Recently, the major upgrade of dydx has become big news in the DeFi derivatives track. In the bear market, decentralized derivatives have been deserted for a long time, but the upgrade of dydx has also caused everyone to think deeply. The following is a brief introduction to the event itself and a discussion on the future development of DeFi.
On October 24, digital currency news website CoinDesk reported that dYdX has officially open-sourced its V4 code. This major decision not only marks a solid step forward for dYdX in terms of technical transparency and openness, but also a new milestone in the derivatives track. Open source means transparency of technology, and it also means that more developers and institutions can participate in it and jointly promote technological progress.
dydx announces the launch of V4
In addition, dYdX has also initiated the technical transition from the Ethereum Layer 2 network to an independent blockchain on Cosmos. This technological evolution will not only bring users a more efficient and secure trading experience, but also further prove dYdX's long-term planning and investment in the derivatives track.
It is worth mentioning that as early as June 16, BlockBeats reported that the founder of dYdX announced on social media that dYdX v4 will be completely open source and emphasized that it will not include any commercial copyright licenses. This means that not only large institutions or developers, but anyone can freely use the corresponding code according to their needs, further promoting the popularity and development of decentralized derivatives trading platforms.
In addition, dYdX unlocked up to 70% of its tokens in a single day in December. This dynamic may also be related to its open source decision and technological advancement, further demonstrating its confidence and determination in the derivatives track.
In general, dYdX's decision to open source V4 code not only brings new opportunities to the entire derivatives track, but also demonstrates its firm determination to promote the development of the entire derivatives track. According to its latest market data, the current price of dYdX is US$2.27, with a 24-hour increase of 8.1% and a 24-hour trading volume of US$26.842 billion, showing a strong growth momentum.
After the launch of V4, dydx's TVL data continued to rise
To sum up, dYdX’s open source decision undoubtedly brings new opportunities to the entire derivatives track, and also demonstrates its firm determination to promote the development of this track. As for whether the derivatives track has become a popular narrative as a result, and some even think it will dominate the next round of bull market, these are topics worthy of our further attention and discussion.
In recent years, the dynamic changes in the financial sector have been remarkable. Traditional banks, such as SVB, FRB, and Credit Suisse, have encountered liquidity crises one after another, and in the field of cryptocurrency, the sudden collapse of FTX and the tug-of-war between Binance and the SEC have also become hot topics. These events can't help but make people wonder: In this centralized financial system, are our funds really safe?
Volatility is an inherent property of financial markets, especially in the cryptocurrency space. Volatility does bring adaptability and anti-fragility to cryptocurrency systems, but it can also be a huge challenge for investors seeking long-term stability. However, it is in this context that decentralized finance (DeFi) has begun to emerge and show its unique charm.
Derivatives, as an important part of the financial market, have also successfully entered the cryptocurrency field. Now, investors can trade derivative contracts based on cryptocurrency prices in the crypto market, such as Bitcoin futures and Ethereum options. This brings stronger liquidity to the market and provides investors with more risk management tools.
Looking back over the past few years, we can see some important milestones in the DeFi field. In September 2020, UNISWAP, as the largest airdrop project in the history of cryptocurrencies, quickly emerged as a leader in the DeFi field. In September 2021, the decentralized derivatives trading platform DYDX issued a token, and its TVL subsequently grew rapidly under the stimulation of regulatory turmoil. In 2022, with the merger of Ethereum and the rapid development of Layer2 technology, Layer 2 solutions such as Arbitrum and Avalanche began to be warmly welcomed by the market. Among them, the trading volume and market value of the decentralized derivatives trading platform GMX have achieved explosive growth, even surpassing its competitor DYDX.
GMX's performance
However, despite the strong momentum of decentralized derivatives trading platforms, more than 97% of derivatives trading volume is still executed on centralized exchanges (CEX). This means that decentralized derivatives exchanges (DEX) only account for 2.72% of the total trading volume, showing its huge growth potential. With this in mind, we have reason to believe that derivatives DEX may dominate the next round of bull market.
Every bull run in the digital currency field is an evolution of technology and the market. In the previous article, we have explored the open source strategy of dYdX and the impact of DeFi. However, when we look to the future, a new track is emerging, that is, the derivatives track.
In the last round of bull market, DeFi's deposit, lending and swap transactions became the focus of the market. These innovative solutions not only challenged the traditional business model of centralized exchanges, but also successfully led the development direction of the entire market. However, as the market matures and investors' needs gradually increase, traditional currency transactions and financial products seem to no longer meet their pursuit of higher returns. This has created huge market opportunities for derivatives, especially leveraged contract trading.
Why has the derivatives track become the focus?
1. The trade-off between risk and return: As the high-return opportunities of the early stage gradually disappear, investors begin to pursue higher risks to obtain higher returns. Leveraged trading provides them with such a platform.
2. Market depth and liquidity: Compared with traditional currency-to-currency trading, the derivatives market provides greater market depth and liquidity, attracting more large investors and institutional participation.
3. Price discovery and risk management: The derivatives market not only provides price discovery for underlying assets, but also provides investors with tools to hedge market risks.
4. Continuous technological innovation: With the advancement of blockchain technology, decentralized derivatives trading platforms provide investors with more trading tools and strategies.
The next bull market may be different from the previous ones. The derivatives track, with its unique advantages and market potential, is likely to become the core of this bull market. It is crucial for investors, project owners, and exchanges to prepare for this upcoming change.
During the bull market of 2020-21, although decentralized derivatives have not become the focus of the market, their potential value and influence have begun to be recognized by people. In fact, with the popularization of centralized derivatives of cryptocurrencies, the development of decentralized derivatives has also been greatly promoted.
Finance, a field that has been with us for a long time, is undergoing a profound transformation. In this transformation, centralization and decentralization are no longer mutually exclusive, but begin to merge and bring more value to the market. In this context, the derivatives track has become the leader of this transformation. Its charm and potential in the field of cryptocurrency have attracted the attention of the entire market.
Although decentralized derivatives exchanges currently account for a relatively small share of the market, their growth rate and potential market space are astonishing. This growth is not just in numbers, but more importantly, it represents the gradual establishment of market awareness and trust in decentralized derivatives. As more and more investors and institutions begin to understand and recognize the various advantages of decentralized derivatives, we have reason to believe that this track will play a more critical role in the future financial market.
Looking ahead, we are optimistic about the prospects of the derivatives track. With the advancement of technology and the maturity of the market, we expect the derivatives track to attract more funds and attention and become the core of the next bull market. We look forward to seeing more technological innovations, market opportunities and cooperative competition in this track.
