The non-custodial trading platform on Ethereum, dYdX is the eight-biggest platform with $24.6 million locked in total value.
This decentralized finance (DeFi) platform has seen immense growth in the past year, having originated more than a billion dollar. It also had $534 million generated in trade volume in the past seven months, as per the data shared by dYdX.
The growth seen by the decentralized exchange (DEX) was declining during the last few months of 2019 after an incline throughout the year. From the high of over $31 million in total value locked in mid-November, 2019, TVL dropped to a mere $13 million in mid-January 2020, in line with the price of the digital assets.
However, it was where it found its groove back and climbed to $28 million in late March and is currently around $24.5 million, as per DeFi Pulse.
While the ETH locked on dYdX saw the same fate as the total value, because of its price, this wasn’t the case with the stablecoin DAI. In Late November 2019 nearly 5 million DAI were locked on this DeFi project only to come crashing down to 83k in January 2020 and 2.6k DAI on March 15, after the violent sell-off in the market.
Given the growing issuance of stablecoins and money parked in them, the locked DAI has also now jumped back above 4 million on dYdX.
dYdX is powered by the open source protocol, Solo which allows users to lend, borrow, or margin trade any supported asset including ETH, DAI, and USDC.
The interest rate for borrowers’ on the platform varies by assets and adjusts as per its supply and demand while it is paid to lenders, minus 5% set aside for dYdX’s insurance fund.
The money market for taking margin positions, dYdX protocol allows one to trade with any DEX on the Ethereum network.
Traders can leverage long positions of up to 5X their collateral value, and 4x for shorts. The platform charges fees of 0.15%-0.5% for takers and 0.00% for makers.
They launched their native markets late last year which allows users to trade with each other which has been seeing significant growth.
On March 12th, Black Thursday, it saw a massive influx in amount traded, despite having increased the minimum trade amount.
To borrow funds, they initially must be collateralized with 125% for their value and if the ratio falls below 115%, liquidation occurs. Liquidation occurs with a 5% penalty which others can take advantage of. Loans just like margin trades can remain open for a maximum period of 28 days, only to be then automatically closed with a 1% expiration fee.
Given the potential for profit, the liquidation market is healthy and competitive, with “increasing gas price starting to squeeze profits lower,” noted Brock Elmore, Co-Founder of Topo Finance.
“This is good for the protocol as it makes sure that undercollateralized accounts are liquidated before the collateralization drops below 100% (at which point it would be unprofitable to liquidate),” he wrote.