dYdX - DYDX
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What is dYdX (DYDX) and how does it work?
DYDX crypto was initially launched, together with its governance token, for the layer 2 protocol of non-custodial decentralized cryptocurrency exchanges to facilitate operations on this layer and to allow traders, partners, and liquidity providers to define the development and future of this community.
Holders of the DYDX token have the opportunity to propose changes for layer 2 and vote for them, as well as having the opportunity to profit from the staking of the token and discounted trading fees. Layer 2 is built using Starkwire’s StarkEx scalability engine, which allows users to trade ross-margined perpetual on the platform. With this scaling solution, dYdX can increase transaction speed, eliminate gas costs, reduce trading fees, and lower minimum trade sizes on the protocol.
DYDX crypto was developed as an open-source platform with the added functionalities of smart contracts that allow users to borrow, lend and trade crypto assets, making it ideal for spot trading, even though its main focus is on derivatives and margin trading. The platform also has its own exchange, created in 2017 using around $10M in seed venture capital funds and launched a couple of years later in 2019. The company also raised additional funds in September 2021 with an initial coin offering (ICO).
This exchange is unique because it combines decentralized with advanced financial tools, supporting margins, and other products that increase crypto exposure through leverage. On its platform, isolated margin trading allows users to assign particular funds on the platform that they are holding, while cross-margin utilizes all assets a trader holds. In addition, the futures the platform supports don’t have an expiration date and can be traded with 25x leverage on synthetic assets.
As users deposit funds in their account, they immediately start earning interest, as their assets are placed in a shared global lending pool for crypto. The platform ensures security by providing liquidity and ensuring borrowers have collateral. Layer 2 on the platform guarantees security and increases scalability by using a zero-knowledge rollup — zkSTARKS. This technology allows to receive proofs while validating multiple transactions off-chain, sends the proofs back to the blockchain, and verifies them with the smart contract. This allows it to operate more efficiently by removing expensive computations from the mainnet while not sacrificing decentralization.