AMA with dYdX: Layer 2 solutions and the future of DeFi

MathWallet hosted AMA in the official Telegram group, and introduced dYdX Exchange which is a decentralized cryptocurrency exchange, built on the Ethereum network.

CEO&Founder of dYdX Antonio Juliano shared his insights about the evolution of DEX and why dYdX could be the go-to DEX for the market.

Host: Yaxin, global marketing director of MathWallet

Guest: Antonio Juliano, Founder and CEO of dYdX

Y: Could you make introduction about yourself and how did you enter into blockchain space and found dYdX?

A: I got into crypto back in 2015 when I was an engineer early on at Coinbase, and then went on to found dYdX in early 2017. At Coinbase I got to work with some of the best people in crypto at the time, and had a great front row seat to seeing all the exciting developments in crypto — especially the launch of Ethereum. Ethereum to me is an entirely new computing paradigm where for the first time you can write programs which execute totally autonomously. I was convinced there would be exciting thing to build on Ethereum and that led me to starting dYdX dYdX is now being built by a team of engineers and operators from top silicon valley tech firms including Coinbase, Google, Uber, Bloomberg, Ripple and more.

Y: How many people in your team? And where is dYdX’s main focus market?

A:Currently there are 12 people on the dYdX team with 7 engineers (including myself ). dYdX has products available in most markets around the world, but we’re especially starting to focus on the Asia, and more specifically China market as obviously crypto trading (especially in derivatives) is very big there and we think DEXs like dYdX can help improve on existing exchanges there

Y: Can you explain briefly what is perpetual trading and how does it generate 50M USD trading volume for dYdX within just few month this year?

A: Perpetuals are synthetic contracts that use a mechanism called a funding rate (basically a dynamic interest rate) paid between longs and shorts to create a product that tracks the price of another asset (eg BTC or ETH). Perpetuals are the largest synthetic product traded on cryptocurrencies. Trading volume for perpetuals is more than the entire rest of the crypto market combined.

There’s a few reasons perpetuals are so popular, and are a great fit for more advanced crypto traders:

— Perpetuals can be traded with leverage — multiplying gains and losses by traders, and dramatically improving capital efficiency

— Perpetuals let users go long or short

— Perpetuals are synthetic, meaning they don’t require the asset being traded to be held by the exchange. This makes it easy for exchanges to support many assets through perpetuals. This is especially true for DEXs: no cross-chain technology is required since the assets being traded are synthetic

Y: As Layer 2 solution aims to solve many scaling and security issue in blockchain space. Could you briefly explain about layer 2 solutions and how did dYdX build on it?

A: Layer 2 solutions allow DeFi apps to scale much more efficiently and reduce transaction fees paid by users (in addition to providing other benefits). There are many new Layer 2 solutions which are being launched soon. dYdX has partnered with Starkware — the leader in a scalability technology called zero knowledge rollups — to scale our product.

This will lead to a massive improvements in our product for users:

— 100x+ cheaper transaction fees: dYdX fees will now be in line with centralized exchange fees — New markets: we’re targeting launching 25–50 new markets in 2021

— UI improvements: dYdX will feel as good as using a centralized exchange: instant UI, no waiting for transactions to mine. And even better since there’s no sign up required and you can custody your own funds!

— Cross margining: meaning one collateral account can be used to collateralize all products a user wants to trade, vastly improving collateral efficiency especially for market makers Higher leverage: by putting price oracles on layer 2, we will have much more performant index prices allowing us to offer higher leverage

Y: Which project/company do you work closely now? How did dYdX build partnership in the Defi ecosystem so far?

A: Besides Starkware, we work with a couple different wallets directly to ensure a great product experience when using dYdX, and surface dYdX to their users. Like I said dYdX is very excited to be partnering with MathWallet on this.

Additionally, dYdX partners with both MakerDAO and Chainlink as price oracle providers — which are the two highest quality price oracle systems available on Ethereum.

Y: We see lot of solid partnership you built up here, it will definitely help dYdX grow stronger, and meanwhile how do you assure the security of trading on dYdX?

A: dYdX is non-custodial, meaning users are in control of their funds while trading — a much more secure way to trade, especially when paired with a hardware wallet. We place huge importance on the security of our smart contracts. Firstly, dYdX is built by world class silicon valley engineers, and has stringent development and testing standards. Our smart contracts have been audited by Open Zeppelin, the world’s leading smart contract security auditors. Most importantly, dYdX has a 3 year history of never losing user funds, and securing billions of dollars that have flowed through our contracts.

Y: As a decentralized trading service provider, could you illustrate what are the benefits of trading on a DEX for your users?

A: 1). Self custody: users always have irrevocable access to their funds. It’s not possible for dYdX to disable withdrawals or freeze/steal user funds. As mentioned, trading on a DEX is a much more secure way to trade!

2). Transparency: all aspects of dYdX are open source and auditable (everything from trade execution to liquidations). Users can just trust our code, not us

3). Access: By operating through Ethereum smart contracts, we can make dYdX available to more people in more places in the world

Y: What is the geographic user distribution of dYdX? Can everyone participate in trading on dYdX?

A: The usage of dYdX is pretty globally distributed right now. Roughly: 35% US, 30% Asia, 25% Europe, 10% Other dYdX is available to most people in most parts of the world, though we do have some products which are unavailable in certain markets (eg perpetuals are not available to us customers)

Y: As part of the Decentralized pionner, how do you predict the future of DEX and DeFi?

A: Eventually I see DEXs and more broadly DeFi becoming the main way people trade and use crypto. There are still some important product and technology challenges that need to be solved to get us there, but I think dYdX and others are pretty close to solving these. After this, I see the huge improvements DEXs offer in security, transparency, and global access driving a continued shift towards DEXs — it’ll be exciting to watch and be a part of over the next few years!

Community questions:

  1. Why do you choose the collaboration with MathWallet and how does the partnership bring into decentralized wallet?

A: MathWallet is obviously one of the leading crypto wallets, and has a great product, which led us to start a partnership with them. We think the partnership will give MathWallet users access to one of the leading DEXs — especially for more advanced products — and will help to distribute dYdX to even more users! We’re also excited to offer MathWallet users a discount on trading fees on dYdX when they use dYdX through MathWallet

2. How did you see the market growth of DEX in China?

A: It’s been great to see the early growth of DEXs in China especially this year, and especially with Uniswap leading the way. I think the evolution of DEXs will mirror the evolution we saw in centralized exchanges: first spot (eg uniswap), then margin and perpetuals (dYdX) Like I said before, perpetuals are really big in China and we think it makes a lot of sense to trade them on a DEX

3. How does dYdX compete with other DEX?

A: The main way dYdX is different than other DEXs is that we offer more advanced products: specifically perpetuals & margin. We also offer a better product experience than other DEXs, and this will be even further improved after our layer 2 launch soon

4. Will you plan to have additional audits at any big next step?

A: We’ll definitely have the new smart contracts for our layer 2 audited before launch!

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