dYdX is Closing the Gap Between CeFi and DeFi

dYdX is Closing the Gap Between CeFi and DeFi

Author: Elan Halpern

Reviewed by Brady Werkheiser

Published on October 19, 20203 min read

dYdX is one of the world's leading decentralized exchanges offering powerful financial products for traders around the globe. By utilizing audited smart contracts, dYdX allows you to maintain full custody of your assets without intermediaries while trading, borrowing, and lending.

David Gogel, the growth lead at dYdX, explains that they began with the goal of "providing trustless access to more complex financial instruments than those offered by existing decentralized exchanges," and have continued to offer unique tools in the DeFi space.

dYdX is known for margin trading, which is a form of trading assets that are borrowed from a 3rd party (lenders), allowing the trader to greatly increase their volume to gain (or lose) higher margins.

The amount of additional funds given to a trader is specified by leverage, which is the ratio between the initial investment from the trader and the value given by the lenders. dYdX currently offers up to 5x (5:1) leverage, meaning if a trader wanted to trade $5,000 of funds, they would only have to put in $1,000.

Margin trading opens the opportunity for those with few assets to gain immense profit from trading, however, there is risk involved.

What you can do with dYdX
What you can do with dYdX

Like most decentralized exchanges, dYdX requires traders to have collateral, which is a minimum deposit needed participate in margin trading. In a process called liquidation, when the value of your collateral falls beyond a specific threshold it will automatically be sold to repay your loan.

The platform can also be extremely profitable for lenders, who get to constantly earn interest at a much lower risk by simply depositing funds, which are protected by collateral from the borrowers.

With the recent boom in DeFi, dYdX has grown tremendously without having to worry about infrastructure downtime or hiccups with the support of Alchemy.

This past August, dYdX saw a peak of over $48 Million in 24 hour trading volume. Since, then the DeFi boom has cooled down a bit, but dYdX continues to capture a growing portion of the decentralized exchange market share, moving millions of dollars daily.

Alchemy supercharges dYdX
Alchemy supercharges dYdX

Gogel notes what attracted dYdx to Alchemy was the "stellar reputation in terms of engineering talent and customer service," in addition to the stability of Alchemy's product that allows them to “set and forget” complicated and crucial aspects of their infrastructure.

While reliability and uptime are paramount to dYdX's needs, Alchemy also offers a number of valuable debugging tools for internal issues and monitoring, which dYdX engineers use to deep dive into their transactions.

The platform currently supports three assets, ETH, DAI and USDC with up to 5x leverage, and 10x leverage for their Perpetual Contract Markets (synthetic trading markets), which offer synthetic trading of of BTC-USD, ETH-USD, and LINK-USD.

All you need to get started is a crypto wallet and some ETH.

dYdX is constantly working on closing the gap between decentralized and centralized finance. With their ZK Rollup Layer 2 solution, dYdX aims to drastically reduce gas costs by 100x and include other major improvements like allowing users to trade from a "single collateral pool that supports cross-margining" this will open up the doors for a plethora of new markets and volume.

Alchemy is excited to power dYdX as they continue to expand and grow their user base. Start trading with dYdX today.


Interested in building your own blockchain app? Sign up with Alchemy for free, check out our documentation, and for the latest news, follow us on Twitter.

Alchemy is the leading blockchain developer platform with over $7.5 billion in transactions and millions of users from 70% of the top blockchain apps including Maker, 0x, MyEtherWallet, Dharma, Kyber. Backed by Stanford University, Coinbase, the Chairman of Google, Charles Schwab, and founders and executives of globally leading organizations, Alchemy powers billions of dollars of transactions for top companies around the world and has been featured in TechCrunch, Wired, Bloomberg and numerous other media outlets.

Section background image

Build blockchain magic

Alchemy combines the most powerful web3 developer products and tools with resources, community and legendary support.

Get your API key