dydx – A Simple Illustrated Guide with Video

dYdX is an open-sourced, decentralized exchange (DEX) built on the Ethereum blockchain. Users can lend, borrow, and bet using the margin trading protocol on the future prices of crypto assets. Tools you’d normally find in traditional finance markets will be brought to the forefront with dYdX.

dYdX plans to take DeFi (decentralized finance) to the next level through advanced margin trading tools and protocols. Anyone is able to come in and use and/or build upon dYdX. As opposed to third-party escrows, users’ crypto assets are run via smart contracts. Trustless peer-to-peer (p2p) short sells and option trades of any ERC-20 asset can be executed on the platform.

Unlike centralized exchanges where you have to fork over your information, dYdX is sans KYC. Users can perform actions such as spot, margin, and perpetual contracts in a truly DeFi spirit.

dydx review

Trading on dYdX

dYdX offers a trustless, permissionless decentralized margin trading protocol and support of three main crypto assets: ETH, DAI, and USDC. Lending and borrowing are performed on Ethereum’s Layer-1.

The dYdX exchange itself isn’t bad but there is much left to be desired. With a lack of features and intuitiveness, you might be better off elsewhere.

Lending With dYdX

The interest rates with dYdX are very competitive ranging from 3.13-27% (DAI). You’ll need to connect a wallet such as Metamask to be able to earn interest on dYdX. To start earning interest in real-time, you’ll need to move your crypto assets to dYdX. You are free to take your crypto assets at any time and receive the interest up to the minute.

Borrowing With dYdX

If you’d like to borrow on dYdX, you can do so directly from your Ethereum wallet—we recommend Metamask. On both mobile and desktop, the borrowing interface is straightforward. All you need to do is select either ETH, DAI, or USDC to borrow and the account you wish to collateralize with.

There is a minimum collateralization of 125%. To prevent liquidation, this has to be maintained above 115%. The transaction will take less than a minute in most instances. 

dYdX Team

Software engineer Antonio Juliano (formerly with Coinbase and Uber) founded dYdX. The team consists of 8 others based in Silicon Valley. Google, Coinbase, and Airbnb all serve as advisors of dYdx. Investors included Craft Ventures, Polychain Capital, and Andreesseen Horowitz.

Why Use dYdX?

Why would you want to use dYdX? Compared to other DeFi products, dYdX offers competitive rates. This is of course subject to change.

dYdX isn’t perfect. The DeFi product is geared towards someone who has experience in the DeFi space. With little to no guides, you ought to familiarize yourself with Ethereum-based wallets before you get started.

For example, beginners to the space would prefer something like BlockFi as they offer better rates and more stability. The only “downside” would be that it is centralized.