dYdX Review

Looking for a smooth and permissionless trading experience on decentralized exchanges (DEXs)? If so, this dYdX review will introduce you to a platform designed to meet those needs. Utilizing StarkWare's Layer 2 technology, dYdX will further speed up your transactions by processing them off-chain, thus reducing the load on the main blockchain.

That said, dYdX isn't perfect. The platform only supports 143+ cryptocurrencies, which is significantly less compared to 500+ crypto offerings on centralized exchanges (CEXs) like Binance and Bybit. On top of that, unlike Kraken, dYdX is off-limits to US traders.

Still, dYdX is a pretty solid trading protocol in the DeFi world. Let's find out the reasons why in this dYdX exchange review!

Verdict at a glance: dYdX, operating on a layer-2 scalability engine, offers a fast and secure trading environment with advanced tools like margin trading. While the dYdX DEX shines in decentralization, its US restrictions might be a drawback to some traders. It also poses steep learning curves for beginners.

What is dYdX?

dYdX is a decentralized exchange that offers advanced trading options, like margin trading and perpetual contracts. It combines the security and transparency of decentralized platforms with the speed and efficiency of centralized exchanges. Throughout this dYdX review, I’ll explore how such features set dYdX apart from other exchanges.

Also known as the dYdX DEX, the platform was founded in 2017 by Antonio Juliano, a former software developer at Coinbase, a prominent exchange, and Uber. Antonio brought his knack for developing Web3 tech into his own venture, determined to democratize global access to financial opportunities.

Antonio’s vision has been strongly backed by many, leading to a recent $65m Series C led by Paradigm. So far in its development, the dYdX DEX has received capital injections from a range of top-tier investors and market makers, including Anderson Horrowitz, a16zcrypto, Polychain, and Cronos.

dYdX's team, which consists of 50+ members and is based in the Big Apple, continues to make breakthroughs with its thread of innovations. One of its biggest waves was when dYdX's exchange volume tipped over $1 trillion just a few years after the release of V3.

Following V3's success, the DEX launched dYdX V4 Chain, achieving what its previous system could not: faster transaction times, a fully open-source ecosystem, and unlimited market listings—to name a few. With an accumulated dYdX trading volume of $220 billion in the V4 Chain, the DEX introduced a new, forward-looking tech this fall: dYdX Unlimited.

Although dYdX Unlimited will mark the end of the V3 protocol (though V4 will still remain operational), the team promises to set a new standard in Web3 trading with this version. Among its standout features is dYdX Bridge, a smart contract protocol that connects Ethereum to the dYdX Chain for more powerful trading.

This latest release is anticipated to increase dYdX's exchange ranking, as the platform aims to become a leading player in DeFi. Currently, dYdX's exchange ranking sits in the top 110 (based on BitDegree's tracker), securing its status as a mid-tier exchange. Let's see what else to expect in this dYdX exchange review.

dYdX Review: PROS

dYdX exchange volume's trailblazing progress over the years suggests that the platform's next-gen trading features have attracted a strong user base. In this dYdX review, I'll dive into what makes such features so appealing.

Starting from how the dYdX DEX manages to double transaction speed with StarkWare technology to the strong community governance backed by the DYDX token, I'll help you decide if the DEX is worthwhile in this dYdX exchange review, compiling my personal findings with user testimonials.

Layer 2 Scalability via StarkWare

Trading on DEXs is often met with the hindrance of lower transaction speed, especially when compared to high-performing CEXs like Bybit. dYdX aims to resolve this issue by integrating StarkWare's STARK (zero knowledge) rollups, which I will explain in this dYdX review.

In its basic concept, Layer 2 is a secondary protocol built on top of an existing blockchain^[1]. StarkWare's L2, in dYdX's case, is built on top of the powerful Ethereum blockchain. By handling transactions off-chain, dYdX's L2 protocol can deliver higher transaction speed by reducing the load on the main blockchain.

Taking advantage of ZK-Rollups, StarkWare's L2 solution also plays a central role in dYdX's ability to provide more cost-effective transactions. How so? This approach bundles multiple transactions into a single proof, reducing the strain on the Ethereum network while lowering gas fees, as you'll find highlighted in many user dYdX exchange reviews.

In addition to reducing transaction costs, the Layer 2 solution supports cross-margin trading. Users can manage multiple positions from a single margin account, potentially improving capital efficiency and reducing the risks associated with holding multiple positions.

dYdX’s choice of utilizing ZK-Rollups over other Layer 2 solutions, such as Optimistic Rollups, helps deliver immediate transaction finality. Consequently, trades are processed securely without delay, streamlining the overall trading experience.

By incorporating StarkWare’s scalability technology, dYdX enhances transaction speed and efficiency, making the DEX accessible to a broader range of users. However, L2's improvements in speed and scalability come with the cost of security. Thankfully, dYdX seems to have addressed that problem, which I will share in the upcoming section of my dYdX review.

Non-Custodial Asset Management

dYdX's decentralization shines through with its non-custodial approach to security. Simply put, a non-custodial system allows users to retain full control over their assets.

Instead of depositing funds onto the platform, traders can use cold wallets like Ledger Nano X or Trezor Safe 5 to manage their private keys securely. That way, users can minimize the risks of asset hacks, while dYdX can prevent platform failures that typically affect centralized exchanges.

Moreover, on dYdX, trades are executed directly from users' wallets, ensuring both security and privacy. The platform's hybrid model combines on-chain settlement with an off-chain matching engine, offering deep liquidity and low slippage. As a result, transactions are executed faster and more efficiently without compromising security.

On top of that, dYdX's non-custodial setup also supports cross-margin trading, which is often highlighted in user dYdX reviews. Why? Well, dYdX's cross-margin trading enables users to open and manage several positions simultaneously to improve capital efficiency.

Within its custodial system, dYdX also seamlessly integrates Zero-Knowledge Proofs (ZKPs), allowing one party to verify a transaction without revealing the underlying data, adding privacy and protection^[2].

Overall, dYdX's non-custodial model aligns with the core values of DeFi, as users won't have to rely on a specific entity to protect their assets. Combined with the seamless integration of high-performing features like ZKP roll-up, dYdX as a custodial decentralized exchange can be worth trying out for traders prioritizing both security and flexibility.

Advanced Trading Modes

One of the strongest aspects of dYdX is its range of advanced trading tools, making it a standout in any dYdX review. Traders can access perpetual contracts with no expiration dates and a leverage ratio of up to 25x (selected contracts only), providing options for both high-risk and conservative trading strategists. While high-leverage trading can amplify profits, you need to also understand that it may increase the potential for losses, so careful management is crucial.

Additionally, traders on dYdX can open positions across 143+ markets. Its cryptocurrency selections include the following examples:

• BTC;
• ETH;
• BNB;
• DOGE;
• LTC; 
• AAVE;
• ATOM.

Furthermore, dYdX offers access to over 35 derivative pairs (as of writing), like BTC-USD and ETH-USD, or smaller altcoin pairs pegged to UNI and CAKE. The platform supports various order types like stop-limit and trailing stop orders to help traders automate their strategies with controlled risk.

As I've mentioned in this dYdX exchange review, cross-margin trading is also available. For capital efficiency, traders who prefer opening multiple positions under one margin account can go with this trading mode. This will reduce the risk of liquidation and optimize collateral. However, for more focused risk management, isolated margin trading is recommended, but stay cautious.

Finally, traders can opt between long or short positions when trading perpetual contracts, which is ideal if you're looking for a more advanced method of trading. Most importantly, if you're a budget-conscious trader, dYdX's Layer 2 integration helps reduce gas fees for your trades.

Strong Community and Governance

When you're reading user dYdX reviews, you'll probably come across its native token that powers the entire ecosystem. The token shares the same name as the exchange, DYDX.

Let me introduce you to the DYDX token a bit. It is an L1 protocol token on the dYdX Chain, which is a proof-of-stake blockchain network built on top of the Cosmos SDK while leveraging the consensus mechanism of CometBFT.

Holders of DYDX tokens can obtain special privileges. They can either stake their holdings or run a validator to earn 100% of the protocol fees, mainly in USDC, for securing the network.

DYDX tokens also have governance value. Token holders can vote on protocol updates, trading parameters, and platform improvements, either through Snapshot or on-chain vote. Having this level of transparency empowers token holders to influence the direction of dYdX and its development.

Additionally, active participation through governance proposals strengthens the platform's connection to its users. DYDX token holders are incentivized to engage, driving long-term commitment and ensuring the platform's growth aligns with user feedback.

More than that, dYdX's governance system aligns with the core principles of DeFi, ensuring that no single entity has excessive control and transparency. Instead, power is distributed across the community, promoting fairness and transparency. Users can have a more meaningful role with this decentralized approach, especially when it comes to shaping the platform's trajectory and reinforcing trustless systems.

By empowering its community and decentralizing decision-making, dYdX has set up a flexible and responsive ecosystem. Not only does the governance structure help increase dYdX's exchange ranking, but it also strengthens the platform's standing in DeFi. As a DEX, dYdX is committed to creating a sustainable, user-driven environment through its native token.

Mobile Trading Experience

While compiling my dYdX review, I found its mobile app worth mentioning, as its functionality mirrors the website interface almost perfectly.

The dYdX DEX mobile app, available on iOS and in beta for Android, offers traders seamless access to their portfolios. With over $740 million of dYdX exchange volume (as of writing) processed since the launch of dYdX Chain (v4), the mobile app also supports 143 markets and up to 25x leverage.

Similar to the web version, the mobile functionality allows users to trade, track prices, or manage balances effectively, with the added convenience of doing it anywhere and anytime.

One of the app's key strengths is its intuitive interface and real-time market tracking, allowing users to easily monitor positions, browse assets, and link crypto wallets. The dYdX DEX app integrates effortlessly with the hot and cold wallet of your choice, such as Ledger Nano X or Ledger Nano S Plus, ensuring extra protection while enabling access to trading and staking rewards.

As noted in user dYdX reviews, while some advanced features like in-depth analysis tools are still in development, the app regularly releases product updates based on user's feedback.

With its open-source code available on GitHub and constant updates, dYdX ensures its mobile app remains feature-rich and accessible to a growing user base, enhancing the trading experience on both iOS and Android platforms.

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dYdX Review: CONS

While dYdX offers a decent range of advanced trading features and a non-custodial asset management framework, the platform is not without limitations. So, allow me to cover the platform's drawbacks in this dYdX review and how they might affect the user's experience.

US Market Restriction

Due to regulatory barriers, dYdX is currently unavailable to US traders. But isn't the DEX based in New York? Well, I was confused as well when writing this dYdX review, but obtaining operating licenses in jurisdictions as stringent as the US is notably challenging.

Understandably, excluding American users is rather a miss. The US is one of the largest crypto markets, and the geographical lock may impact dYdX exchange volume and overall liquidity. So, for US traders looking for alternatives, I'd suggest sticking to highly reputable CEXs like Kraken or Coinbase.

	KRAKEN	COINBASE
Overall Score	9.1	8.6
Best For	Best for Beginners	Buying, Selling, and Managing Cryptocurrencies
Operating Countries	United States, Germany, United Kingdom, France, Canada, + 190 more	United States, United Kingdom, Germany, Canada, France, + 100 more
Latest Coupons	Visit Site All Kraken Coupons	GET UP TO $50 IN BTC All Coinbase Coupons
Verdict	One of the best crypto exchanges.	A reliable, well-known and respected cryptocurrency exchange platform.
	Visit site Read review	Visit site Read review

Table: Kraken VS Coinbase comparison.

Furthermore, the platform's legal restriction in the US not only affects its user base but also hampers governance participation. Since DYDX tokens allow holders to vote on important protocol decisions, the exclusion of US traders may weaken the decentralized governance system, limiting input from a major segment of the global crypto community.

But then again, navigating the complex US regulatory landscape has been a blocker for many DEXs, including dYdX. Until the platform finds a way to comply with US regulations, it will miss out on the opportunity to tap into this critical market. Overcoming this barrier is crucial for expanding dYdX’s influence and growing its user base globally.

Not Beginner-Friendly

Although dYdX is a robust DEX for derivatives trading, it is not exactly beginner-friendly, especially with its removal of spot trading in 2021.

For novice traders and even those with years of experience, spot trading is generally regarded as a safer entry point. It lets you buy or sell cryptocurrencies at market prices, and most people comfortably choose to hold their assets for strategic exits. In essence, there is less risk involved.

With derivatives trading, though, you can't exactly do that. For instance, when you trade a perpetual contract on dYdX, you're not actually holding the actual crypto asset but, instead, a contract that speculates its future price.

If you've been in the game for some time, you probably understand that the crypto market is too volatile to predict. This is why perpetual contracts are considered to be highly risky, as they require an excellent grasp of the market.

However, if you're eager to explore dYdX's derivatives trading, the platform offers a risk-free test environment called Testnet. Here, you can experiment with advanced order types, including limit and market orders, and try out long or short strategies. It functions pretty much like the actual interface you see when you're trading.

User dYdX reviews who are getting started with derivatives trading also note the importance of finding a reliable source to support your learning journey. Both dYdX Academy and BitDegree provide plenty of resources to help you understand the advanced mechanics of the crypto world. Even better, BitDegree's Missions enable you to learn all those technical concepts and earn various Web3 rewards, making learning both practical and rewarding.

dYdX Exchange Fees

After looking at the pros and cons in this dYdX review, let’s look at the platform's transparent and competitive fee structure, which is based on the maker-taker model. 

Makers who add liquidity benefit from lower dYdX exchange fees compared to takers. The fee structure is tiered, depending on your trading activity over the past 30 days and the types of orders you place.

Typically, as a maker, expect to pay around 0.2% in trading fees. The more your trading volume increases, the lower your fees can go, potentially reaching as low as 0.0%. Likewise, if you're a taker, your trading fees begin at 0.5% and may decrease to 0.2% with the more trading volumes you accrue.

Uniquely, dYdX V4 incurs zero gas fees for submitting or canceling orders, a benefit attributed to its Layer 2 scaling solution with StarWare. The said technology minimizes transaction costs users typically face on other platforms.

While there are no dYdX exchange fees for deposits, you'll still need to cover the associated gas fees, which are paid to Ethereum miners. Plus, dYdX may waive gas fees altogether if you're a new user and making a minimum deposit of 1,000 USDC. Subsequent deposits of 2,000 USDC or more will also qualify for this exemption.

Followingly, consider the withdrawal costs. Users are subject to standard crypto network fees for withdrawals, and a fast withdrawal option on Layer 2 perpetual trades incurs a 0.1% fee.

As for token swapping, there may be associated fees, too. That said, if you're swapping ETH, USDC, or DAI, you don't have to pay any fees.

For more detail, let's take a look at the following breakdown of dYdX exchange fees.

Table: dYdX exchange fees.

Also, take note that due to recent changes, the platform’s fee structure has further been lowered for users with monthly trading volumes below $100,000, positioning dYdX as a more affordable option for those not trading in high volumes or if you’re just testing the platform out.

How to Sign Up on dYdX

Now that you have insights on dYdX's stronger and weaker points, perhaps you’re curious about how to get started on the platform. No worries, aside from the dYdX review, let’s also explore the step-by-step guide for signing up. 

Step 1: Get started with dYdX by selecting a compatible wallet. The platform supports both hardware wallets like Ledger Nano X and Trezor Safe 5, along with software ones like the Coinbase Wallet. The wallet you choose will be used to interact with the platform while ensuring that your funds remain protected and intact.

Step 2: Once your wallet is ready, visit the dYdX website and connect your wallet. Click on the "Trade" button at the top right corner, then follow the on-screen prompts to link your wallet.

Step 3: After connecting your wallet, it's time to deposit funds. Navigate to the "Portfolio" section of the interface, click on "Deposit", and enter the amount of crypto asset you want to fund your wallet with.

Step 4: Approve the transaction on your wallet to complete the process. Keep in mind that while dYdX does not charge deposit fees, you'll still need to cover standard network fees.

Step 5: Once your wallet is funded, select your preferred trading pair from dYdX's available markets. Go to the "Trade" tab to browse through available trading pairs, such as ETH-USD, BTC-USD, or LINK-USD. After selecting a pair, you will see real-time market data, price charts, and other key information. Review the data carefully before placing a trade.

Step 6: Now that you’ve selected a trading pair, you can begin placing trades directly from your wallet. 

You can place different types of orders, such as market orders or limit orders, depending on your trading strategy. Once your trade is confirmed, the transaction will execute without requiring further deposits onto the platform.

Step 7: If you want to explore advanced trading options, dYdX provides access to margin trading and perpetual contracts. These advanced features can be found under the "Trade" tab, where you can manage your leverage and position size.

Take note that perpetual contracts on dYdX allow up to 25x leverage (except for ETH and BTC markets, where the maximum leverage is 20x), providing more opportunities for experienced traders to increase potential returns. You can also monitor your equity, margin usage, and liquidation price in real time to ensure that your positions are well-managed and within your risk tolerance.

Pros

• Very low trading fees
• Exceptional functionality
• Mobile trading app

Main Features

• Very competitive trading fees
• An intuitive mobile app
• Up to 100x leverage available

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Pros

• A very well-known crypto exchange platform
• More than 500 different cryptos available
• Two-factor authentication

Main Features

• Over 500 different cryptocurrencies available
• Strong security
• Small withdrawal fees

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Pros

• Fully reserved and transparent
• Multiple tradable asset classes
• Early new token support

Main Features

• 265 supports cryptocurrencies
• Secure & transparent
• Fully reserved

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Conclusions

dYdX keeps things simple with its low fees but also spices things up with its advanced trading tools. As mentioned in this dYdX review, transactions are blazing fast. On top of that, dYdX's non-custodial system gives you personalized control over how you manage your assets.

That said, if you're a beginner, you might want to think twice before using dYdX's advanced trading modes. The platform's US restriction is also another downside to consider.

If you're looking for an exchange that is friendly to both beginners and experts, check out Binance. And, if you're a US trader, consider trying out alternatives like Kraken. But, if you're after a DEX that gives you full control and advanced features, maybe give dYdX a try.

The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.

Scientific References

1. C. Sguanci, R. Spatafora, A. M. Vergani: ‘Layer 2 Blockchain Scaling: A Survey’;

2. C. D. Pop, M. Antal, T. Cioara, et al: ‘Blockchain and Demand Response: Zero-Knowledge Proofs for Energy Transactions Privacy'.