The crypto community is full of stories about someone going from rags to riches overnight, especially those about airdropped wealth. From August to September this year, the market witnessed another wave of incredibly lucrative airdrops staged by DYDX. Airdrops of the token are easily accessible, and many early investors have made instant fortunes. In addition, thanks to the increasingly higher trading volume of dYdX, DEXs have reentered the spotlight. That said, what is DYDX? And why is there so much expectation for it?
01 Why is dYdX so popular in the crypto market?
What is DYDX?
DYDX is the native token of dYdX, which is the first decentralized futures exchange that was established and launched available products. Right now, dYdX is also the largest decentralized trading platform for trading crypto derivatives. As such, the exchange is also known as the leader of decentralized derivatives trading, and some Chinese investors have vividly nicknamed it the “Di Yi Di Xie”, literally the “first blood”. Why is dYdX so popular in the crypto market?
1. Great background
Launched in 2017, dYdX did not issue any token in a year when the market was flooded with ICOs (Initial Coin Offerings). Instead, the team focused on developing and improving the product. With the first DYDX airdrops started in August 2021, the token was officially listed on dYdX from September 8 to September 9. The exchange’s determination in withstanding all the temptation of huge profits is rare in a market where everyone is trying to make quick money through market hypes.
dYdX is backed by a first-class team. Its core founder Antonio Julianno, a former software development engineer for Uber and Coinbase, has a strong tech background and experience in product development at a major crypto exchange. This alone offers him great prospects in the crypto community.
With Antonio’s connections, soon after it was founded, in October 2017, dYdX received a $2 million seed round investment from a16z crypto, who also invested in Coinbase, and Polychain CapitalP, which was founded by Coinbase’s first employee Olaf Carlson Wee. From 2018 to the listing of DYDX, dYdX completed Series A, Series B, and Series C financing with funding size going from $10 million to $65 million. Most of its investors were either one of Coinbase’s investors or its founding members (such as Brian Armstrong and Fred Ehrsam).
What is the focus of dYdX? Why do all these major investors have faith in its prospect?
2. dYdX’s scope of service included spot trading, perpetual contract, margin trading, and lending & borrowing, which are all mainstream services provided by a DEX.
This begs two questions. Firstly, since its services overlap with those available on other DEXs, why is dYdX the leader of decentralized derivatives trading? Secondly, CEXs have matured and are now equipped with a full range of derivatives trading functions, such as spot trading, contract, leverage, etc. Moreover, they also promise convenient and smooth trading experiences, whereas DEXs often suffer from insufficient market depth and liquidity, which harms the trading experience. In light of all this, why do major investors prefer DEXs like dYdX to CEXs?
Uniswap is the leader in spot trading among all the DEXs out there. According to data from CoinGecko, the 24-hour trading volume of Uniswap (V3 & V2) is less than $4 billion, whereas dYdX, also a DEX, has registered over $8.7 billion in terms of the 24-hour derivatives trading volume as of September 29. This record is leaps and bounds ahead of the trading volume of Uniswap, the leader of DEX spot trading, and is significantly higher than the 24-hour spot trading volume of Coinbase, which is a CEX. Of all the derivatives exchanges, dYdX ranks 14th. This is the case because the top 13 exchanges are all CEXs. Such impressive statistics have earned dYdX a cool name: the leader in derivatives trading.
In the past, DEXs did suffer from shortcomings such as insufficient market depth & liquidity, which led to unsatisfactory trading experiences. However, the crypto market has demonstrated an increasingly rigid demand for DEXs. As Bitcoin halves, the crypto sector enters a bull market almost every four years, and each bull market will trigger a new round of stringent regulatory supervision. When it comes to regulatory supervision, CEXs are inherently and unavoidably risky. On the other hand, DEXs can completely eliminate such regulatory risks, which is why there has been increasing market demand for them. Apart from this, whether in traditional finance or in the crypto sector, the derivatives trading market is way larger than the spot market, which also explains the popularity of dYdX, a project backed by strong backgrounds and fantastic trade statistics.
Moreover, dYdX offers far better trading experiences than DEXs in the past. By adopting the model of on-chain settlement plus off-chain order matching, the exchange facilitates peer-to-peer transactions between traders, with market makers providing liquidity. After dYdX started to run on the Layer 2 version of the Ethereum network, its trading experience has become almost as good as that of CEXs. Ever since the issuance of its native token (DYDX), trade-driven mining on the exchange has allowed users to trade while making a profit. Therefore, dYdX’s trading volume has skyrocketed since September 9, reaching new records every day.
02 Conclusion
That is why this decentralized derivatives trading platform has managed to achieve rapid growth in its trading volume. It also explains its popularity among big investors and users. Uniswap has taken its place in the capital market as a leading DEX. With a rising market cap, the exchange now ranks 11th in the global cryptocurrency rating, according to data on September 29. With superior statistics, dYdX would surely do better.
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