The derivatives market is today, without a doubt, the largest market in the world, with a total of 1.2 trillion dollars. The DeFi universe had this gap, but dYdX came with a new concept in terms of a platform for derivatives based on Blockchain smart contracts. dYdX promises to revolutionize the way blockchain users trade derivatives and margins using decentralized finance.
HOW DOES IT WORK?
Revolutionizing the way crypto users trade their assets, dYdX is a 100% decentralized derivatives and margin trading platform. Today it has more than 24 million in locked funds.
Exchange here allows for 4 times plus leverage over trading, as well as borrowing or loaning. Bureaucracy means problems for everyone, so there are no minimums or lock-up periods, just to let users feel even freer.
DIG INTO IT:
Users have the option to go long or short, just by buying assets into tokenized margin positions. The platform also has an option to integrate with other decentralized exchanges, if you want, so it can improve liquidity.
Today the platform offers 3 asset options to deal: ETH, USDC coin, and sDai. Personnel plans for the short term are for work to add additional markets, with two essential conditions: decent liquidity and that those markets trade on decentralized exchanges.
LEND AND BORROW: WHERE THE CRYPTO MAGIC HAPPENS
In this platform, as you start lending your crypto assets, it automatically allows you to earn passive income. Each asset is different, hence each one has a different variable interest rate. It is also possible to earn interest automatically when you deposit funds here, with no extra mile to go to get the bonus.
The interest earned by users is generated by fees from other users, who had borrowed funds before on the exchange.
An important aspect we must remember is that you don’t need to overconcern if a borrower will pay back funds or not, cause on dYdX all funds are backed by a 115% crypto collateral (100% of times), which can be liquidated to secure the system.
It is good to remember that the user’s collateralization rate always must be over 115% if they want to borrow any assets. Going below 115% rate means that these user’s funds will be automatically liquidated, to ensure security amid negotiations.
Another good aspect here is that there is no lock-up period, or minimum deposit amount, which allows users to withdraw their funds whenever they want, with no barriers whatsoever.
About borrowing on dYdX, the process dwells in how the funds are managed. Funds come out of a global lending pool managed by smart contracts, so borrowers can deposit and withdraw funds, whenever they want and with no lockup period.
Remember interest rates for users that want to borrow here depend on the utilization ratio, which can be explained as the borrowed amount or supplied amount. The yearly average historical lending rate in dYdX is about 4.89% (supply) and 6.46% (borrow).
To borrow here a user must have a collateralization ratio above 125%, another way there is no deal. For the platform, it is incredibly important for users that they maintain a ratio of at least 115%, otherwise, their margin gets liquidated.
Within this platform, users can short ETH on the exchanges just by purchasing sEth. sEth can be defined as a “margin token”, which means it gains more and more value as the price of Ethereum itself drops down.
This sEth token can be traded across exchanges, which means the process improves when it comes to liquidity.
Let us say, per example, you had purchase sEth and the market does down $20. It means that you made $20, no tricks, and no mystery. It is important to remember these sEth contracts expire at a previously fixed date and time, usually after 28 days.
dYdX offers users a completely innovative platform when it comes to trading DeFi assets. It is a decentralized derivative and margin trading platform, with locked funds going up to 24 million dollars.
To exchange here allows users to trade with margins of over 4x leverage, as well as borrow or loan assets, all of this without no minimums or lock up periods. Today the platform does not have any trading fees, and no native token as well.
It is no wonder it became one of the Dapps with the highest volume of locked funds, being at 6th place in the DeFi world.