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dYdX Review: Pros, Cons and How It Compares

Our comprehensive dYdX review looks at their interest rates, usability, security, reputation and fees. We break down every element of the service, so that you can make an informed decision.

  • dYdX
  • Dean Fankhauser
    By
  • Posted
  • Bitcompare score
  • Go to sitedYdX

Our take

2.3
Bitcompare score

dYdX review

dYdX is a decentralised trading platform that offers spot trading, margin trading, lending and borrowing. It’s build on smart contracts with Ethereum in a completely decentralised way.

It's built by a team in San Francisco that's funded by some of Silicon Valley's top investors. They launched in 2017 and have managed to raise two rounds of funding to continue executing on their vision of DeFi.

They're significantly smaller in users compared with other DEX's, however, they seem to be gaining traction with some of their DeFi-based lending and borrowing products.

Borrowing with dYdX

Currently, dYdX supports ETH, DAI and USDC. It has a minimum collateralisation of 125% and has to be maintained above 115% to prevent liquidation.

The product connects directly to your Ethereum wallet, allowing you to borrow directly into it.

In order to use this product you’ll need an Ethereum wallet. We’d recommend using Metamask or Coinbase Wallet. In our case, we tested this with Metamask on the Chrome browser and Coinbase wallet on our iPhone.

Its borrowing interface is fairly straight forward on both mobile and desktop. You can simply select USDC, DAI or Ethereum to borrow. You then select the amount you want to borrow and the account you want to collateralise with.

The transaction takes less than a minute in most cases, which is pretty astonishing when you compare that with the traditional finance industry.

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Lending

dYdX have very competitive interest rates and are constantly rated amounts the top interest accounts for ETH, USDC and DAI.

Like most DeFi lending platforms, the rates fluctuate wildly. In our testing we were earning up to 27% on DAI at one point. At the time of this writing, it’s now 3.13%, which is still quite competitive.

In order to earn interest with dYdX, you’ll need an Ethereum wallet like Metamask or Coinbase Wallet. Once connected, you simply move your assets into dYdX and it’ll automatically start earning interest in real time.

One of the powerful things about DeFi is that you can take your assets at any time and receive all the interest up to that minute.

The dYdX team

dYdX was founded by Antonio Juliano who was previously a software engineer at Coinbase and Uber. He’s joined by a team of 8 others that are Silicon Valley based.

Advisors of dYdX are Silicon Valley veterans from companies like Google, Coinbase and Airbnb.

They’ve also got an all-star set of investors including Andreessen Horowitz, Polychain Capital, Bain Capital, Craft Ventures, Kindred Ventures and other top VC firms based in Silicon Valley.

dYdX’s history

The platform was launched in 2017 and received venture funding of $2m from A16z in December 2017. Since then dYdX has grown from being a decentralised exchange to offering a larger range of financial products such as lending and borrowing.

The service has grown, leading to a subsequent round of $12m in October 2018. They’ve hired a larger team, launched new products and are currently hiring more staff to help them scale further.

Why use dYdX

The only reason to use dYdX over another DeFi product is because it offers more competitive rates. Unfortunately, rates change almost by the second, so while they may be best right now, five minutes from now, someone else could be more competitive.

The product is decent, however, it’s not great. It’s rough around the edges, feels quite dated and is definitely geared towards someone who is very familiar with decentralised finance. It provides very little in regards to guides and help, so I definitely wouldn’t recommend this to someone who isn’t comfortable with Ethereum-based wallets and already using cryptocurrencies.

There are centralised options like BlockFi which generally offer better rates and more stability. It’s far easier to use as well.

If it’s DeFi only that you’re looking for, it’s an ok option, however, putting rates aside, we’d choose Dharma as a product over this. Dharma is far more polished and easy to use.

dYdX support

dYdX offer email support. While fairly responsive, it’s not exactly sophisticated. Should the service be hit with an attack or there be another crypto disaster of some sort, we can imagine this would not scale well. We couldn’t even find a FAQ section.

Their support services leaves us a little concerned to be honest. It seems more like an afterthought. Particularly for a company with this level of funding.

Ease of use

If you’re already a DeFi user, this should be pretty straight forward. Connect an existing wallet and you’re ready to go. As I mentioned earlier, it’s not the nicest interface, but it roughly makes sense.

If you’re not an experienced DeFi user, we don’t recommend this. If you want to simply earn interest, then go to BlockFi. They generally have better rates and don’t require strange Ethereum wallets that aren’t exactly easy to set up and use. If you don’t understand cyber security, they’re also too risky.

How to set up a dYdX interest account

  1. Make sure you have an Ethereum wallet like Metamask or Coinbase Wallet
  2. Go to dYdX website
  3. Click on ’Start lending’
  4. Connect your Ethereum wallet
  5. Click ‘Deposit’
  6. Select relevant currency
  7. Select relevant wallet
  8. Enter the amount
  9. Click ‘Deposit’

How to set up a dYdX loan account

  1. Make sure you have an Ethereum wallet like Metamask or Coinbase Wallet
  2. Go to dYdX website
  3. Click on ’Start borrowing’
  4. Connect your Ethereum wallet
  5. Click ‘Borrow’ in the top navigation
  6. Select relevant currency
  7. Select relevant wallet
  8. Enter the amount
  9. Click ‘Borrow’

Pros and cons of dYdX

Pros

  • Some of the best interest rates during our tests
  • dYdX is a trustless platform with no counterparty risk. You are in control of your funds all the time.
  • By aggregating both spot and lending liquidity across multiple exchanges, dYdX offers high overall liquidity to the user.
  • With its Ethereum smart contracts being audited by Open Zeppelin and tested on the ground with more than 3 billion US dollars in transaction volume flowing through it so far, the platform has proved that it is highly secured.
  • The advanced matching engine and low-latency order book of dYdX offer a robust trading experience.
  • You can trade on the exchange’s web interface or by leveraging its comprehensive APIs.
  • The platform is highly accessible. It does not require any sign-ups.
  • Using dYdX, you can do margin trading with up to 4x leverage backing your positions with any supporting collateral.

Cons

  • The number of trading currencies is limited with many in-demand pairs absent.
  • There are more polished options in the DeFi space.
  • For newly-initiated DeFi users, the platform may prove counter-intuitive.
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Frequently asked questions about dYdX

We’ve compiled some answers to questions we often get. Should you have any other questions, feel free to reach out below in the comments.

What currencies can I use on dYdX?

Currently, dYdX supports DAI, USDC and Ethereum. We're not aware of them adding any more in the near term.

Is dYdX safe to use?

If you're new to decentralised finance, it could be a better option to use something like BlockFi. It's easier and their rates are generally higher. If you're comfortable with Ethereum wallets and are capable of keeping your keys safe, then dYdX is generally quite safe to use.

What can I do with dYdX?

dYdX is a decentralised exchange, lending and borrowing platform. The entire platform is based on Ethereum and it's decentralised which means you need an Ethereum wallet to use the service. You can exchange DAI, USDC and Ethereum. You can also borrow and lend their currencies at market rates.

Do I have to lend or borrow for fixed terms?

No, you don't need to lend or borrow on fixed terms. You earn and pay interest almost in real time. This means that should you withdraw your funds after two weeks, you will have access to that interest.

What are the Collateral Requirements for dYdX Borrowing?

The minimum collateralization requirement is 125%. However, the level needs to be maintained above 115% to prevent liquidation. The borrowing interface is intuitively designed. You can access it through your mobile as well as desktop. All you need to do is select among USDC, DAI, and Ethereum to borrow. The transaction does not even take a minute in most cases.

What is the Lending Interest Rate?

The lending interest rates fluctuate. Yet, the platform is among one of the top interest accounts for ETH, USDC, and DAI. Individual testing has shown the interest rate going up to 27% on DAI at one point. You must have an Ethereum wallet to earn interest with dYdX. You are free to withdraw your locked assets any time you want, along with all the interest that has been accrued against your account up to that minute.

What Order Types are Allowed in dYdX?

It allows three types of order: market, limit, and stop. The market order allows you to execute the buy or sell of a given asset immediately at the current market price. The limit order allows to buy or sell at a specified or better price. In advanced limit order options, you can add advanced options like Good-Til-Date, Post-Only, or Fill Or Kill. A stop order executes when the index price crosses a specified stop price. The platform has recently launched the provision of Trailing Stop Loss orders that enable traders to protect their gains by adopting a position to stay open and continuing to profit as long as the price is moving in their favor.

What are the Fees of dYdX?

For spot and margin trading pairs, the maker fee is 0%. Whereas, for perpetual markets, it is -0.025%. For the spot and margin trading pairs, the taker fee is higher than 0.3% or variable gas cost. For perpetual markets, the taker fee is higher than 0.2% or variable gas cost.

What is Minimum Order Size?

For ETH-DAI and ETH-USDC pairs, the minimum size for the market or fill-or-kill orders 1 ETH. For DAI-USDC, it is 200 DAI. The minimum order size for the market or fill-or-kill orders for BTC-USD, ETH-USD, and LINK-USD pairs is 0.01 BTC, 100 USD, and 15 LINKs, respectively. 

For perpetual pairs, the minimum order size on limit orders is 0.75 BTC, 7500 USD, and 600 LINKs for the pairs of BTC-USD, ETH-USD, and LINK-USD.

dYdX summary

As an exchange

dYdX just isn't competitive as an exchange in our opinion. When testing, it was far from intuitive and they were severely lacking in features. There are far better options for exchanges whether they're decentralised or centralised

As a lending platform

dYdX offers competitive rates and is fairly easy to use for those who are used to DeFi and Ethereum-based wallets. If you're less comfortable with that, then we recommend using a centralised service like BlockFi who generally offer more competitive rates and are far easier to use

As a borrowing platform

dYdX offer fairly competitive rates for loans and the platform is easy to use if you're used to DeFi and Ethereum-based wallets. It's near instantaneous and because it's decentralised, it's secure, so long as you know what you're doing. Again, BlockFi generally offer better rates and an easier to use experience in most cases.

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Our dYdX score

2.3
Bitcompare score
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