What is dYdX?

4 min readJan 25, 2023

In 2017, programmer Antonio Julian had the idea to launch his own decentralized cryptocurrency exchange. It had to be different from its main competitors: both custodial Binance, OKEx, and trading platforms without a governing body like ZeroX and Kyber. After all, its peculiarity is its focus not on the spot market, i.e. not on simple selling and speculation, but on more complex financial instruments. Antonio Julian was interested in margin trading and derivatives. That’s how begin the history of this wonderful exchange)

dYdX is a decentralized exchange on the Ethereum blockchain, with a management token of the same name.

dYdX is not a regular DEX exchange. The platform allows users to trade derivatives (futures) on any available cryptocurrency using margin collateral and leverage. There is no need to pass KYC, like on centralized crypto exchanges. It’s enough to connect your own wallet (such as Metamask or Trust), log in via email and start trading.

The launch of dYdX came in 2021. The investors of the project were A16Z, Spartan, Polychain and other well-known investment funds. Interestingly, before the listing, the project gave away a large retrodrop to early users. Traders who spent $200–300 on commissions when working with dYdX received $30K-50K in project token at the time of listing on September 8th.

Once the wallet is connected, several digital signatures need to be made for the vault to sync with the exchange. After that, you need to deposit the cryptocurrency to be traded. This can be USDC, USDT, or Ethereum, DAI, MATIC, and UNI stackcoins.

The internal functionality is similar to many crypto exchanges. There is a coin chart, order stack, trade position details, and the trader’s own trades. Of orders, all types of orders are available, such as Limit, Stop-Limit, Trailing-Stop and Take-Profit.

In the “Portfolio” column you can view open trades and cryptocurrencies available for trading. Further down the list are reward blocks, work profile settings, competitions and tournaments, platform management with DAO and additional information including documentation, statistical charts, social networks, privacy policy and support.

Ethereum blockchain has fairly high transaction fees. dYdX is based on StarkWare’s unique mechanism that allows you to trade without network commissions (except for the costs of the exchange itself).

Technically, dYdX operates on the Layer 2 blockchain of Ethereum. StarkWare provides low and sometimes even zero commissions, without sacrificing security or privacy. There is no need to pay miners for each transaction, transactions are executed instantly and confirmed on the blockchain “retroactively” within hours.

StarkWare will soon be releasing its STARK token, a portion of whose issuance will go to dYdX holders as part of a retrospective drop.

Despite working quite comfortably, dYdX still engaged in the development of its own blockchain dYdX V4, based on the Tendermint PoS protocol with the ability to use the Cosmos SDK. This will create a decentralized autonomous order book and matching mechanism that can be scaled to increase bandwidth and the number of orders.

The dYdX native token is traded on Gate, WhiteBIT, FTX, Huobi and many other major exchanges. Holders of the coin get to trade with reduced commissions, stake dYdX at 13% APR, as well as manage the protocol and vote on changes to the DAO composition. The most active traders regularly share a prize pool, which is allocated to token holders as an additional incentive.