dYdX – The Protocol for Decentralised Derivatives
What is the dYdX Protocol?
The dYdX protocol for derivatives is a completely decentralised protocol which can be used to execute financial derivatives on Ethereum’s blockchain.
By using blockchain technology and the 0x Protocol, dYdX is able to be a completely trust-less system. dYdX completely removes the need to entrust an exchange or any other party with your investments.
dYdX allows for peer-to-peer, trust-less short sells and options on over ERC20 tokens. The best thing about this protocol is that it is completely open source and free to use. This is yet another step in the right direction for mainstream blockchain adoption.
dYdX is built using the 0x Protocol for token trading, which put simply, is an open protocol that allows for the trust-less and low friction exchange of Ethereum-based assets.
To keep up with dYdX updates you can follow the dYdX Protocol’s Slack Channel. dYdX will be open sourcing the protocols smart contracts shortly and will be releasing the beta version of their exchange platform in the near future.
The growing popularity of blockchain technology has caused exponential growth in digital assets. Currently, there are both decentralised and centralised platforms that allow for various forms of derivative exchange for blockchain assets, with many more in development. However, the platforms that are presently available only allow investors to take long positions on digital assets; it is an arduous and complicated task for any investors to be able to take short, hedged or other complex investment positions.
The dYdX protocol will solve the current issues by aggregating investors through a decentralised peer-to-peer protocol that enables shorting, lending and option trading of any tokens on the Ethereum blockchain. The dYdX protocol allows for financial strategies such as:
dYdX Short sells:
- Short sells that will enable investors to profit from price decreases. Shorts can be used to speculate or to hedge an existing position.
dYdX Lending:
- A fully-collateralized low risk lending facility for short sellers that enables the token holders to earn interest fees.
dYdX Options:
- can be used to hedge positions, manage volatility, increase leverage, and more
The dYdX Protocol uses blockchain technology to be a completely trust-less system. dYdX completely removes the need to entrust an exchange or anyone else with your investment.
dYdX Utilises The 0x Protocol
Using the 0x Protocol enables dYdX to have complete exchange functionality, as well as its own fully collateralised peer-to-peer lending protocol.
dYdX uses off-chain order books with on-chain settlement to enable efficient markets. Using 0x orders for token exchange allows dYdX derivatives to use existing 0x buy/sell liquidity.
“It’s still early days for dYdX, but we’re excited to take on the $1.2 quadrillion derivatives market.”
— Antonio Juliano
Founder of dYdX (Previously, software engineer Coinbase and Uber – C.S. Princeton)
Summary:
The dYdX protocol is a completely decentralised protocol that executes financial derivatives using the 0x Protocol on Ethereum’s blockchain.