dYdX is a decentralized exchange offering permissionless lending and margin capabilities for ETH, USDC, and DAI. With the recent introduction of Spot Markets, users can also swap between these assets off-chain without paying gas.
Users can leverage dYdX to trade Ether on margin with up to 5x leverage, as well as perpetual futures contracts for Bitcoin, Ethereum and Chainlink with no expiry. These perpetual futures contracts are now available for trading with up to 25x leverage and zero gas fees on a Layer-2 (L2) scaling solution powered by StarkWare.
We have a tutorial for using dYdX’s L2 perpetual futures contracts here.
Since introducing maker and taker fees, dYdX became one of the first profitable DeFi companies..
dYdX Trading Fee Discount
New users at dYdX following our links will get $50 free on your first deposit and 10% off trading fees!
dYdX Lending Rates
dYdX was founded in mid-late 2017 by Antonio Juliano. With one of the most seasoned teams in DeFi, it’s evident that the project has been the accumulation of knowledge from many different facets of professional work to date.
dYdX has raised $22M in funding to date, including a $2M seed round, a $10M Series A round led by Paradigm, and a $10M Series B round led by Three Arrows Capital and Defiance Capital.
The company features a strong development core, with the five current software developers bringing experience from tech giants including but not limited to Google, Uber, Bloomberg, Coinbase and NerdWallet to the table. Supplemented by strong operations and recruitment/community management members, this nimble team of seven is on pace to exceed expectations yet again.
With dYdX, users deposit collateral to a non-custodial orderbook so that orders can happen off-chain. This means that you will only pay gas when depositing and withdrawing assets from dYdX. However, you’ll notice that every trade has a “fee” which is routed to dYdX. The advantage of this system is that orders can be placed simply by signing a transaction, rather than waiting to have it processed on the Ethereum network.
Here’s a look at how to use dYdX’s top products.
Trading with Leverage on dYdX
Perhaps the most unique aspect of dYdX is it’s novel approach to margin trading via isolated and cross margin strategies. For those unfamiliar with margin trading, these services allow you to take on increased exposure beyond the number of assets you currently have at your disposal.
Isolated margin lets you leverage one specific asset, while Cross magin lets you take out a position using all the assets in your account.
Margin is the collateral amount being deposited by the trader. Borrowed funds are usually collateralized by other assets and must be repaid plus interest.
Leverage is created by using margin — it is the increased buying power available to place a higher value trade than a trader otherwise could. Leverage increases the potential reward for a trader, but also increases the risk. Here’s how it works on dYdX.
By navigating to the “Margin” tab, users can take out a leveraged long or short position on ETH.
When taking out an Isolated long position, the trade is processed in ETH. When taking out an Isolated short position, the trade is paid using DAI. Using Margin, users can select the amount of leverage they’d like in multiples of 100% – up to a total of 500% (or 5x).
After selecting your leverage, you can review the costs associated with the order, along with how it affects your current balances.
dYdX will ask you to sign the transaction – rather than accepting a transaction fee. This is because all orders are happening off-chain. Once a Margin order has been placed, you can track it under “Positions” just below the order book.
Here’s some more context on the difference between isolated and cross margin.
Isolated margin trading is when you ‘isolate’ a certain amount of funds as part of a trade, at specific leverage. Leverage determines how much margin deposit is required, and if liquidation occurs, losses are capped by the size of the isolated position. In practice, you can think of this as leveraging each specific asset on a case by case basis.
Unlike isolated margin, cross margin utilizes all of the assets in your dYdX account balance as collateral. Seeing as account balances can always be positive (meaning that you are earning interest) or negative (meaning that you are paying interest), unique positions can be taken to further leverage your interest in a particular trading strategy.
Cross margin would allow you to convert ETH deposited in the dYdX smart contracts into DAI to earn a higher interest rate on your lending. Alternatively, cross margin can be used to increase your long on ETH by “borrowing” USDC or DAI. This means that while you have an enhanced ETH balance (say 2x of what you actually own), you will owe an equivalent amount in DAI or USDC back to the protocol (displayed as a negative DAI or USDC balance).
dYdX Perpetual Futures
Layer 2 (StarkWare)
The L2 version of the protocol is extremely similar in function to the original L1 version, however trades are settled at significantly higher speeds off-chain using ZK-Rollup technology. Leverage of up to 25x is permitted for trading.
This reduces overall fees and minimum trade sizes, as well as enabling cross-margin – the ability to trade multiple perpetual contract markets using a single account’s collateral balance. More trading pairs will also be added in the near future, with more than 30 different perpetual contracts planned for 2021.
To use the L2 dYdX Perpetual Futures, navigate to the “Trade” button and select “Perpetuals”.
You will be asked to select a username for your account and accept the terms and conditions of the platform. The network will request a transaction to connect to the StarkEx smart contract, which will cost some gas fees.
You will also need to enable USDC on dYdX (just once), in order to deposit collateral into the contract for trading. USDC is currently the only asset accepted as collateral for L2 trading.
Please note that your Perpetual balances are separate from those used on Margin, and should be thought of as separate accounts within the same platform.
Just as with Margin Trading, users can adjust their leverage on perpetual contracts. However, you’ll notice the account terms are slightly different:
Equity is your current perpetual account value, denoted in the settlement (quote) token. Instead of being given a Collateralization figure, we see Account Leverage. This figure tells us how much leverage our account is using in total, across all positions.
Seeing as this is a more sophisticated and risk intensive product that restricts US traders from participating, we put together a separate tutorial that can be found here.
Note: dYdX Layer-1 perpetual futures contracts have been discontinued as of April 20, 2021.
dYdX’s on-chain perpetual futures were the talk of the town in 2020. By giving users the ability to trade Bitcoin, Ether and Chainlink on margin with high leverage directly on Ethereum, dYdX’s trading volume saw a surge that drastically outpaced any spot market.
The latest dYdX trading fees are below. Use our exclusive dYdX link to save 10%.
|Trading Pair||Maker||Taker (>=5ETH)||Taker (<=5ETH)|
|Taker (>=1000DAI)||Taker (<1000DAI)|
One of the great parts about dYdX is that any assets deposited to the platform automatically accrue interest. You can see your lending incoming by navigating to the “Balances” tab.
From here, you’ll be able to see an overview of the different rates being offered for each of the supported tokens. You’ll see that each asset has a different interest rate, and will find that these interest rates are dynamic. This means as the supply and demand for each asset change, the interest rate changes as well.
You can always check the current interest rate you would earn on an asset on the markets page under “Supply APR”. As it stands today, users can earn 0.03% APR when lending ETH, 2.58% when lending DAI and 1.48% when lending USDC.
When clicking “Deposit”, a modal will open encouraging you to select the amount you wish to lend along with the expected APR.
This prompts a transaction in your web3 wallet (like MetaMask) that must be accepted to initiate the deposit. Once approved, your assets will begin accruing interest automatically! You can check accrued interest via the “Balances” tab at any time. Interest is paid continuously, meaning you can close a position or withdraw funds at any time without worrying about a lock-up period.
To borrow on dYdX, navigate to the “Borrow” tab, and select the asset which you wish to take a loan in.
When selecting an asset, dYdX will display the APR you will have to pay for taking out the loan.
Today, users must pay an APR of 0.78% when borrowing ETH, 7.37% when borrowing DAI and 5.59% when borrowing USDC.
Please note that in order to borrow through dYdX (and virtually all other lending platforms), you will need to deposit collateral first. As with most other platforms, you will be required to overcollateralize your borrowing position, meaning that you must put up more than 100% of collateral for whatever you intend to borrow.
Interestingly enough, collateralization on dYdX is slightly lower than competitors, often starting at 1.25x collateralization with a minimum margin requirement of 1.15x (most industry competitors require 1.5x collateralization).
When you wish to close a position, utilize the “Outstanding” button to pay back the borrowed assets plus whatever interest was accrued. At this point, your collateral is free to be withdrawn back to your original wallet.
While dYdX continues to improve on its existing feature sets, it should come as no surprise that this is only the beginning of the protocol. While there are currently only 3 different assets on the platform (2 of which are stablecoins), it’s likely that the platform will soon expand its supported assets in the near future.
In the meantime, dYdX offers a unique alternative to lending via Compound specifically for the actions that can be taken beyond lending and borrowing. As highlighted in the margin trading section, dYdX currently offers a one-stop-shop for earning interest on leveraged positions all in a trustless fashion.
Over the coming months, we’re eager to see how the existing interest rates align with the values of other competitors. For now, be sure to stay up to date with all the latest updates from the blog via their official blog here.