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Review of dYdX Exchange (2024)
The explosion of decentralized finance over the past couple of years has brought extra attention to the cryptocurrency world, with many users looking to make profits in the form of interest on their holdings or by longing or shorting assets. dYdX is a decentralized exchange that is a great way for users to do both and they do not even need to do anything other than connect their wallet to the platform.
You can do margin trading with up to 100x leverage or buy perpetuals of your favorite assets, and just by depositing assets into the protocol you can begin earning interest. If you are interested in margin and perpetual trading in decentralized manner, then dYdX may be for you and this review will tell you everything you need to know about the platform.
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dYdX Overview
- Trade perpetuals with no gas fees
- Long or short assets with no identity verification
- Earn interest on deposits and borrow with competitive rates
dYdX Pros & Cons
Pros
No gas fees when trading perpetuals or swapping supported assets
Introduction of DYDX token
Long and short with high leverage
Earn interest on deposited assets and competitive borrowing rates
Cons
Limited selection for margin trading pairs (three)
Only 3 assets available for swaps
The interest rate for Ethereum can sometimes hit 0%, effectively making it worthless
Supported Wallets
You have to connect to dYdX with a web3 compatible wallet such as MetaMask or a hardware wallet through MetaMask, here are all the wallets that dYdX supports, some of them are supported for both Margin and Perpetuals, some are Perpetual only and are noted as such:
- MetaMask
- Ledger Hardware Wallets (Nano S, Nano X)
- Trezor Hardware Wallets (Trezor One, Trezor Model T)
- Coinbase Wallet
- TrustWallet (Perpetuals only)
- Rainbow Wallet (Perpetuals only)
- TokenPocket (Perpetuals only)
- WalletConnect; here is the full list of wallets that can be connected via WalletConnect
- imToken
How to Connect Your Wallet to dYdX
Connecting your wallet to dYdX is easy, just follow these steps:
- Visit https://margin.dydx.exchange/ or https://trade.dydx.exchange/
- Click “Connect Wallet”
- Choose your wallet of choice, as noted in the Supported Wallets section some can only be connect to the “trade” or perpetuals version of dYdX
- If connecting to the margin section you simply sign through your web wallet that you want to connect, and create an account with the option of creating a username and adding an email, but is not required
- If connecting to the trade section then you have to generate a Stark Key, which is free, by verifying through your wallet, and then you create your account with the same options of a username and an email
- Click “Create Account”
- Verify the transaction through your wallet
- Done! You can deposit assets into the platform from your wallet to begin using its features
What You Can Buy on dYdX
Since dYdX operates as a margin trading platform there are only actually three assets you can swap with the platform which are:
However, if trading perpetuals you have many more options, you are just buying a position rather than the asset. You can take positions in many different crypto coins and tokens including but not limited to:
Best Features of dYdX
It should be no surprise that one of the best features of dYdX is their margin and perpetuals trading, as it is the main aspect of the platform. Users can do margin trading with leverage up to 100x, while there are dozens of crypto assets to choose from for perpetuals. There may not be an easier way to begin trading perpetuals for users than connecting their wallet to dYdX, as there is no identity verification required as there would be with centralized exchanges.
No Gas Fees for Most Transactions
Moving a lot of their transactions to a layer 2 solution provided by StarkWire has resulted in there being no gas fees for almost all transactions you perform on dYdX, including swaps of assets and buying or selling perpetuals.
Earn Interest for Deposits or Borrow with Competitive Rates
As soon as you deposit your assets into the platform, regardless of your intentions, you can begin earning interest on your deposits, with stablecoins giving you around 5% a year in interest.
On the flip side, you can borrow stablecoins with competitive rates of around 10%, which is fairly standard for stablecoins, or borrow ETH with almost zero percent interest.
Is dYdX Safe?
dYdX is extremely safe to use because it is decentralized, so users’ funds are locked into smart contracts rather than being held by an exchange.
It is secured by the Ethereum blockchain. The only risk you run in using dYdX is making a bad trade.
What are dYdX Fees Like?
The fees you pay on dYdX varies depending on if you are doing margin or perpetual trading, and it should be noted that swaps between DAI, ETH and USDC are free. Fees for margin trading are based on a maker and taker model where maker orders (orders that add liquidity to the order book) have no fees, while taker orders (orders that fill existing maker orders) have a fee or 0.3% or the variable gas cost, whichever is higher.
Fees for perpetuals are also based on the maker and taker model but are based on your trading volume in the past 30 days. It should also be noted that there are no gas fees for perpetuals trading. The fees can very from .05% (Maker) .10% (Taker) all the way down to 0% (Maker) .06% (Taker) depending on your volume.
The introduction of the DYDX token has added a trading fee discount aspect to perpetuals trading as well, with users being able to get anywhere from a 3% to 50% discount depending on their current balance of DYDX.
Frequently Asked Questions About dYdX
Yes, if you are in the US you can use dYdX but you have to comply to a few rules:
- you must physically settle all trades you make using dYdX
- you must fully close and physically settle all margin positions you open within 28 days
- you must not access or trade any advanced features including Bitcoin trading and perpetual contracts on dYdX, including via use of a Virtual Private Network (VPN) to modify your internet protocol address or otherwise circumvent or attempt to circumvent this prohibition.
DYDX is a governance token that allows the dYdX community to truly govern the dYdX Layer 2 Protocol. By enabling shared control of the protocol, DYDX allows traders, liquidity providers, and partners of dYdX to work collectively towards an enhanced Protocol.
DYDX enables a robust ecosystem around governance, rewards, and staking, all of which is designed to drive future growth and decentralization of dYdX, resulting in a better experience for users.
Staking pools are designed to promote liquidity and safety on the Protocol. Rewards programs for trading, liquidity providing, and past usage of dYdX will help drive growth and adoption of dYdX.
You cannot currently buy the DYDX token as it is still in the distribution phase. You can earn it through trading or staking.
The DYDX token can be earned by users doing one of two things. Users can either collect rewards by using the protocol or alternatively earn through staking USDC or DYDX to pools. Protocol rewards are calculated based on fees paid and open interest, while staking rewards are based on your share of the pool.
Liquidity on dYdX is provided by the users, much like on Uniswap, PancakeSwap, or SushiSwap. Users deposit liquidity in exchange for rewards in the form of fees, and this is where the liquidity comes from. dYdX provides none of their own liquidity, as it is decentralized.
A Stark Key is a public key that links a user’s Ethereum key with dYdX’s smart contracts. This Stark Key is used to identify a user’s account on dYdX’s Layer-2 infrastructure and is saved locally on the user’s browser.
