Crypto Derivatives Trading Startup dYdX Raises $10 Million

  • Andreessen Horowitz's a16z crypto fund-backed dYdX raises $10 million to develop Ethereum-based app for decentralized derivatives and marginal trading.
  • dYdX uses a fully open-source protocol, so anyone may use or contribute to its codebase to deploy financial apps that don't require intermediaries. 

dYdX, a blockchain startup “building open-source protocols for decentralized financial derivatives and margin trading”, has reportedly raised $10 million from a group of private investors, in order to create programs that let people borrow money from each other without requiring an intermediary.

dYdX's multi-million dollar funding round was led by VC firm Andreessen Horowitz's a16z crypto fund,  Silicon Valley-based Polychain Capital, among others. 

At present, dYdX only has five employees who are developing an Ethereum-based “margin trading protocol” for deploying crypto-based financial products such as interest-accumulating loan programs, “leveraged long positions”, and “short sells”, according to Fortune.

"Decentralized Finance"

As most blockchain-enabled solutions aim to achieve, dYdX’s financial products eliminate the need for third-parties such as brokers, so that transactions may be processed faster and in a more cost-effective manner.

dYdX founder Antonio Juliano was quoted as saying that "decentralized finance will be first real application of blockchain technology” as the distributed ledger’s first (well-known) application began with the peer-to-peer (P2P) electronic cash system known as the Bitcoin (BTC) network.

Other applications of blockchain tech soon followed with the development of decentralized exchanges (DEX) such as the 0x and Kyber projects, Juliano explained. These new DEXs allow people to trade tokens without requiring centralized platforms like Coinbase.

"Next Logical Thing" For Blockchain 

Although the vast majority of digital currency transactions are still carried out on centralized exchanges, Juliano believes DEXs have a lot of potential and “the next logical thing is derivatives”

The former engineer at Uber and Coinbase added that newer types of financial contracts will significantly improve the current “primitive” method of crypto asset trading - which will then result in “less volatility in the underlying market.” dYdX’s project uses Ethereum-based smart contracts to automate cryptocurrency trading and also features trade settlement supported through DEXs, such as those developed by 0x (Paradex), to create financial derivatives.

More Options For Shorting Ether (ETH)

As explained by Juliano, these derivatives assist traders by allowing them to “hedge risk” while also engaging in some speculative investments and/or trading - which “ultimately [helps to] smooth out see-sawing markets.”

The Princeton University computer science graduate further noted that anyone may develop financial products on top of dYdX’s codebase, or software library. In fact, earlier this month a tech firm deployed the first product on the dYdX platform called Expo - which aims to make it easier for investors to short ether.

The San Francisco-based entrepreneur explained: “Basically, Expo abstracts a lot of complications of margin trading away from the user. People don’t have to worry about getting a loan." As CryptoGlobe reported on October 13, ether shorts hit an all-time high as Bitfinex's data on TradingView indicated there were over $60 million in outstanding short interest.