What is dYdX (DYDX)?
dYdx is a decentralized trading platform based on Ethereum with great functionality. It has its own open source protocol that allows users to borrow, borrow or trade on margin with all the assets available on the platform.
Where do dYdX come from? Brief history
dYdX has a longer history than most other platforms in the Defi space. It launched in 2017 and was one of the first Ethereum-based DeFi platforms.
The platform gained wide popularity in 2020-2021, when new instruments were launched, and the trade turnover increased significantly.
In 2020, the platform launched perpetual futures trading on Ethereum. In 2021, dYdX teamed up with StarkWare to develop a Level 2 scaling solution.
The development of dYdX, oddly enough, was also facilitated by the imposed bans on the use of cryptocurrencies and mining in China. Cryptocurrency market participants from China were forced to switch from CeFi platforms to DeFi. Many of them made a choice in favor of dYdX, which at that time proved to be very good and offered a large set of unique tools for DeFi platforms.
The launch of its own management token had a positive impact on the platform's activities. On August 3, 2021, the platform announced the creation of its own governance token, which will have two main functions:
- managing the future direction of the dYdX platform.
- getting discounts on trading commissions within the platform.
The token quickly became in demand and after listing on the largest exchanges, its price increased by more than 1000%.
How does dYdX work?
At first glance, dYdX doesn't differ much from other DeFi platforms on the market. However, if you dig deeper, you will notice significant differences that make dYdX stand out from its competitors.
Platform users can:
- borrow funds.
- trade using leverage.
Both lenders and borrowers on the dYdX platform interact through a global lending pool. There is a single managed smart contract (liquidity pool) for each asset. When a lender deposits funds on the platform, it is added to the appropriate pool. The borrower can borrow funds from the same pool.
In order for this system to work effectively, interest rates on deposits and loans are made floating. They change depending on the ratio of supply and demand for funds.
If the demand for loans grows, and the supply remains low, then the interest rate on loans and deposits grows. And vice versa.
To ensure the safety of the platform, a so-called “security pool” has been created. It is designed to ensure the stable operation of the platform during strong market fluctuations or other emergency situations.
A limited number of cryptocurrency pairs are available for margin trading on dYdX, but the creators plan to expand their list in the future. There are two methods of margin trading available to users:
- isolated margin trading.
- cross-margin trading.
Isolated margin allows users to use only one asset. Cross margin trading allows you to use all the assets in your account to open a position.
In simple words, cross-margin trading uses all the assets in the user's account, and isolated margin is only one asset.
What makes dYdX unique?
The trading platform has many unique features and solutions for the DeFi space. Only a few existing decentralized protocols support margin trading and none of them are actively used.
DYdX's competitors cannot offer users identical financial instruments or services. Therefore, the interest of users in the dYdX platform is constantly growing.
Moreover, dYdX successfully competes not only with DeFi platforms, but also takes market share from CeFi platforms. Decentralized platforms provide users with greater security, since all transactions take place without the participation of a third party. Users control their funds themselves.
Also, the outflow of users to the DeFi sphere is observed against the background of bans from some countries and exchanges. Many Chinese traders and investors have been forced to switch to DeFi platforms following the ban on cryptocurrency and mining.
Binance Futures and several other centralized platforms have recently blocked users from some European countries. In this regard, dYdX and other decentralized sites have an undeniable advantage. They do not have a single center, so there is no need to go through the verification procedure. It doesn't matter who you are and what country you are from.
Where to buy dYdX?
You can physically buy DYDX on many cryptocurrency exchanges. Against the background of the great popularity of the dYdX platform, its token was added to the listing of the most popular crypto-exchanges.
You can also purchase DYDX on the dYdX trading platform itself.
During the launch of the token, the platform distributed tokens free of charge among users who performed at least one operation on the exchange. Later, the token skyrocketed in price and users were actually able to make big money without investing anything.
Now the token is added to the list of traded instruments by some brokerage companies, but in this case we are talking about CFDs on DYDX. Those. you will not physically own the token and will not be able to dispose of it. You can only make money on changes in the value of an asset.
For CFD trading, contracts are more interesting, because in this case you can not only buy DYDX, but also sell. Thanks to this opportunity, a trader can work both in a bull market and a bearish one.
How to Buy dYdX (DYDX)?
There are several ways to buy DYDX. The most obvious one is to purchase DYDX on one of the cryptocurrency exchanges. If the token is listed, then you can easily buy DYDX for another cryptocurrency.
If the purpose of buying DYDX is short-term speculation on the change in the value of the token, then in this case you can use the services of a brokerage company.
There are brokers who actively include cryptocurrencies, including DYDX, in the list of instruments available for trading. In this case, you will not buy the DYDX token itself, but the CFD contract.
For trading, this is a more suitable option, especially for beginners who are not familiar with the cryptocurrency market. It will take just a few minutes to open an account. Brokers also work with bank cards and popular payment systems. This greatly facilitates the process of depositing / withdrawing funds.
Brokerage companies work with clients all over the world. Therefore, you can buy dYdX without any problems.
Cryptocurrency exchanges, especially the DeFi platforms, also work with traders and investors from different countries. Therefore, you can invest in dYdX without any problems.
How to start investing in dYdX?
First, you need to understand that any action on the market can lead not only to profit, but also to loss. Therefore, before you start investing, you need to study the market, its features and rules for working on the market.
It is worth starting directly investing or trading only after you have received the necessary amount of knowledge for this.
Let's look at two ways to invest in dYdX:
- invest in dYdX via cryptocurrency platform.
- invest in dYdX through a brokerage company.
To invest in dYdX through a cryptocurrency platform, you first need to choose the most convenient and suitable platform for you. There are many factors to consider here: permission to operate the platform in your region, the size of the commission charged for transactions, the security of transactions, anonymity, the level of support for registered customers, and other parameters.
After deciding a cryptocurrency platform, it is worth moving on to the next stage - deciding a cryptocurrency wallet. Unfortunately, many cryptocurrency platforms do not support direct work with traditional money. Therefore, you cannot do without a cryptocurrency wallet.
The online wallet is offered by all cryptocurrency exchanges, guaranteeing users quick and efficient access to the trading floor. But the problem is that they do not provide a sufficient level of security for funds. Very often, cryptocurrency platforms are subjected to hacker attacks, as a result of which traders and investors irrevocably lose their funds.
The exchange was decided, the wallet was registered and configured, after that you need to replenish your account, and you can invest in dYdX or other cryptocurrency assets.
When working with a broker, you also need to start by choosing the most convenient and suitable company for you. First, it is worth paying attention to well-known companies that have been working on the market for a long time and have a good reputation.
It is also worth paying attention to the available trading instruments. Many companies still provide a limited selection of cryptocurrencies. DYDX and other interesting cryptocurrencies may not be available for trading. However, there are brokers on the market right now that will allow you to invest in dYdX.
Further, the process is much simpler than on cryptocurrency exchanges. You can open a trading account within a few minutes and replenish it without any problems in the usual way: bank transfer, bank card, popular payment systems, etc.
Is it safe to invest in dYdX online?
Investment security depends on many factors. There are always trading and non-trading risks in the market. The task of any trader or investor is to minimize these risks and increase the likelihood of obtaining a positive result.
To do this, it is necessary not only to take a responsible approach to the choice of an exchange or a brokerage company, but also to deeply master the knowledge of the principles of the functioning of the financial market. Including the cryptocurrency market, since it has certain and very important differences.
Is dYdX a good investment?
DYDX is a very interesting tool for both long-term investment and trading.
The DYDX token has good growth prospects as the dYdX platform is actively developing and now has practically no worthy competition in the DeFi market.
Platform developers set ambitious goals for themselves and do everything to achieve them. The development and growth of the platform's popularity will contribute to the growth in demand for the DYDX token, and its value will continue to grow.
From a trading point of view, DYDX is also interesting. The token has less volatility than other popular cryptocurrencies. This reduces the risks associated with trading.
Should traders invest in dYdX?
The decision to invest in a particular asset should be made by the trader independently. It is necessary to take into account many factors, including your experience, the amount of capital, goals, other instruments in the investment portfolio, etc.
But in general, DYDX is quite an interesting asset for investment. Therefore, when selecting instruments for an investment portfolio, you should definitely take a closer look at DYDX.
How to Buy dYdX right now?
To buy dYdX right now, you need to open a real account on a cryptocurrency exchange or in a brokerage company.
In the first case, you can physically buy dYdX and further consider this instrument for long-term investments.
The second method is more suitable for trading. You will not be able to own the asset, but you will be able to buy dYdX or sell, capitalizing on price changes.
Almost all brokerage companies provide clients with the opportunity to open a demo account. This is an important stage in the training of a trader. In addition, demo accounts are actively used by experienced traders. On demo accounts, they test their trading strategies and trading robots.
Demo accounts are more complicated on cryptocurrency exchanges. Not all exchanges offer this service to traders and investors.
The process of opening a real account may differ from company to company, but in general it is not a complicated process. It should be understood that all companies are interested in clients and therefore create the most understandable interface and try to facilitate the process of registering a real account.