dYdX Exchange: Decentralized Derivatives For Cryptocurrency?
Though some financial derivatives such as futures trading are gradually coming to Bitcoin, we're still a very long time off from these financial products being widely accessible for the entire cryptocurrency asset category.
The protocol allows you take out peer reviewed short sells, long spans and options on any ERC20 token. It also gives the capability for traders to make fully-collateralized loans, that are utilized to to fund short sellers.
As a refresher, a decentralized protocol means that no single entity controls the process. No one can cancel your order, steal your funds rip you off provided that the smart contracts powering the protocol are firmly composed and properly vetted. There are a few examples of decentralized exchanges such as EtherDelta, in which you can exchanges crypto assets peer-to-peer. But the majority of these platforms limit you to buying one token for another, which is why dYdX's concentrate on more complex fiscal positions is unique.
After the platform starts in the spring there'll be a decentralized open protocol that anyone can access, as well as a centralized relay constructed by dYdX that acts as a user interface to the protocol.
The UI will resemble a traditional trading site but will never take control of user funds, and dYdX will charge a small fee on all transactions which use their interface. Obviously anyone else may also build public or private ports to interact with all the dYdX protocol for free. Order books will be off chain together with on-chain settlements, which allow for quicker trading, particularly during times of network congestion.
Initially you will only have the ability to trade with ERC20 tokens (and Ethereum itself) but technologies such as cross-chain nuclear swaps may empower trading of non-Ethereum-based tokens later on like Bitcoin.
What Is DYdX Exchange?
DYdX was set by Antonio Juliano, a former software engineer in Coinbase and Uber. The startup has raised a seed round led by Andreessen Horowitz and Polychain Capital, with participation from Coinbase founders Fred Ehrsam and Brian Armstrong, Elad Gil and many others.
Juliano plans on utilizing the funding to build out a group of engineers (it's currently a one-piece store) and experience extensive third-party security audits on the protocol before launching. As mentioned earlier the only thing that can bring down a brand new protocol is defects in its code, making crypto safety audits very vital for any severe decentralized protocol.
Both the decentralized protocol and also concentrated relay are expected to launch around April, together with the individual safety audits being the biggest roadblock before launching.