Overview of dYdX (ETHDYDX) — one of the leading cryptocurrency trading platforms

Exchange-based decentralized protocols continue to gain popularity. To attract more users, developers are providing Web3 products with different features and releasing their tokens that can generate revenue for their owners.

What is dYdX?

dYdX is a decentralized exchange (DEX) protocol based on the Ethereum platform. A unique feature of the dYdX DEX exchange is its support for crypto derivatives — open-ended contracts for trading on the blockchain (swaps).

Contracts for more than 30 cryptocurrencies are available on dYdX, including:

Bitcoin,
Ethereum,
Cardano,
Avalanche,
Cosmos,
Dogecoin,
Bitcoin Cash,
Polkadot,
Chainlink,
Blur,
Pepe.

The company behind the development of dYdX was founded in 2017. The project team launched its decentralized exchange on the Ethereum blockchain in the same year, which provided margin trading and lending (lending) services.

Four years later, in 2021, cross-margin trading of open-ended contracts — analogous to futures with no expiration date — became available on the dYdX DEX exchange. On the DEX derivatives exchange, users can trade contracts using leverage and lend to traders, earning income.

The dYdX ecosystem

Currently, dYdX only supports the Ethereum network. Still, the developers are already preparing to launch their network and migrate the native tokens of the DEX platform into their blockchain network, dYdX Chain.

The dYdX Chain is a blockchain network powered by the Proof-of-Stake consensus algorithm and built using the Cosmos SDK and the CometBFT protocol.

In addition to trading perpetual contracts, dYdX provides users with three other essential products:

Staking — generating revenue from commissions paid by traders;
Governance (DAO) — voting by token holders on initiatives to grow the dYdX ecosystem;
Non-Futurable Tokens (NFT) — in 2022, the dYdX team released a collection of 4,200 animated hedgehogs called Hedgies. Perhaps the name was chosen for a reason, as the English word "hedgies" echoes "hedge" — one of the ways to minimize losses in trading, based on which they create strategies to hedge risks.

The dYdX token

ETHDYDX is the native ERC-20 management token of the dYdX platform based on the Ethereum blockchain. Until October 2023, Ethereum and Solana were the only blockchain networks where ETHDYDX tokens were available. However, after the launch of its own dYdX Chain network, users can transfer their tokens from the Ethereum network to the dYdX Chain.

The token was originally named DYDX, but after the launch of the leading dYdX Chain network, the token used in the Ethereum blockchain was renamed ETHDYDX. The native token of the dYdX Chain's network will be called DYDX to avoid confusion.

The ETHDYDX token empowers the community to manage the dYdX DEX protocol. Once ETHDYDX is migrated to its network, token holders will have significantly expanded options for token use.

The dYDX token has three main functions:

Governance (DAO) — the ability for token holders to propose and vote on proposals already put forward to improve the dYdX Chain and the DEX exchange;
Staking — users can become validators or delegate their tokens to participate in the consensus of the network and earn rewards;
Security — the more tokens are staked, the harder it is to launch an attack on the dYdX Chain network.

In addition, users can earn income by issuing loans on the dYdX platform and participating in liquidity mining.

536 million ETHDYDX tokens exist, but only 309.2 million are circulating on the market — almost 73% of the total. However, ETHDYDX is an inflationary token that does not have a maximum issuance.

Regarding capitalization, ETHDYDX ranks 73rd in CoinMarketCap's cryptocurrency ranking: this figure exceeds $791 million and has grown by 263% over the past year. Moreover, most of the growth came between October 2023 and January 2024.

The ETHDYDX exchange rate rose by about 40% over the same period, from $1.83 to $2.58. However, relative to its all-time high (ATH) reached in September 2021 at $27.78, the rate is 90.2% lower at the time of writing. The token is traded on major centralized and decentralized exchanges such as Binance, Kraken, ByBit, KuCoin, Uniswap, and others.

Does dYdX have a future?

DeFi Llama's analytical data shows that the dYdX exchange is among the top 50 DeFi protocols regarding the number of blocked assets (TVL), which is $316 million. Moreover, in its segment, dYdX is in the 2nd place after the decentralized derivatives exchange GMX, which has TVL exceeding $621 million.

The dYdX team followed the roadmap and launched the leading network in October, almost as planned (the initial launch was scheduled for the end of September). However, the developers have not yet provided a roadmap for their project for 2024, although they may release one soon.

Nevertheless, the main milestones — Milestones 3-5 — have already been outlined. In Milestone 3 (the third stage), the developers plan to introduce:

new advanced order types (Post-Only, Stop-Limit, and Reduce Only),
the function of dynamic calculation of commissions,
implementation of the most advanced Cosmos SDK functions for block validation,
portfolio management,
web trading interface.

The fourth and fifth phases are not as detailed yet. Still, the dYdX team will focus their primary efforts on features such as governance and interoperability with other blockchains.

Given that dYdX is already among the leading decentralized solutions in its segment and analysts' predictions that liquidity in DeFi could reach new highs in 2024, the platform is well-positioned to be part of a growing trend in the crypto market.