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CoinEx Research: dYdX, GMX, and ZKX, Decentralized Derivatives Platforms Compared

2022-11-03 06:38:43

I. dYdX: The No.1 player in decentralized derivatives trading

1. Project Overview

At the moment, dYdX is the absolute leader of the decentralized derivatives category. The exchange, founded in 2017, offers perpetual futures, lending, and borrowing, with a leverage of up to 25X. Built on Ethereum, dYdX uses Layer 2 solutions to help users trade cryptos efficiently with low gas fees.

2. Team

dYdX is led by an elite team, with strong professional expertise, decent educational backgrounds, and experienced developers.

Antonio Juliano, the founder of dYdX, is a former Coinbase engineer. After graduating from Princeton University with a BSc in computer science in 2015, Antonio started working at Coinbase as a software engineer. A year later, he joined Uber and continued to work as a software engineer. In 2017, Antonio created Weipoint, a search component for decentralized networks. In August 2017, he founded dYdX. Based on his resume, we can tell that Antonio is a tech expert with a solid technical capacity. Other core members of the team include:

• Brendan Chou, software engineer, and designer, joined dYdX in early 2018. He and Antonio Juliano were schoolmates at Princeton. In 2015, Brendan graduated from Princeton with a BSc in computer science. He is a former Google engineer;

• Achal Srinivasan, a product designer, joined the team in 2020. He graduated from Rice University in 2020 with a degree in computer science and used to work for Coinbase.

• Vijay Chetty, Director of Business Development, graduated from Princeton University with a degree in economics and joined dYdX in 2020. He worked as an analyst and investment consultant at Blackstone Investment. Later in his career, he focused on business development/corporate cooperation.

3. Fundraising

According to public information, dYdX has at least conducted four fundraising rounds.

dYdX Fundraising

dYdX has received investment from institutional investors that include Paradigm, Polychain Capital, Andreessen Horowitz (a16z), and other big-name institutions in the industry, as well as Coinbase CEO Brian Armstrong, a top individual investor. In particular, a16z and Polychain Capital were involved in the first three fundraising rounds, which indicate that these top investors are very confident in the project’s team and future prospect. According to public information, liquidity providers such as Wintermute and QCP Capital have also provided funding for dYdX to build more extensive partnerships with the project.

4. Technology

Initially, dYdX adopted StarkWare as its Layer 2 solution. It uses prices fed by Chainlink’s oracle network for operations such as the calculation of funding rates and forced liquidation prices. The products offered by dYdX include margin trading, spot trading, and lending. However, dYdX has now left the StareWare ecosystem and built a new public chain by itself.

5. Going forward, will dYdX find new success after it left StareWare?

dYdX chain will be built using the Cosmos SDK and Tendermint Proof-of-Stake consensus protocol, which means that it will be open to the Cosmos ecosystem, an interconnected system of application-specific blockchains. The upgrade marks dYdX’s fourth iteration (V4). In dYdX V4, each validator will run an in-memory order book that is never committed to consensus (i.e., off-chain). The V4 plan is expected to be completed in late 2022.

Once dYdX becomes an independent network, the tokenomics of dYdX might change. 

To be more specific:

1) dYdX may become a public chain token (coin), and transactions on the chain will consume dYdX;

2) Staking: Just like other PoS chains, dYdX chain’s nodes also need to lock up a large amount of dYdX;

3) dYdX chain will associate dYdX with protocol revenue.

Right now, the dYdX price stands at about $1.6, with a total market cap of around $1.6 billion. Additionally, the average unit price of dYdX purchased by institutional investors is about $0.3. We believe that there is still a lot of room for price growth (no financial advice).

II. GMX

1. Project Overview

GMX is the largest decentralized derivatives trading platform on Arbitrum. It is a DEX platform that supports both spot and perpetual contracts and currently focuses its main business on derivatives trading. Formerly known as Gambit, a BSC on-chain project, it was migrated to Arbitrum and supports the Avalanche (AVAX) chain. Unlike dYdX, GMX does not use an order book or AMM model. Instead, it employs a GLP liquidity model. By “GLP liquidity model”, we mean that when a user provides liquidity for GMX, instead of providing two tokens in a 1:1 ratio, such as ETH/USDT, they directly purchase and stake the liquidity token GLP issued by the GMX Protocol, and by staking GLP, they participate in GMX market making.

GLP represents a basket of tokens:

GLP Index Composition

2. Team

GMX’s founder goes by the name of X (https://twitter.com/xdev_10) on Twitter. With over 6,000 Twitter followers, X is a serial entrepreneur and has created XVIX, Leveraged Token, and Gambit. Other information about the founder remains unknown. The GMX team is no match for dYdX’s team.

3. Technology

GMX adopts the same global debt framework as SNX, but its counterpart, GLP, does not use worthless coins as collateral like SNX. Instead, it uses an index asset formed by fair assets in different proportions (i.e., GLP) as collateral. As GLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa. Meanwhile, GLP (the index liquidity token) is separated from the governance token GMX.

4. Fundraising

According to public information, Gambit completed a fundraising round of $1.5 million in June 2022, with the involvement of institutional investors that include SuperLayer Labs. Based on its fundraising status, GMX is a lot weaker than dYdX in terms of investor background. Despite that, GMX has recorded stunning price growth. Though the market remains bearish, GMX’s market cap still stands at about $600 million, with a protocol TVL of approximately $50 billion. In this regard, it seems that GMX might even exceed dYdX. Its strong price is mainly the result of its enabling tokenomics, which empowers the project’s governance token GMX, thereby attracting more traders and liquidity providers to its platform. As far as tokenomics is concerned, GMX has done a better job than dYdX.

GMX Fundraising

III. ZKX-StarkNet, A Rising Star in the StarkWare Ecosystem 

1. Project Overview

ZKX is a permissionless protocol for derivatives built on StarkNet, with a decentralized order book and a unique way to offer complex financial instruments as swaps. The protocol is powered by a DAO and will provide an elevated trading experience with gamified leaderboards and unique liquid governance. Since dYdX left StarkWare, ZKX has become the largest decentralized derivatives platform in the ecosystem, which allowed the project to receive official investment and support from StareWare. Additionally, its tokenomics is also more reasonable than that of dYdX. Specifically, its token can be mainly used for: governance, staking, trading fee discount, protocol revenue sharing, premium functions (e.g., higher leverage), etc.

ZKX token can be mainly used for

(Use cases of ZKX’s token)

2. Team

ZKX boasts a team of 30 members, including executives from Flipkart, PayTM, and Byju’s, with decades of experience in business creation, scaling technologies, startups, and financial derivatives. That said, this team pales in comparison with the dYdX team.

ZKX team members

3. Technology

ZKX’s technical structure is as follows:

ZKX’s technical structure

The node network consists of two basic parts: A decentralized Limit Order Book (DLOB) and Data Provider Service (DPS). DPS gives ZKX flexibility regarding the data it can bring, the type of assets it can procure, and the prices it can have. This also adds scalability to the system because all matches within the order book happen much faster than possible on-chain. That said, all fundamental checks are still within the L2 of StarkNet, and the order book will always be validated within the framework of ZK-rollups and ZK-proofs. You can benefit from fast execution and flexibility while enjoying known security and privacy.

4. Fundraising

ZKX is backed by strong institutional investors, including StarkWare, Alameda Research, Huobi, Amber Group, and Crypto.com. It is noteworthy that ViaBTC Capital also participated in the extension round of the project. In addition, with official backing from StarkWare, ZKX enjoys strong support.

dYdX & GMX & ZKX Fundraising

5. Product Comparison

As can be seen from the above figure, ZKX offers many unique features. Meanwhile, after dYdX left StarkWare, ZKX has been given more opportunities, including rich ecosystem functions enabled by the combination of StarkWare and StarkNet, more outstanding and valuable token functions, and user-sharing capacities. At the same time, the project is also the focus of multiple sectors, including Layer2-StarkWare, ZK-rollups, and top decentralized derivatives trading. This means it could evolve into a hit project in the StarkWare ecosystem. Despite the fierce market competition, ZKX has kept improving its trading experiences and user interface. Offering well-rounded security protection and a comprehensive trader incentive model, ZKX could have a place of its own in the decentralized derivatives trading sector in the future.

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