How about dYdX? What other decentralized derivatives exchanges deserve attention?
Original title: dYdX is a “semi-centralized” derivatives exchange. So what other decentralized derivatives exchanges are worth paying attention to?
dYdX announced the launch of the governance token DYDX, and decided to airdrop 75 million tokens to more than 36,000 historical users, making the entire industry start to pay attention to the decentralized derivatives track.
Unlike the last Uniswap indiscriminate airdrop, dYdX allocates the amount according to the user’s historical transaction volume level, and the corresponding transaction volume must be completed again on the Layer 2 version to finally get the airdrop.
So what we can foresee is that in the next month, dYdX’s trading volume will usher in a surge (in fact, it has become the industry’s first since yesterday).
This airdrop of the unicorn dYdX largely marks the arrival of the era of decentralized derivatives. So what exactly is dYdX? And what other projects worth paying attention to on this track?
Important member of the Coinbase gang
Antonio Juliano founded dYdX in 2017. He was previously an engineer at Coinbase and Uber. He positioned dYdX as “the world’s largest cryptocurrency exchange.”
Since the main investors and core members of dYdX are highly overlapped with Coinbase, dYdX can be regarded as the tentacles of the “Coinbase gang” in the field of decentralized derivatives.
From the perspective of time, dYdX is the world’s first decentralized crypto derivatives exchange. But judging from the current volume, it is the second largest decentralized derivatives exchange (previously Perpetual’s largest, but it reversed yesterday).
Juliano is very optimistic about the entire decentralized derivatives track. He believes that DEX will eventually defeat CEX, and perpetual contracts will surpass other derivatives. And dYdX is working hard on perpetual contracts.
“I think the most important thing that has happened in the crypto market in the past year is that the trading volume of derivatives that are truly driven by perpetual contracts is far greater than the combined trading volume of everything else in cryptocurrencies.”
Soon after dYdX was founded, it received a $2 million seed round investment from Polychain Capital founded by core members of a16Z and Coinbase.
Until June of this year, dYdX completed a $65 million Series C financing. If you count the previous seed round, A and B rounds (completed in January this year), dYdX has raised a total of $87 million.
Whether it is the investment lineup or the scale of financing, dYdX’s performance far exceeds the imagination of the outside world. Of course, this also ensures that dYdX can focus on polishing the product for a long time-how to provide a faster trading experience, better manage risks, and develop more complex trading strategies.
So how does dYdX perform?
dYdX-Hybrid Electric Vehicle
Although dYdX was established in 2017, it was not until 2020 that the first perpetual contract agreement was constructed and launched, and then the transaction volume increased by 40 times (from $63 million in 2019 to $2.5 billion in 2020) .
As we all know, the derivatives market is much larger than the spot market, and the scale of decentralized derivatives has just barely tied the spot. The main contradiction is the contradiction between the complexity of derivatives and the backward infrastructure of DeFi.
In short, the trading experience is too bad.
This backwardness of infrastructure is reflected in both the network layer and the application layer.
The improvement of dYdX at the network layer is to combine the non-custodial on-chain settlement with the off-chain low-latency matching engine using the order book, which improves the trading experience in terms of liquidity and low slippage.
Later, a Layer 2 solution was launched to improve the scalability of the network, which was known as “the fastest decentralized exchange ever.”
But in terms of application products, the biggest highlight of dYdX is the order book model-which means that the operating experience is very close to a centralized exchange. And this is nothing bright for a DeFi product.
dYdX has a widely praised advantage, that is, it can order a stop loss like a centralized exchange. So far, no fully decentralized DeFi product can achieve it.
Because the request on the chain necessarily requires the signature of the submitting party, dYdX transfers this part of the function to the vault under the chain to perform the operation, and then re-mark the data after the operation on the chain.
In terms of security, the off-chain vault is no different from the server of a large centralized exchange. Of course, using zero-knowledge proof is theoretically safer.
dYdX’s order book model is a bit unique in the DeFi world, because the first wave of DeFi’s most powerful impact on traditional finance is the AMM model. I don’t know why dYdX chose this ancient model.
Of course, as an encrypted derivatives exchange, dYdX still has many unique advantages.
Compared with fully decentralized derivatives exchanges, dYdX has low fees, fast transaction speeds, and diverse asset types…Compared with centralized derivatives exchanges, dYdX is indeed more transparent and resistant to censorship.
However, the above-mentioned relative advantages of dYdX, in turn, can all be regarded as disadvantages. After all, the advantages of DEX are completely provided by CEX, and the advantages of CEX can also be directly selected by DEX.
The positioning of dYdX between DEX and CEX is more accurately a “semi-centralized exchange”.
This is a bit like the current gasoline-electric hybrid vehicle, which can neither fully meet the needs of the present nor represent the future. It is destined to be a transitional product.
Therefore, we should focus more on those fully decentralized derivatives exchanges that truly represent the future.
Decentralized derivatives exchange inventory
In addition to the specific analysis of dYdx above, there are still some other players on this track, such as Perpetual, Synfutures, leverj, MCDEX, Futureswa and Deri, which will be briefly introduced below.
If it is a consensus that dYdX’s order book model is difficult to understand (buy the AMM model and embrace the order book model), then Perpetual’s vAMM (Virtual Automated Market Maker) is more controversial. .
The principle of vAMM is: it seems to be traded in the AMM liquidity pool, but in fact there is no real liquidity pool, but a virtual liquidity pool is generated to mark the price, and the user’s funds are placed in the vault In the end, the funds in the vault are used for settlement.
The advantage of this is that it does not require a liquidity provider to provide sufficient liquidity, because in fact the trader is providing liquidity for each order.
This logic is like that all stockholders walk into the trading hall of a securities company with cash, then put the cash on the table, open a simulated board to trade, and finally leave the trading hall with cash to settle and leave.
However, it is indeed possible to guarantee that there will always be liquidity available for liquidation under the premise that no one suffers impermanent losses. This is a model innovation, but there is always a suspicion of superfluous.
SynFutures is known as the “Uniswap in the field of futures contracts”, but currently there are only early access versions on Ethereum and Polygon.
What SynFutures wants to achieve is that users can easily list their futures contracts with just a few clicks, and can purchase the required derivative contracts in a permission-free manner.
SynFutures’ trading model looks similar to Perpetual’s vAMM-sAMM was launched, but the two are just similar in name, in fact, there are essential differences.
They all felt that the AMM mechanism was only suitable for simple spot transactions, and the external arbitrage mechanism could not cope with complex derivatives transactions, so they offered two diametrically opposed solutions.
Perpetual’s vAMM does not have an AMM pool at all, but has its own independent cash settlement system and does not rely on external arbitrage mechanisms. SynFutures’ sAMM model does have a real AMM pool, but this is a more complex AMM model.
SynFutures’ response is that liquidity providers can mine a single currency, but 50% of the funds will be combined into a long futures contract in another currency. At the same time, sAMM will also establish an equal amount of short futures contracts for users.
In this way, for liquidity providers, whether it is to increase liquidity or withdraw liquidity, it will not increase risk because the risk is hedged.
But this mechanism is a kind of protection for a single liquidity provider, but it is inefficient for the entire product.
MCDEX launched the V3 version, known as the “game changer”, because it designed a new AMM mode——
In addition to the well-known liquidity providers and traders, there is also the role of operators, who are the creators and managers of perpetual contracts. In addition, there are auxiliary roles such as goalkeepers, which are used to take over accounts with insufficient margin.
MCDEX also has the concept of a shared liquidity pool, which is very efficient in terms of capital efficiency.
In addition, there is also a stop loss mechanism. The principle is to send the order to the operator’s server, and submit the order to the agreement when the price meets the requirements, and continue to process the order after the agreement is validated.
Futureswap has no bright spots and no slots, and it is quite satisfactory. V3 should be launched in the near future, and officials have placed high expectations on V3.
Although Deri is minimalist in product design, it surpasses many very complex financial derivatives in function.
Deri seems to be a mediocre AMM model of decentralized derivatives exchange, but Deri has achieved a large part of the industry-leading function——
Different from traditional binary pools, Deri V2’s liquidity pool supports multiple transaction targets, which means that liquidity providers can use one of a variety of tokens for liquidity mining, and more importantly, traders can Use one of a variety of tokens as a margin to open a contract.
Its significance is that the conversion friction of traders is smaller, and in the future, as various basic tokens come online one after another, it will also attract the holders of these tokens.
Another neglected advantage of DeriV2 in the future is NFT. Marking the position as NFT allows users to hold, transfer or import any other DeFi project (not even a DeFi project) at will, which further releases the efficiency of capital.
It is also worth mentioning that Deri’s hedging, speculation, and arbitrage operations are all on the chain.
All in all, Deri’s advantage is to use real-chain mechanisms to exchange risk exposures “accurately and efficiently”. This is the difference between pure electric and hybrid electric.
Leverj’s Layer 2 is a Plasma side chain. Currently, it provides perpetual contracts for BTC, ETH and DEFI indexes. The biggest advantage is to provide 100 times leverage.
In the short term, centralized derivatives exchanges are forced to shrink the market, and decentralized derivatives exchanges have truly ushered in the moment of attack.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-about-dydx-what-other-decentralized-derivatives-exchanges-deserve-attention/
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