The dYdX protocol token (DYDX) is the dYdX community governance token that can be used to earn mining prizes and participate in staking pools and receive trading discounts in exchange. The DYDX Digital Currency Protocol was launched in 2017 by Antonio Juliano, a computer science graduate of Princeton University and a former engineer of Uber, and has since grown to prominence.
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Lux V is another founder of DYDX Exchange, a computer science graduate of the University of Washington who worked for several years at large companies such as Amazon as a programmer and software developer. David Google, the DYDX Digital Currency Foundation’s head of development and operations, is the third member of the platform to study economics at the Universities of Pennsylvania.
What is dYdX (DYDX)?
DYDX (dYdX) is the governing symbol for the Layer 2 protocol of decentralized digital currency exchanges. This helps facilitate Layer 2 operations and allows traders, liquidity providers, and partners to participate in defining the future of the protocol as a community. Token holders are given the right to propose changes to dYdX Layer 2 and are given the opportunity to make a profit by sharing tokens and transaction fee discounts.
Layer 2, built on the StarkEx Starkwire scalability engine, is used to trade cross-platforms on the platform. The scaling solution allows dYdX to increase transaction speed, eliminate gas costs, reduce transaction fees, and reduce the minimum transaction size in the protocol.
dYdX is an open-source platform with smart contract capability, designed for users to lend, borrow and trade cryptographic assets. Although dYdX supports spot trading, the platform focuses on derivatives and margin trading.
The exchange was established in 2017 with more than $10 million in initial capital of venture capitalists and became active in 2019. The DXDY Token was the initial public offering (ICO) on September 9, 2021.
How does dYdX work?
The dYdX platform is now divided into two main layers that offer DeFi products with different features.
Margin: Point and margin transactions in Ethereum Layer 1.
Perpetual: Trade in Layer 2 by Starkware (recently released).
Ethereum Layer 1 Point and Margin Trading is a trading platform that runs on Ethereum Blockchain smart contracts and allows trading without any intermediaries. Has the following products and features:
- Point and margin trading with a maximum of 5 times leverage supports three pairs: ETH-DAI, ETH-USDC, and DAI-USDC.
- Permanent trades (moved to Layer 2) with up to 10 times the leverage support three pairs: BTC-USD, ETH-USD, and LINK-USD.
- Loans without minimum loan and waiting period, support for ETH, DAI and USDC tokens.
- Borrow with a minimum guarantee of 125%, support for ETH, DAI, and USDC tokens and the guarantee must be above 115% to prevent liquidation.
Perpetual non-memory transactions are performed on the Layer 2 blockchain system. This system operates separately from the previous dYdX protocol in Ethereum. Off-chain transactions are processed and credentials are sent to the Ethereum chain. ZK-rollups basically have the following features:
- Validation speed is higher because the status is updated after out-of-chain validation.
- As the data is stored on the Ethereum blockchain Secure and decentralized features remain.
- Lower gas costs and transaction fees are preferred.
- Starkware does not publish all transaction details in the chain. Therefore, the privacy of traders is granted.
Perpetual by Starkware offers a commercial product that has features, including:
- Leverage up to 25 times.
- Crossover and out-of-chain order booklet.
- Only accept USDC as collateral.
- Avoid running ahead
dYdX supports portfolio management for traders to monitor their trades, claim trades and receive fee discounts based on their trading volume.
For any trading platform, price data feed or oracle price is an important part because it directly affects the benefits and experiences of users. dXdX uses oracle Chainlink and MakerDAO to feed price data through its smart contract running on the Ethereum blockchain.
Unique dYdX features
The most important feature of dydx is its staking pools and two types of pools are offered by the dYdX platform:
The safety pool works exactly as its name implies, creating a secure network for users to stake their DYDX tokens. Safety Pool ensures that DYDX stickers receive their share of the pool in proportion to the amount they stake. However, users must wait 14 days for their token to be removed from the stake process, and they must submit their withdrawal request before the end of each period.
The liquidity pool is presented with two main purposes, one is to strengthen the effects of liquidity in the network and the other is to encourage large market makers to invest in this platform. Marketers will create new markets based on the dYdX Layer 2 protocol, and share DYDX shareholders in that pool of liquidity according to the amount of their tokens. Stakers can leave the stake process after 14 days and even during the 14-day period. Currently, the marketers of the second layer dYdX protocol include Amber Group, Sixtant, Wintermute and DAT Trading.
Benefits of trading dydx
Holders of DYDX tokens will receive three benefits as follows:
Retrospective extraction reward
Mining rewards are for users who trade on the dYdX platform Layer 2 protocol and for investors who use the platform for a long time. The amount of reward depends on the activity of the users, which is based on several levels. Retirement extraction bonus is now available, as the initial transfer limit has expired.
Transaction Rewards encourages digital currency traders to participate in the dYdX Layer 2 protocol. Every trader under the dYdX Layer 2 protocol is eligible to receive a reward. However, the amount of reward depends on trading activity, volume and other factors. Active traders with more than 10,000 tokens will receive a 15% discount on all trading commissions.
Liquidity Provider Rewards
Liquidity Provider Bonus is available to Ethereum Active Address Holders who retain at least 5% of their build volume in their previous term. Users will receive a reward after 25 days and this trend will be valid for the next five years. The purpose of this award is to increase DYDX liquidity in the long run.
The dYdX (DYDX) token
There are a total of one billion DYDX tokens that will be distributed over a five-year period. Here is how to distribute the DYDX token:
Fifty percent of the tokens go to the dYdX community, which includes liquidity suppliers, traders, shareholders, and users who complete trading tasks. Part of this percentage also belongs to the community treasury.
27.73% of the tokens belong to past active investors. 15.27% of the tokens are allocated to official dYdX team members including founders, consultants, staff and other members. 7% of the tokens will be allocated to consultants and staff who will join the project in the future.
Decentralized finance investing is a great option to build a productive portfolio, but there are risks that the investor cannot ignore. There are currently fewer exchangeable digital currencies on the dYdX platform with small centralized risk. Although dYdX focuses on the DeFi industry, some of its operations are still focused.
Overall, the DYDX token looks promising right now. However, investors need to consider market fluctuations before investing money. Following any trading method using technical or fundamental indicators would be a smart option for deciding to trade.