Today we continue to talk about a very good project, which is also a decentralized perpetual contract exchange, which is DYDX. I think the famous one must be everyone. I talked about GMX a few days ago. GMX is very good, right? Then there are many small My partner said, let’s talk about DYDX. Okay, let’s talk about it today, and then make a comparison. DYDX’s current market value is only US$330 million, and its market value ranks 100+, which is basically the same as GMX’s market value. Then today we look at the characteristics of DYDX and its comparison with GMX.
Introduction
DYDX is the world's first decentralized digital currency derivatives trading platform, and dYdX is a set of protocols that allow any financial product to issue and trade ERC20 tokens. dYdX adopts off-chain orders and on-chain matching, supports spot transactions, margin transactions and contract transactions. It mainly supports margin (leverage) transactions and derivatives (perpetual contract) transactions, providing up to 20 times long and short transaction functions, with a minimum leverage of The change rate is 0.01.
The dYdX protocol aims to create an efficient, fair and trustless financial market that is not controlled by any centralized organization.
Dydx exchange is a decentralized perpetual contract exchange that runs on the L2 blockchain system and provides L1 spot/leverage/lending services. Compared with DeFi platforms that adopt the AMM model (passive trading), it is obvious that traders have more autonomy on the dYdX platform. Users can create more complex trading strategies based on their own needs (customized combinations of leverage multiples, order types, stop loss types, order validity periods, etc.) to meet their own trading needs. dYdX supports 8 different order types - Market Order, Limit Order, Stop Market Order, Stop Limit Order, Trailing Stop Order, Take Profit Market Order, Take Profit Limit Order and Basket Order.
Transaction mode. It adopts the form of order book and provides liquidity by professional market makers such as Wintermute and Altonomy.
Funding rate. Funding rates are determined by trading volume and the number of dYdX tokens held. The greater the trading volume or dYdX token holdings, the lower the funding rate.
DYDX is a governance token that allows the dYdX community to hold and govern the dYdX protocol. Mainly used for dYdX protocol governance and fee discounts.
underlying technical architecture
dYdX (currently the V3 version) is a DeFi derivatives trading platform built on the Starkware network, one of the four kings of the Ethereum L2 track.
With the help of Starkware's high scalability and low transaction rates, as well as dYdX's smooth off-chain order book and on-chain settlement model, users' trading experience on the dYdX platform is almost comparable to that of centralized exchanges (CEX).
The dYdX V4 version will be migrated to the Cosmos network. dYdX will create its own independent L1 blockchain dYdX Chain based on the Cosmos SDK and CometBFT PoS consensus protocol, with a fully decentralized off-chain order book and matching engine.
dYdX Chain As a customized L1 blockchain on Cosmos, dYdX will have more autonomy, such as being able to run nodes, adjust the platform's charging structure, etc., thus providing users with a better trading experience.
project team
Antonio Juliano — CEO. Graduated from Princeton University in 2015, majoring in computer science. He once worked for Uber and created a decentralized network search engine called Weipoint in 2017.
George Xian Zeng—COO. Graduated from Princeton University in the United States. Worked at McKinsey, Facebook, and Moonship. Joined dYdX in 2022
David Gogel — VP. Graduated from the University of Pennsylvania, worked at AIG, RelayNode, GogelX, and joined dYdX in 2020.
Arthur Cheong — Chairman. Graduated from Nanyang Technological University, worked at JST Capital and Zilliqa, joined dYdX in 2021
Pitfalls and Risks
Insufficient decentralization: only real transactions are on the chain, the infrastructure provider Starkware is not open source, and the centralized nature of the product is still very strong. The official has obviously noticed this and is building V4, claiming that it can be completely decentralized
The development progress of V4 cannot be determined. Officials have previously stated that dYdX V4 will be released at the end of 2022. By January 2023, Milestone 2 - Internal Testing has been completed.
dYdX Chain V4 is the latest iteration of the dYdX protocol and will be composed of open source software. The version currently in production is called v3, and the core of dYdX’s v3[2] and past versions is smart contracts deployed to existing chains, combined with centralized services hosted in the cloud.
v4 will be an independent L1 blockchain with a fully decentralized off-chain order book and matching engine. The dYdX chain will be based on the Cosmos SDK and the CometBFT PoS consensus protocol.
project financing
The current financing status that can be queried should be 4 rounds, with a total of 87 million US dollars raised.
Token distribution
The maximum supply is 1,000,000,000 DYDX, the circulation volume is 173,487,366, and the circulation rate is 17.35%. The current currency price is 2.15 US dollars, and the peak price was 27 US dollars (September 21). The team took a ratio of almost 15.3+7+16.2=38.5. It is still relatively high, and there are still a large number of tokens that are not unlocked. The TVL on the chain is about 340 million, which is still down compared to the peak of 1 billion US dollars.
GMX comparison
1. Liquidity
Liquidity on a cryptocurrency exchange refers to the amount of cryptocurrencies that can be bought and sold on the exchange and how stable the prices of these cryptocurrencies are.
dYdX introduces market makers to provide liquidity and pursue matching efficiency, but slippage cannot be avoided and transactions will not be completed at a stable price. When the transaction amount is huge, the slippage will be higher.
The GMX platform adopts a zero-slippage mechanism. The counterparty is a capital pool, and the quotation is provided by an oracle, which can quickly complete the transaction. Since it has zero slippage, traders can buy and sell at a more stable price, even when the transaction is completed. Even when the amount is huge, its oracle's zero-slippage mechanism still ensures price stability.
2. Price discovery mechanism
The price discovery mechanism determines whether the exchange has pricing power.
The order book has pricing power and can determine the price. Relatively speaking, there will be no large deviations in OI, because the order book is a competition between users, so the long and short positions need to be matched 1:1, and most positions are It can be offset, and the part that is not offset and causes the position to shift is expressed as an increase or decrease in price, which is the same as the mechanism of a centralized exchange.
The oracle machine has no pricing power and does not affect the price. It can only passively receive the price feed from the oracle, so the party receiving the price can only digest the price changes by itself. This may lead to problems with oracle attacks. For example, GMX was attacked in September 2022 due to zero slippage.
Because GMX adopts a 0 slippage mechanism, zero slippage actually means that the attacker always has unlimited liquidity and the attack cost is low.
If a user is long $1 billion of AVAX on the GMX platform, according to common sense, such a high transaction volume will definitely drive up the price of AVAX. However, GMX uses 0 slippage, and it still opens a position based on the quotation given by the oracle machine. .
However, a transaction of this size will definitely drive up the price of AVAX tokens on other trading platforms. Assuming it has increased by 20%, then the oracle will feed back the latest AVAX price (which has increased by 20%) to the GMX platform. This will At that time, the position can be closed according to the latest price that has increased by 20%.
On the GMX platform, due to the use of oracle quotations, it is a zero-slippage mechanism. If the trading volume of the platform is huge in the future, but the way to obtain the price is still from the outside, it will be easy for the price to be attacked.
Because no matter how big or small the transaction volume is, there will be no slippage on the GMX platform. When a large transaction occurs, there will be a difference and delay between the price of the external platform and the quotation of the GMX platform, and this price delay will be used by attackers. use.
But for the dYdX platform, it does not use an oracle quotation mechanism, and the price can reflect the fair market price. When competing with CEX, dYdX has more advantages.
3 Value capture capabilities
Obviously, GMX has a stronger value capture capability. 30% of the platform fee is given to GMX pledgers, and the remaining 70% is given to GLP pledgers. GMX gives 100% of the platform fees to token pledgers. The better the development of the platform, the higher the income of token holders. That is, the value of GMX tokens is deeply bound to the development of the platform. This is also The main reason for the increase in GMX price.
However, the value of the DYDX token is not deeply bound to the development of the dYdX platform. The platform token has not captured much value from the development of dYdX. Although dYdX has developed quite well, the price performance of the DYDX token is very average. .
Finally, we conclude that DYDX is the leading decentralized derivatives trading platform because it came out early. Of course, there are some problems that it is also working hard to solve. For example, the current centralization will also be solved in the future V4. Compared with GMX, I think GMX is more powerful in innovation, and GMX’s tokens are more integrated into the system. In fact, DYDX’s tokens have little to do with its own platform. Of course, both platforms have their own advantages and disadvantages. The mechanism of GMX is indeed great, but there will be a death spiral in the bull market, that is, everyone is doing long, so the pool cannot be full of money-makers, and there are also problems with oracle attacks, etc. So there are really pros and cons to each.
