain and others off-chain, utilising the best of both worlds. The plan however, is to fully decentralise with version 4, which is to be released by end of 2022:
tldr;
The team behind dYdX has always been driving technological innovation of their protocol. Starting off on Ethereum, they migrated to layer 2 with starkware and now plan to build their own blockchain on cosmos.
dYdX @dYdXWe’re excited to announce that dYdX V4 will be developed as a standalone Cosmos-based blockchain! 🔗🎉
The implications of this on the token could be interesting and we will have a look at what might happen.
The token is mainly used for governance at the moment and has little other use than staking within the safety module and a discount on trading fees, but V4 might bring some innovation.
(A zoomable version of the diagram can be found here.)
