In order for a blockchain or blockchain-based platform to reach its full potential, in most if not all cases it will need to have its own cryptocurrency. In order for this cryptocurrency to have any value, it needs to be able to be bought, sold, or traded. Most of the time, the easiest way is through a cryptocurrency exchange. If a cryptocurrency is easily available in the market, it allows the market to assign value to it.
While centralized exchanges (CEX) are the most common way to trade cryptocurrencies, they are not without their problems. There is usually a central authority responsible for deciding which cryptocurrencies can be bought, sold, or traded on an exchange, and is responsible for setting prices and stating what can be exchanged.
This can cause problems, especially if an exchange experiences a liquidity crisis. This is what happened to the FTX cryptocurrency exchange in November 2022, triggering a market crash.
Another problem is that because they are centralized, there are some crypto advocates who argue against what they see as the fundamental point of cryptocurrencies - namely, that they are not centralized and are under the full control of one authoritative body. Therefore, there is an alternative, and it comes in the form of decentralized exchanges (DEX).
Simply put, it is an exchange where anyone can exchange anything at any time without being told what they can or cannot bring to the market. dYdX DEX is just one of many decentralized exchanges.
What may make dYdX slightly different from other DEXs that offer crypto traders plenty of options is that it offers users options beyond cryptocurrency trading.
For example, it actually offers the opportunity to bet on whether cryptocurrency prices will rise or fall. This is called margin trading.
Margin traders borrow crypto assets using collateral, and when the collateral falls below a certain level, trades are automatically made to cover the loan. This process is implemented through smart contracts – computer programs that automatically execute when certain conditions are met – based on dYdX on the Ethereum blockchain
Every blockchain-based network needs to have its own native cryptocurrency, and dYdX has the DYDX token. This is used to keep the system running and to pay interest and rewards to investors. There are 1 billion DYDX tokens in total, which will be released in one form or another over the course of five years or so.
The dYdX platform was founded by former Coinbase engineer Antonio Juliano and launched in 2017, with the DYDX token entering the public market for the first time in 2021.
One important thing to note at this point is that DYDX is based on the Ethereum blockchain, which means it is technically a coin and not a token. That said, you will hear mentions of things like DYDX Token and DYDX Token Price Predictions, but these are all wrong.
