AMA#2 - Antonio Juliano, Founder of dYdX

Bankless AMA - Antonio Juliano, Founder of dYdX Antonio Juliano, the Founder of dYdX, arrives at the Bankless Nation for an AMA! dYdX is a non-custodial trading platform on Ethereum, featuring a lot of cutting edge trading features meant to mimic the legacy system, but in the DeFi world! ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⚔️ GODS UNCHAINED - TRADING CARD GAME https://bankless.cc/godsunchained - you own the cards - start a free account, play and trade https://godsunchained.com/! 🧙‍♀️ POLYMARKET - BET ON CRYPTO https://bankless.cc/polymarket - bet your beliefs! - use it to bet on DeFi outcomes https://bankless.substack.com/p/how-to-bet-on-defi-with-polymarket! 🌈 AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK https://bankless.cc/aave - earn some interest! 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY https://bankless.cc/AMPL-MINE - learn about this experiment! ----- We do AMAs every 2nd and 4th Thursday https://bankless.substack.com/p/announcing-bankless-amas-every-2nd of the month. Become a Bankless member https://bankless.substack.com/subscribe to get access to the Zoom Webinar and ask questions to future AMA guests like Antonio directly! Here's the video recording https://www.youtube.com/watch?v=VvTe1fczn-o&feature=youtu.be. Antonio is the founder of dYdX, a popular trading, margin, and and derivatives market on Ethereum. The Bankless Nation asks him questions about: Spot trading Margin trading Perpetual swaps Borrowing & Lending The complete dYdX stack Regulatory Compliance, KYC Starkware and L2's dYdX token?? And more.... ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Hoffman?

  The.

• 3:43David Hoffman?

  Three, two, one.

• 3:46Ryan Sean Adams?

  Bankless Nation, welcome to our second live video AMA. I am joined by DYDX's Antonio Juliano, who is the founder of DYDX.

• 4:00Ryan Sean Adams?

  Just hold on one minute. I'm gonna mute myself on YouTube. I hear it. I hear an echo, but I'm good now. Antonio, how are you doing? Welcome to the Bankless Nation. Are you ready to be put on the hot seat? You ready for some AMA questions, sir?

• 4:12Speaker 02

  Doing well. Yeah, I'm ready. Excited. Excited to answer everybody's questions.

• 4:16Ryan Sean Adams?

  Awesome. All right. So I think this is actually the first time that we've had you in front of the Bankless Nation in like podcast form or anything, but we've run a number of articles about DYDX, specifically some of the perpetual features and things that we want to dig into today. I'm sure the community will want to dig into as well. So I'd love to start with an introduction. Before we do so, though, a few housekeeping items. So first, if you are tuning in live on Periscope, head on over to the YouTube channel. That way, we can see some of your questions as they come in and get those questions answered. This is an AMA, so it's interactive. So if you have questions for Antonio during the conversation,

• 4:58Ryan Sean Adams?

  please go ahead and post those on YouTube. Also, for the Bankless Nation members who are in Discord, you can post questions in Discord as well. You can also join us in Zoom. We will try to prioritize your questions first. And this is probably going to go about an hour. So it is 2:00 PM Eastern for me. We'll probably go until 3:00 PM Eastern. So we'll try to like throw in kind of a halftime and a 15 minutes left signals for you so you can get all your questions in. So that's it as far as housekeeping. Antonio, let's continue with an introduction. So how the heck did you find yourself in crypto, sir?

• 5:39Speaker 02

  Yeah, absolutely. So how did I find myself in crypto? I've been in crypto for a little over five years now, actually. Pretty much my entire professional career, I've been in crypto. And the way I got into crypto was different than I'd say the way most other people got into crypto. So I started my career at Coinbase. I was a software engineer there, and that was basically my first job right out of the college. And I got to Coinbase very differently than how pretty much everybody else got to Coinbase. Like, most people were like super into Bitcoin, which was like basically All there was at the time, um, and that kind of naturally led them to working at Coinbase. But I didn't know anything about cryptocurrency. Um, and then Coinbase was just kind of one of the like 20

• 6:20Speaker 02

  companies I applied to my senior year of college. Uh, but I was really impressed with them, really impressed with like their interview process. They kind of do this like unique thing in their interview process, which D Y D X also does, which is like called a work trial. So like basically, uh, during my senior year of college, they like flew me out to San Francisco and I, I basically just like pieced out on classes for a week. Um, and then I like worked full time at Coinbase, uh, for my work trial and was just really excited about everybody's enthusiasm for, for Bitcoin and like the space. And I had no idea what it was, but like clearly these people were like very smart and like very passionate about it. Um, so kind of just decided to take a leap of faith um, and go work with these people on this crazy thing.

• 7:00Ryan Sean Adams?

  So this was kind of like random chance of the universe, right? That like you just got interested. Okay. And what did your family think when you told them, hey, I'm going to like, of all of the, uh, companies I could join, I'm going to do the, the Bitcoin thing. What did your family think about that decision?

• 7:16Speaker 02

  They certainly had a lot of questions. I probably explained Bitcoin as, as probably a lot of you all have as well, uh, to my family like a million times. Um, but yeah, they were definitely pretty supportive of it. Um, I mean, I think at that Coinbase, at that time, like Coinbase was like kind of a legit company, like they'd raised like a good amount of money at that point. So it was like, okay, clearly there's like something going on here. We don't quite understand what's going on. Um, but this like seems like a reasonable company. So yeah, go do your thing. Um, and I guess they, they were definitely supportive of it.

• 7:47Ryan Sean Adams?

  That was quite the start. Okay. So you're, you're at Coinbase, your first job sort of out of college, uh, you're getting a feel for it. Your first exposure to crypto, it sounds like you fell down the rabbit hole there in some way, and then went even deeper. So, so then what happened? You're at, when you're at Coinbase?

• 8:02Speaker 02

  Yeah, absolutely. So I joined Coinbase and just Coinbase at the time had a lot of just like the absolutely best people, like a lot of them in crypto at the space were like all at Coinbase like during that time. And this was like back in 2015 or so. So it was a really great place to be. And it was basically just like, you know, I think we still do this at D Y D X, but especially then at Coinbase, like we just talked about like Bitcoin, like literally all the time. And it's like heights up on like the price and stuff like that and like things that were going on in the space. Um, and it really just felt like this little like, I don't know, like club almost where it's like, we were all super excited about this thing that nobody else like even knew what it was.

• 8:39Speaker 02

  Um, so we all just talked about it quite a lot. And it was like, you got to like, listen to things like Olaf, like Carlson Wee, like giving like a presentation over lunch, like Fred or some like, you know, giving a presentation on Ethereum early on. And then I think like the thing that really did it for me in terms of like, just really selling me on the space, um, was Ethereum. Uh, probably like it was for again, like a lot of you, um, but, but basically at the time that was like right when Ethereum was kind of coming out, like the Ethereum ICO happens. Um, you know, the, the main net network was launched like during my time at Coinbase and then Coinbase also started supporting ETH. As their like second crypto asset after Bitcoin during my time at Coinbase.

• 9:20Speaker 02

  And this was like really a big change for all of us like at, at Coinbase at the time. Because like I've been saying, it was basically like a hundred percent like interest in Bitcoin at the time. And it was just like a hundred percent clear to us that like Bitcoin would be the only interesting cryptocurrency ever. Just like, of course it like has the network effects, like. There were any other cryptocurrency that were doing something interesting. Well, like obviously why wouldn't Bitcoin like just adopt the features? Um, and then like start doing itself, it itself with its like bigger network effects. So it was just a hundred percent clear to us, uh, that Bitcoin was going to be the only interesting thing ever in cryptocurrency. And of course we were wrong. Um, and you know, let's see, we can all know what's happened since then.

• 10:01Speaker 02

  Uh, but during this kind of like the launch of Ethereum, uh, you know, that's when I think it took all of us just a long time to like wrap our heads around like what exactly like Ethereum was. Just kind of this concept. That like you can write these programs that execute deterministically like on a blockchain and they can be anything, right? Like it's it's totally its own like smart contracting language and everything like that. And I think it took me probably like six months or so to like really wrap my head around that. And just had a really great opportunity to like be at the forefront of like, like I said, like Olaf and Fred, like giving presentations. Like we had Vitalik come in really early on and like talk to us about smart contracts. We had like Joey Krug like come in and give us like a walkthrough on like creating like our first smart contract, all that kind of stuff.

• 10:45Speaker 02

  Um, and then after I feel like I I kind of wrapped my head around like Ethereum and that you could just for the first time, create these programs that execute on like this totally permissionless decentralized ledger. It really just struck me that this is just like a paradigm change in computing, like period. And that's like what really like got me excited about like working in the space.

• 11:06Ryan Sean Adams?

  Very cool. All right. So programmable money use cases, I guess, pulled you the rest of the way down the rabbit hole. So Antonio, I want to get to the questions because this is for the bankless nation to ask you questions. And I've got a first question from um, Jesus Perez in the bankless community. And he wants to know, to understand the differences between perpetuals and margin trading. So like when to use margin trading and when to use perpetuals specifically. And you know what I think would be useful too, as maybe we can use this question to to start with, but

• 11:47Ryan Sean Adams?

  is for you later to maybe describe some of the core products that DYDX actually has. Because we have a lot of people here that are very familiar with DeFi, very familiar with crypto. But um, they haven't necessarily used some of these sorts of, you know, perpetual products and margin products that are pretty standard in uh, in other areas of traditional finance. So why don't you start with that question of when to use margin trading and when to use perpetuals? What's the difference?

• 12:19Speaker 02

  Yeah, absolutely. I can start with that. And maybe actually, I'll just start with just kind of like the products that D Y D X offers and then

• 12:24Ryan Sean Adams?

  Okay.

• 12:24Speaker 02

  Describe like, you know, how they work and then like when to use them. So, so yeah, D Y D X basically is obviously a decentralized exchange, but our main wheelhouse and what we're kind of focusing on is more advanced types of financial products. So we have three, well, actually, we have five main products on the exchange. So we like support quite a lot of stuff. Um, so first is just spot trading. If that sounds fancy to you, it's not. It's basically just like buying and selling like you would do like on a Uniswap or a Zero X or like anything else. You can do that on D Y D X too. Um, the other two kind of more basic things that you can do are you can lend funds, very similar to like a compound. You just kind of deposit your funds on D Y D X. They passively earn interest over time. They're kind of like lent out to margin traders.

• 13:07Speaker 02

  You can borrow funds directly to your wallet. Again, very similar to like what you can do on a compound. Um, so these are kind of like the three things that we support that are like relatively standard like in a DeFi space. Like you've probably done them on other decentralized platforms. But like our, our real kind of like the special sauce of D Y D X is these more advanced financial products. And those two are margin trading and then perpetuals trading, as you just mentioned. Um, so kind of getting into like what each of those are in turn. So margin trading, all it is, is trading with borrowed funds. So, and you basically will use that to acquire leverage on cryptocurrency and all leverage is, it sounds fancy, but the best way to think about it is you basically just multiply your gains or losses by like a certain multiplier.

• 13:51Speaker 02

  Uh, and you can also like take short positions on cryptocurrencies. So D Y D X makes this like really easy to do on our margin product. Uh, you can go basically like up to five X long or up to four X short, um, on Ethereum and then die in U S D C or what we support there right now. Um, and basically what's going on behind the scenes is when you're kind of trading on the margin product, you're interacting with like the lending and borrowing pools, uh, to just basically like borrow funds behind the scenes. And that's how you kind of acquire the leverage. So that's the first product. The second product.

• 14:23Ryan Sean Adams?

  So before we get to the perpetuals, Antonio, just a quick recap. So you've got spot trading and then you've got lending and borrowing. And those first three, were they necessary in order to build the fourth that you were talking about, which is the, the margin trading piece?

• 14:37Speaker 02

  Yeah, yeah, that's a great point, actually. And they basically weren't necessary to kind of build the other points. Maybe if I were to like, take a step back and just like, say how I like, think about like, the DeFi space and then just kind of like, finance in general. So I really think of like, DeFi and then like, finance in general as like, a stack. So it's basically like, at the base layer of the stack, you have things like money, so things like crypto assets, which like Bitcoin and Ethereum kind of came out first. And then like, the next thing in the stack is like, decentralized exchanges or like lending platforms. And you can't have those, right, without like, the bottom thing, which is like, decentralized asset to trade. So that's kind of like, things like Uniswap, ZeroX, like, compounds kind of fit in that like, second layer of the like, DeFi financial stack, if you will.

• 15:22Speaker 02

  And then like, on top of that, I really think about like, more advanced types of products. So things like margin trading, things like derivatives trading. And that can't exist without like, buying and selling, can't exist without like, lending and borrowing, which you know, can't exist without the assets themselves. So it's like, really like, you kind of need the like, things like, lower in the stack to like, to support the higher things. And that's like, why we support like, all of those things. It's kind of like, like you say, like, we basically need to support like, lending and borrowing. And obviously, like, trading itself to be able to support margin trading.

• 15:53Ryan Sean Adams?

  And that's super cool, because it's not just D Y D X that has to build those like, core pieces in order to get to margin trading and derivatives. It's basically the entire DeFi system that's building those. Like, it's no accident that one of the first DeFi use cases, something like Maker, which was a borrowing and lending platform. So that's super cool. Now, before we leave margin and go to perpetual, I want to make sure we're solid on margin, right? So you used two words there. You used one, long. I want to long something, right? And the other, short. So does that just basically mean if I'm longing something, I am borrowing some, some asset against my collateral?

• 16:32Ryan Sean Adams?

  And I'm making a concentrated bet to amplify my gains. If I'm right, if it go, if number goes up, I get more gains, right? But I'm putting myself at risk. Is that what longing is? And then maybe you could describe shorting?

• 16:44Speaker 02

  Yeah, absolutely. So longing is just like, you make money when the price goes up. Shorting is just like, you make money when the price goes down.

• 16:52Ryan Sean Adams?

  More money when the price goes up. That's an important difference.

• 16:54Speaker 02

  Exactly. You make more money when the price goes up. Um, and then, yeah, shorting is you make money when the price goes down. Potentially it's a multiplier. But the reason you might want to do like margin trading or more broadly, just like trading on leverage, which actually you could do through the margin product and also through the perpetual product, which we'll get to. But just kind of like the concept of leverage or like why you might want to use it um in the first place. Um, is say you are holding uh a hundred dollars worth of Ethereum. You could, you know, be your hodler, just kind of like keep it in your wallet. You're absolutely convinced that like the price of Ethereum is like going to the moon. Uh, so like, why would you not just like hold your ETH in your wallet? It's like, that's great, good for you, you'll make some money if you're right and like the price of Ethereum goes up. But kind of the reason you might want to use leverage like on top of that,

• 17:39Speaker 02

  um, is you can make even more money a- as you, as you just said, uh, if the price goes up and and kind of you're right. Uh, it's also important to call out that this is not free. It's like, oh, you're also exposing yourself to kind of increased losses if the price, if you're wrong and like the price goes down. But just kind of like this example of say you have a hundred dollars worth of Ethereum. Say you used a five X leverage to kind of take a five X leverage long position on that Ethereum. It's basically now like your gains, like if you're right, are multiplied by five. So say in this example, you're a hundred dollars worth of Ethereum, the price of ETH doubles. And now that would have been worth two hundred dollars if you had just like held it like in your account.

• 18:20Speaker 02

  Um, in this kind of new leverage world where like you basically are multiplying your gains. So in like the normal case where you just hold, you, you make a hundred percent. So you're like two X. Um, and then kind of the leverage case, if you like would have doubled your money. Uh, and now since you're multiplying by like the five X leverage, you make ten X gains. Um, so it's basically like you just like multiply the gains you otherwise would have made. Um, and kind of the exchange for that is is taking on more risk.

• 18:48David Hoffman?

  And it would have gone in reverse, right? So like, this isn't a free lunch, like if it goes down, you can also ten X your losses, right? And and can you also comment on like the the collateral requirements and also the risk, uh, risks of liquidation?

• 19:03Speaker 02

  Absolutely. So the way our contracts work is kind of similar to like a Maker contract or like a Compound contract. They require on the margin side, fully over collateralized borrows. But it's basically like you can use the Ethereum that you come to the platform with like as margin. So let's maybe just walk through like a really simple example of how that would work. So here you are with your hundred dollars. Let's say you're like one ETH and you're long, you're a hodler, but you've decided that you want to use leverage. You basically would come to the D Y D X platform with your one ETH and you're like, okay, I'm super convinced that ETH is going to go up. Let's take the 5X leverage long position.

• 19:43Speaker 02

  You basically pop down your one ETH as margin deposit and then you borrow some stablecoin under the hood. This is all very simple, actually. Kind of the product interface is basically just like you put in like, you know, I want to go like five ETH levered, one ETH like leverage long at like 5X. But like what's going on under the hood is you're actually borrowing some stablecoin. So you're borrowing, say, like another four ETH's worth of like DAI or USDC. And then you use those borrowed funds to buy four more ETH to like put on top of that one that you put up as margin deposit. So now you have kind of like five ETH sitting here in your account. You're borrowing, you still have to repay your borrow that you borrowed in kind of the stablecoin once you close your position. But that's

• 20:27Speaker 02

  kind of inherently where the leverage comes from and what's going on under the hood.

• 20:31David Hoffman?

  And there's also a fee involved as well, right? And so can you talk about where the fee component fits in?

• 20:37Speaker 02

  Sure, like the interest rates or?

• 20:40David Hoffman?

  Yes, exactly. Right.

• 20:41Speaker 02

  Yeah. Yeah. So exactly. Very similar to how if you're, you know, taking a loan on like literally any financial platform, you, people are not just going to let you borrow money for free probably. So it's like you basically have to pay them some interest rate. So now let's continue with our example. So now you're sitting here with your 5X leverage long position. Under the hood, what's going on is there's five ETH like in the D Y D X smart contracts locked in your account. And then the D Y D X smart contracts basically also remember that you have to say pay back the Like, uh, let's say like two thousand, uh, die, uh, that you kind of borrowed to, to buy like the other forty in the first place. And basically you have to pay like the longer you hold this position, the more interest you'll have to pay.

• 21:25Speaker 02

  And you'll have to pay a dynamic interest rate. It's again, very similar to how compound works with kind of its variable interest rates over time. And the interest rates just kind of vary, again, similar to compound, uh, based on like the supply and demand for the pool. But there is some like interest that you'll have to pay to basically be able to hold this position. Uh, the other cool thing, uh, about D Y D X though, is in addition to paying interest on the amount that you're borrowing. You're also earning interest on the amount that you have like in, uh, collateral on your position. So simultaneously, so since you're borrowing the die in this example, let's say you're paying interest on that die with whatever the interest rate is there. But you're also earning interest rate on your ETH that you have like locked up as collateral.

• 22:09Speaker 02

  Um, so the system works very well in that regard. Uh, normally like the interest rates on stable coins are higher. Um, than the interest rates you would see on ETH at least like historically. Um, so normally if you're taking a long position, you'll be paying interest. But actually it's kind of cool. Like if you take a short position, a lot of the time you'll, you'll be earning interest on the platform. And kind of the platform will show you like how much interest you're earning or paying.

• 22:33Ryan Sean Adams?

  And then maybe the last piece to cover in that is what happens in the event of a margin call.

• 22:38Speaker 02

  Yeah. So in the event of a margin call, and this is again, very similar to, to basically what happens on like a compound or Maker Dow. If you've used any of those platforms before, but in the event of a margin call, so let's say like in our example, like you, again, like you have this five ETH like locked here. And then you're borrowing like the two thousand die. Um, and basically what our smart contracts will enforce is that the value of this five ETH always has to be greater. And like the value of this two thousand die, or else like, you know, you may have like lost money, the smart contract itself like may have lost money on the trade. So let's say you went long, sadly you were wrong, like the price of ETH is like going down instead of up as you had hoped. Um, and it gets down to the point where now your five ETH is worth just like a.

• 23:23Speaker 02

  A little bit more than like the 2000 die that you had borrowed. So it's like, kind of, it's looking like it's getting to the point where like you might not be able to like cover like the losses on your position anymore. What will basically happen at this point is there is we kind of a decentralized network of liquidators on D Y D X. That will look for these kind of under collateralized or close to like under collateralized positions on D Y D X. And then they'll liquidate your account, which in all liquidation means is they'll kind of basically pay back your borrow for you. And they'll take some of your collateral in exchange to do that. And effectively, what that means from your, the trader's perspective is you lost money on this trade. And then your trade was like closed out before you like lost like too much money.

• 24:08Speaker 02

  And it'll be like a small amount of of capital, probably that's in your accounts after you get liquidated. But it's, it's probably like you lost like most or almost all like of your initial deposit. So that's kind of where the risk comes in that we've been talking about with margin trading. It's definitely something you should understand a little bit more and kind of like think critically about the risks before you enter into. But something where it's like you can kind of increase your risk and also like increase your reward there too.

• 24:35Ryan Sean Adams?

  These mechanisms aren't new to DeFi. This is the same way it works on a centralized exchange or in traditional finance. And then before we get off the topic of margin trading, so I imagine when we were talking about a long position there. But I imagine a short position is just the same sort of mechanism, but the bet is directionally different. You're betting instead that the price of ether will go down. Is that correct?

• 24:58Speaker 02

  Yeah, that's exactly correct.

• 24:59Ryan Sean Adams?

  Okay, cool. All right. So we've got a, a good base. I think that's important, you know, even though we're still on kind of question one, but it's really important because I think this will answer a bunch of questions and having that foundation is important. So we've gotten all the way through the first four product offerings, margin. Now we get to the fifth where things I think get, you know, a little more interesting and maybe another layer of complexity. So the fifth is perpetuals, right? And do perpetuals essentially sit on top of all of the other layers? So you need trading, you need lending and borrowing, you need margin as well, like a mechanism. And now, once you have those things, you can build out perpetuals. Is that kind of how it works?

• 25:44Speaker 02

  Um, sort of. I would say in terms of like their level of complexity, they're definitely like the most complex, like financially complex product that we offer. They don't actually use lending and borrowing under the hood. They use basically like a separate mechanism. So it's kind of like, you know, if we think of our stack metaphor again, it's like assets, like, you know, buy, sell. And then it's kind of like lending and borrowing slash margin and then like derivatives are like off to the side a little bit. Um, but they do like, like I said, kind of use like more like financially sophisticated mechanisms to basically offer the product that people want to trade, which I'm happy to go more into.

• 26:19Ryan Sean Adams?

  Yeah. So tell us, what is a perpetual?

• 26:22Speaker 02

  Yeah, absolutely. So a perpetual contract is a synthetic contract. Um, and this is something that has become like really popular um in crypto itself. If you, you know, ever heard of or traded on Bitmex, this is exactly the product that's made like Bitmex really popular. Tons of other new uh kind of centralized exchanges like Finance has launched perpetuals, FTX has launched perpetuals in the past year. So kind of just motivating like, you know, why, why do we offer perpetuals too? They're basically by far the most popular trading product by volume in crypto right now. Uh, like there's more volume on crypto perpetuals uh in the entire market than there is on the entire buy, sell market for crypto combined.

• 27:02Ryan Sean Adams?

  And another word people use for perpetual sometimes is derivatives. Is a perpetual a type of derivative?

• 27:09Speaker 02

  Yeah, basically. Um, yeah, it's kind of like derivative is like the master, like class, it's like a superset, like perpetual is like a type. Um, so that's a, that's exactly like why you like, you know, there's a lot of volume on them in terms of like what a perpetual contract is or like how it works under the hood. Um, in, in the main like selling point of why you might want to use a perpetual contract as compared to another type of derivative is kind of in the name. Um, they're perpetual, which basically means that they don't expire. Most types of derivatives, like if you've heard of like a future or like an option or kind of more traditional types of derivatives like that expire. So like if you were to buy like a normal future, it would expire, say at the end of the month. And like you could get price exposure to ETH or whatever you wanted to trade on with that, but it's

• 27:54Speaker 02

  a little bit less useful because you can't hold it like as long as you might want to.

• 27:57Ryan Sean Adams?

  So those Bitcoin futures that were, you know, so much celebrated and they came out in 2017, right? With the, like by the CME, basically, um, those expire, those every, every 30 days or so, they just expire. You can't kind of renew them. You have to start from scratch again. Is that right?

• 28:13Speaker 02

  Yeah, that's that's exactly correct. And the other reason why perpetuals are really cool and why it like makes like a lot of like new traders kind of use them as their first derivative product is because they it feels like fairly similar to like trading the underlying like asset itself. So let's maybe take like the Bitcoin perpetual on D Y D X as an example. Since the contract is synthetic, basically what synthetic means is under the hood there the asset that you're trading does not exist within the platform. So like on the D Y D X like Bitcoin perpetual, there's no actual Bitcoin like involved anywhere. We basically created this like financial contract, which effectively just tracks the price of Bitcoin.

• 28:55Speaker 02

  And without actually having Bitcoin involved. And the other really nice thing about perpetuals is it, like I said, feels like you're trading the underlying asset. So the D Y D X Bitcoin perpetual and really any perpetual contract you might trade within crypto is just set up to track the price of the underlying asset. So if you're trading the D Y D X Bitcoin perpetual with kind of like its underlying mechanisms are designed such that like the price tracks like the price of another asset, which they could be Bitcoin. It's it's actually not like that dissimilar from like a like D I or something like that, which like tracks like the price of one dollar. It's like instead here

• 29:33Speaker 02

  like we're just like creating this, you know, synthetic asset, which tracks the price of like another asset, which is like a Bitcoin or something like that. The underlying mechanisms are different.

• 29:44Ryan Sean Adams?

  And the reason you can do that is back to that first layer that you were talking about, right? Which is you have the money layer essentially, where we might call that the the value layer, the collateral layer. And you're saying that collateral layer, it could be Bitcoin, it could be Ether, or it also could be a stablecoin like you guys use U S D C a whole bunch, right?

• 30:02Speaker 02

  Yeah, that's exactly correct. And in different like perpetual platforms will use like a different collateral. So we have two types of collateral on the system right now. So we have some perpetuals which are margined in U S D C, which just means that there's U S D C collateral. Our ETH perpetual right now, you can actually use like ETH as collateral and also trade on the price of ETH, which is very cool, like a very like ETH Product for all you ETH heads out there. And but that's kind of under like how it works under the hood. And kind of maybe if we're just to like finish out the the talking about like how exactly the perpetuals work. The main thing, the main mechanism that perpetuals use to basically like keep their peg or like trade at the price that you want them to trade at. Is this mechanism called a funding rate?

• 30:47Speaker 02

  So all a funding rate is, it's basically very similar to a dynamic interest rate. That's paid between like those who are long the contract and those who are short the contract. So in what long the contract and short the contract means is because this asset is synthetic. It's effectively zero sum. So like for every one unit of long, there's like one unit of like people going short. So say you go to D Y D X and you buy like. Uh, one Bitcoin worth of the uh, D Y D X Bitcoin perpetual. You're basically trading against somebody else who's kind of taking the short side of that trade. And getting back to this funding rate are kind of what it is or like why it's like really important and important to understand if you're trading perpetuals.

• 31:29Speaker 02

  Is the funding rate is the mechanism by which the perpetual like tracks the price of Bitcoin. So kind of going back to the perpetual, it is its own asset. It can basically trade at, you know, like any other asset, just whatever price people want to trade it at. So the question, if we're like designing this derivatives contract, this perpetual contract. Is how do we make it trade at the price of Bitcoin? And basically what how the funding rate comes into that is so, so we know what the price of Bitcoin is, say it's like $10,000. Um, and then we know what the price of the uh, D Y D X Bitcoin perpetual is trading at. And where the funding rate comes in is if the perpetual is trading too low, like relative to the price of Bitcoin. So like basically we want to move the price up, right? Like want to get it like closer to being the price of Bitcoin.

• 32:14Speaker 02

  Um, then basically we want to incentivize more people to go long, right? Like we want to incentivize them to buy to like drive the price up because when people buy, price goes up. So what basically happens is then the funding rate, which is just this interest, which again is paid between those who are long and and those who are short. Would basically. Make the people that are short, pay the people that are long, some interest rate. To basically incentivize more people to take the long side of the trade. And again, like drive the price back up to like what we want it to be. Conversely, like if the price of the perpetual is too high, um, we want to drive the price down, right? Like we want it to be lower, we want more people to sell. And we want to incentivize more people to go short, which basically means selling.

• 32:56Speaker 02

  Um, so in that case, the funding rate would make the people that are long, pay the people that are short. Um, some kind of dynamic interest rate over time. And that's basically the whole thing is just like, once you understand like this funding rate. And kind of like how that's used to like effectively like stabilize like the price of the perpetual. Alongside like what the price of actual Bitcoin is. Uh, you really understand like for the most part, like how like most of the contract works. So when you're kind of trading these perpetual contracts on D Y D X, just the important thing to note. Um, is that there is kind of some funding rate, which is, you know. From a trader's perspective, it feels similar to like paying like some interest rate. Or even sometimes earning some interest rate, uh, like you would on margin.

• 33:35Ryan Sean Adams?

  Very good. All right. So we've got markets within markets. Now let's put a bow on this perpetual thing. Um, and so we went to all of that work to construct a perpetual, everything you just described. Why? Why can't we just trade Bitcoin? Why can't we just trade ETH? Why are we doing this? Why is a perpetual better than margin or a different use case, let's say than the other four?

• 33:58Speaker 02

  Great question. Yeah. So kind of the main reasons that perpetual, that a trader might want to trade a perpetual over margin. It's not like strictly better, like there are trade offs to both, but kind of the main reason. Why we've seen a lot of volume like flow into perpetuals, both on D Y D X and also on other crypto platforms is for a couple of reasons. So first reason is you can trade them with much higher leverage. So D Y D X isn't quite there yet, um, but if you've seen like the Bitmex is like hundred X's of the world.

• 34:24Ryan Sean Adams?

  Didn't Binance do like a hundred and twenty five X or something just like silly?

• 34:27Speaker 02

  Twenty five X, F T X did like a hundred and one X just to like fight Bitmex probably.

• 34:32Ryan Sean Adams?

  It's just a race to the bottom. Soon it's going to be a hundred and fifty X, a hundred and twenty. It's just going to keep on going.

• 34:38Speaker 02

  Absolutely. So if like, if you've seen like those like classes of like leverage that are like of the hundred X's of the world, they're trading perpetual products. And like, that's how you get like through the underlying constructions, you can get a lot more leverage. And that's oftentimes like useful to traders. I wouldn't recommend just like going and trading with like a hundred X leverage on BitMEX.

• 34:56Ryan Sean Adams?

  Well, but like what like, so what happens? What happens if you're trading at a hundred X, right? Does that mean like one small price in the wrong direction and you're just completely wiped?

• 35:05Speaker 02

  Yeah.

• 35:05Ryan Sean Adams?

  If you have to look at the second by second chart?

• 35:07Speaker 02

  If the price goes down 0.5% on BitMEX and you're a hundred X long, you get liquidated and you lose all your money. You can't let the price go down like.

• 35:16Ryan Sean Adams?

  Who does this?

• 35:17David Hoffman?

  It's a straight gamble. It's a straight gamble.

• 35:18Speaker 02

  It's madness. Yeah, like most of the like hundred X's stuff is a bit crazy. Like you, you definitely shouldn't do that. Um, and but most people don't like a couple of people do. It's mostly like marketing, if I'm being honest, like just like trying to get like the higher like leverages of the world. Um, but like most people trade with like, you know, 10 to like five to 10 to like maybe up to 20 X leverage or so. Which if you have like really good understanding of like how you think the price is going to move, it can make sense. So, so the first is like higher leverage on our margin product right now, our maximum leverage is 5X on our perpetual products. Our maximum leverage is 10X. That's actually going to increase quite a lot. Once we move to our Starkware integration for perpetuals, which we can get into later.

• 36:02Speaker 02

  So first reason is leverage. Um, second reason you might want to do this is the, the funding rates can be a lot more attractive. Then kind of paying like the underlying interest rates on margin. So that like makes it like really, you know, sometimes more attractive for traders to, to trade perpetuals. And then the third reason, which is really, really important, especially if you're trading on DeFi, is because perpetuals can support synthetic assets. So that's basically means that like to offer like trading of Bitcoin, we don't need Bitcoin. We don't have to worry about like any of the cross chain stuff. You know, we could spin up like a, you know, whatever market we wanted to like XRP market or like, you know, Litecoin, all these like types of different things.

• 36:44Speaker 02

  Um, and from a technical perspective, it would be very similar. The only thing we need is like a price oracle that's like reporting what the price of the asset that we want to trade is. So it allows exchanges to spin out like way more easily, like spin up trading for new markets. And just make mark like these markets like really liquid. Um, and all liquid means is like, if you want to make a trade, there's like tons of people on the other side. Like willing to make the opposite trade.

• 37:08Ryan Sean Adams?

  Okay, alright, so it basically allows you to use any store of value, any money at the base layer to create anything you want.

• 37:14Speaker 02

  Right.

• 37:14Ryan Sean Adams?

  Okay, alright, so I think we got to Hazy Spur's first question.

• 37:22Ryan Sean Adams?

  But that was like a fantastic amount of like foundational knowledge, I think that most, a lot of people don't understand with like margin perpetuals. But that answers that question. I do have one last question on perpetuals. So there is this thing that you guys recently came out with called an inverse perpetual. Okay, what's the inverse part of perpetual? And you did, it's an inverse perpetual of ETH, I believe. What does the inverse piece mean?

• 37:51Speaker 02

  Yeah, that's a great question. So fundamentally, under the hood, exactly the same thing, like still has the funding rate, still has like the same dynamics of like the perpetual contract. The inverse thing, basically what that means is it just like determines what type of collateral you're using. So the inverse part on the ETH perpetual means that you are trading the price of ETH and you're also using ETH as collateral. This is kind of like if you've ever traded on like BitMEX before, you'll know that like BitMEX uses like Bitcoin as collateral. And you can also trade the price of Bitcoin on BitMEX. It's a very similar idea to that. But this is like the very like ETH native product and like ETH native way to do this.

• 38:30Speaker 02

  You can come to D Y D X, you can only have ETH, you can lever up and trade on ETH with this product that's running like on the Ethereum blockchain, like control your keys the entire time. So that's kind of why we launched our ETH perpetual as an inverse perpetual. Is we really see a lot of demand within DeFi and especially crypto more broadly. For people that just hold ETH and like want to say either go like leverage long ETH or sometimes like leverage short ETH. And this product is like a really great way to be able to do that.

• 38:58Ryan Sean Adams?

  So it's really a product for the ETH holders who are, you know, Super Bowls on ETH and they don't want to cash out their ETH for some other, some other lesser money, right? Like a fiat, thirty fiat stablecoin then, right?

• 39:09Speaker 02

  Exactly.

• 39:10Ryan Sean Adams?

  Okay, alright, very good. Alright. Awesome. Okay, we are almost, we are over halfway done now. But okay, let's, let me do some quick hit questions, Antonio, that are coming in. So, one question is from the Discord, a Bankless Discord. Are parts of DYDX still geofenced? If so, what led to that decision?

• 39:31Speaker 02

  Yeah, great question. So, yes. So, the main thing that is geofenced is the perpetual contracts. And the main thing that led to that decision in terms of like where their geofenced customers right now. And the main thing that led to that geofencing is just certain regulations that are basically on derivative contracts within the US and kind of our assessments of like the risk of being an exchange and kind of offering those products to, you know, US customers. It seems like it's not within kind of like the spectrum of risk that we're willing to take on to be able to do that. Maybe just really quickly taking a step back in terms of like how we think about the risk like as a decentralized exchange. I'd say like from a regulatory perspective, especially in the US, like every regulator has like different

• 40:15Speaker 02

  definition basically of what a decentralized exchange is. And also like a different definition of how much or little being a decentralized exchange helps from a regulatory perspective. And probably the CFTC, which is the body that regulates derivative products in the US. It basically like TLDR, like this, don't take, this is not legal advice, but it's like kind of basically like doesn't really matter like too, too much. If like certain parts are decentralized from the CFTC's perspective. So like, that's kind of what led to that decision.

• 40:47Ryan Sean Adams?

  Gotcha. And that's the main regulator that you're dealing with is the CFTC rather than not the SEC so much?

• 40:54Speaker 02

  Correct. Yeah.

• 40:55Ryan Sean Adams?

  Got it.

• 40:56David Hoffman?

  So, Antonio, is there a future version of the world where DYDX is, has to implement KYC onto its platform?

• 41:04Speaker 02

  Yeah, it's a great question. Yeah, not to get too much into the weeds on like the legal stuff with this too, but there's kind of like, like the main reason you might implement KYC is is not with the CFTC. Actually, there's a different like US regulatory body that kind of controls that, which is called FinCEN. They've actually put out some really good guidance and like the past year, they're one of the most proactive regulators in terms of like putting out guidance, which specifically addressed decentralized exchanges. And that's given us confidence to basically be able to operate without KYC. I'm not going to sit here and say that like, you know, the regulatory regime will never evolve in a way that like makes DYDX to KYC. But we really strive to be able to like very much in the ethos of like cryptocurrency,

• 41:43Speaker 02

  just offer like trading to as many people and without like KYC to just democratize access to our products as much as possible.

• 41:51Ryan Sean Adams?

  This took me a while to kind of figure out all of the regulatory agencies that are involved. So like the Spark Notes and it correct me if I'm wrong, because you would know, right? More than me, but Spark Notes are like, if you're dealing with something like a stock or a security, a security, the SEC is the group involved. If you're dealing with something like a future or an option or a perpetual or synthetic it or commodity, it's the CFTC, right?

• 42:16Speaker 02

  Correct, yeah.

• 42:17Ryan Sean Adams?

  Sometimes there's overlap. And then if you're dealing with anything that is like anti-money laundering Patriot Act type stuff, this is all US by the way, sorry international folks, but the US is, they've got a lot of regulatory bodies. Anyway, that last one is, that's FinCEN, right?

• 42:33Speaker 02

  Correct.

• 42:33Ryan Sean Adams?

  Those are the primary regulators that you would probably come into contact with in what you're doing. Is there anyone else?

• 42:42Speaker 02

  Yeah, certainly. We look at like other regulatory bodies besides that, even just in the US. There's quite a lot of them, let me tell you, but I would say, yes, you're correct. Those are the main ones that we think about and engage with and, you know, work with.

• 42:54Ryan Sean Adams?

  Okay, so another question. Oh, go ahead. Yeah, go ahead.

• 42:58David Hoffman?

  Here. So from the, from the realty side of things, like I'm exposed to this a lot. As a good rule of thumb, if there is an investment contract, it is a security and it's under the purview of the SEC. And all those things that are going on on DYDX are not investment contracts. They are not solicitations for investment, but they are instead like products and derivatives, which is why they are under FinCEN. Is that, is that match your understanding, Antonio?

• 43:26Speaker 02

  Yeah, basically, and the derivatives would be the CFTC. But yeah, FinCEN and like CFTC are the major ones for now.

• 43:32Ryan Sean Adams?

  How about this? So this is a question coming in from our Discord. So that notwithstanding, you guys haven't offered perpetuals today. But is there some path for when you might be able to ETA for perpetuals in the US? I think a lot of our US listeners are curious.

• 43:50Speaker 02

  Yeah, it's a great question. Probably like there's no ETA right now, if I'm being honest. Yeah, it's definitely something that it doesn't seem like, at least like within the next year or so, that like we, like any crypto company would basically be able to like offer these types of like more advanced like derivative contracts to US customers just based on the current state of the regulation. I think it's definitely something where this is more like where we would take the strategy of like working with regulators, like really trying to educate them on like the benefits of like DeFi. And kind of like how like a lot of that stuff can play into like objectives that regulators also have. So it's it's not like purely antagonistic, I would say, in terms of like DeFi plus like regulation. Like one of the other things that regulators care a lot about

• 44:32Speaker 02

  is just like the like health of markets, just like making sure that like the collateral is where the exchange set is that kind of like, you know, everybody can have transparency into what's going on with the exchange, like making sure that the collateral is there, like that the operators aren't going to run away with the money. Or like you send DeFi is like a really good fit for basically like solving some of these problems from regulators. The other thing like regulators care in the US about is like who is trading these contracts and whether we agree with it or not, like who has the financial sophistication to basically like be from the government's perspective to be able to like trade them. And I think that that's where like most of the kind of decision to to block US customers comes in, or we're like where a lot of the like laws come in is just due to like

• 45:17Speaker 02

  the CFTC's objective to like make sure that like. And this is a CFTC's view, not my view, but like make sure that like, you know, less financially sophisticated people, however that CFTC defines it, like, don't have access to the more sophisticated financial contracts.

• 45:32Ryan Sean Adams?

  Right now, in America, we tend to define it as, how much money do you have? What's your net worth?

• 45:38Speaker 02

  Yep.

• 45:39Ryan Sean Adams?

  Which is a darn shame, but that is the way it is right now. Understand. Okay. So another quick hit question is, when DYDX token? Everyone's doing yield farming. Like, where's the DYDX token, Antonio?

• 45:53Speaker 02

  I promise you, we are thinking about it. And we're thinking about it very seriously on potentially like, you know, a shorter like time horizon. Potentially like months from now, it's, we have not made the decision yes or no, whether we're going to actually do one. We're just like really critically evaluating like, how could a token be useful in DYDX? Like, what would it be used for? Like, how can we get the more, the community more involved in things like governance? And, and, and stuff like that? How can we use it to just like bootstrap growth of the community and of DYDX itself? So yeah, we're definitely thinking about it. No firm decisions yet.

• 46:29Speaker 02

  But yeah, something that we are looking to make like a decision one way or another on in the next few months. And yeah, if we decide to do it, obviously look for us to release more information at some point.

• 46:39Ryan Sean Adams?

  And you guys raised capital, kind of the, the VC route. But what do you think of these fair launch style of projects that are cropping up these days?

• 46:47Speaker 02

  Yeah, I think it's really interesting. Yeah, I definitely think like different like funding models like make sense for different types of projects. For us, the VC like route like made sense. That's not, you know, necessarily the best decision for, for every like entrepreneur to like, take like VC money. It really depends like what you're trying to build. Um, I'm yeah, definitely a big fan of like a lot of the stuff that's been going on in DeFi. Like I thought like VM was like a great example. Even though like it had some security issues, well, like of course it's going to have security issues. But that's basically what I think a lot of this stuff with like the fair launch. Is, is trying to solve like, in just like allocating like capital that's like really in the community's like best interests to allocate.

• 47:28Speaker 02

  To some of these projects to, to kind of get them off the ground, get them the capital that they need to, to bootstrap like the community and, and kind of let the community take over from there. So I'm definitely a big fan.

• 47:37Ryan Sean Adams?

  All right, here's a question that came in from YouTube. So this is on the subject of alternative infrastructure. So we've got Ethereum, of course, we know and love. There's also these new, whether you call them ETH killers, or competitors, or alternate layer twos, whatever you call them, Avalanche, Polkadot, those sorts of things. Are you considering those infrastructures to host parts of DYDX? And also, maybe you could talk about your Starkware announcement and what that is?

• 48:06Speaker 02

  Yeah, absolutely. It's a great segue to that. So basically, we, in the past like month or so, had done like a ton of research in terms of like scaling DYDX. Basically, what's happened for us, like it's happened for like literally everybody else in the space is we're just spending like a ton of money on gas, as you might imagine. So

• 48:24Ryan Sean Adams?

  And you guys pay for all that?

• 48:25Speaker 02

  Yes, we pay for users' gas. When you trade on DYDX, one of the nice things is you don't like have to pay your own gas fees. So that's pretty nice. Once you've deposited. But yeah, trust me, we're feeling those costs. So like, yeah, one of the things we wanted to solve is it's just obviously, we've gone to the point where there is a lot of demand to use DYDX, but now we need to scale it. And DYDX is never going to be like super big if it's not scalable. So we looked at a lot of these like new blockchains, looked at a lot of like Ethereum native scaling solutions, things like optimism, things like the OVM, things like obviously Starkware. We also evaluated building our own optimistic rollup chain, which would kind of be a special purpose for DYDX. And we really, the reason that we kind of ended up on the Starkware

• 49:09Speaker 02

  integration as kind of the best possible scaling solution for DYDX at this time was for a couple of reasons. So first, like Starkware, like their scaling solution is live right now. Like it's already running in production with like a couple like other exchanges. So like there's an exchange called Diversify, which is already integrated with Starkware, just on the spot side. But we kind of, our work with Starkware has basically just given us a lot of confidence that we can build like this next like level of sophistication and like these margin and perpetual systems on a scalable solution with Starkware. And we're gonna have it running in production, um, not in like years from now, but in months from now, um, probably like three to four months or so that we're aiming to have like this live,

• 49:51Speaker 02

  which I think is a pretty ambitious timeline, uh, because we literally just started working on this with them like a couple, like a month ago. Uh, we've basically, we've gotten to is like, we finished all the research side. So we know what we're gonna build, uh, for the most part, and we're actively building it right now. So like all the D Y D X engineering team is building this. Um, a lot of the Starkware engineering team, they basically have come up with like a custom scaling solution for us. Um, Starkware, for, for those who aren't familiar, um, they're the leader in kind of, uh, using zero knowledge, uh, proofs and kind of, uh, Starks, uh, to be able to scale blockchains. And like the really high level, like fundamental way that it works, um, is just like, so we have, we're D Y D X, we have like a bunch of trades we want to execute, right?

• 50:35Speaker 02

  Um, and normally, so the way it works right now is for every trade that happens on D Y D X, like any other DEX right now, that just maps like one to one with the transaction that gets sent to Ethereum. So we have to pay like a linear amount of gas fees. Like if we like make 2,000 trades tomorrow, we have to like pay like twice the amount of gas fees if, as if we've made like a thousand trades today.

• 50:55Ryan Sean Adams?

  I bet you guys are spending the like tens of thousands of dollars per month range at this point.

• 51:02Speaker 02

  I'm just gonna laugh at that. Um.

• 51:04Ryan Sean Adams?

  Okay, I'm being very naive with that. Okay, hundreds of thousands.

• 51:11Speaker 02

  Yeah. Oh, it's a lot. Um, but yeah, that's also, it, it's driving us in the right direction, right? So that's kind of like one of the emphasis there, like one of the things that's like driving us for like, like move towards the scalable solution. And kind of moving on to the scalable solution. So like, basically what we need to do is we need to be able to support an unlimited number of trades. So like, how do we do that? And the way like the Starkware integration is going to work at a very high level is now instead of sending trades directly to the blockchain where we want to execute them, we'll basically, uh, send them to Starkware instead. And then their services will basically like buffer like all of the trades that we want to execute. So it may be like a thousand trades or whatever in the last hour. Um, and then what they'll do is they won't send all of these.

• 51:52Speaker 02

  Thousand trades to the blockchain. Instead, they'll use their magic, which is kind of zero knowledge proofs. Um, which sounds magical, um, but it basically like translates these like thousand trades. Down into this constant sized data object. Um, so it doesn't matter if it's a thousand trades, if it's ten thousand trades, if it's one trade. Um, it this like data thing that basically proves that all of these trades happened is the same size. Like in megabytes or whatever, um, or smaller than that. Um, but like, so it's the same size. And that's where like all of the scalability comes from. And then you take this like little data object, which is like the zero knowledge proof. You like submit it to the blockchain like periodically and that's like where all the scalability comes from.

• 52:34Speaker 02

  And kind of by our estimates, this should get us like at least like a hundred X like reduction in gas costs.

• 52:40Ryan Sean Adams?

  Wow.

• 52:40Speaker 02

  So that's something that we're really excited about. Um, yeah, there's also a number of other like really important benefits. That we're going to be getting from the Starkware integration. I can just go through really fast. Um, so the second um, is being able to support cross margining. Um, which it sounds like financially sophisticated, but basically all it means right now is right now for each like perpetual on D Y D X, their margins separately. So it's like, if you put down your thousand USDC to margin your Bitcoin perpetual. You can't use that thousand USDC to like margin your like link perpetual. You'd have to like margin it like separately.

• 53:14Ryan Sean Adams?

  Okay.

• 53:14Speaker 02

  Um, but one of the features that other exchanges support, which is actually really important. Um, is what's called cross margining. So you basically have like one account. So you have your thousand USDC. And that's used to margin all of your positions at the same time. So like you could take like Bitcoin position and like a link position. And like it'd be collateralized by like this same account. Um, and this is also really important for like market makers to kind of really capitally efficient. Uh, just like support liquidity on new markets. So we're going to support cross margining um, with the Starkware launch as well. And that's also going to enable us to launch like way more markets, um, like probably on the order of like twenty to like fifty. And then that next like six to twelve months after launch.

• 53:54Ryan Sean Adams?

  By more markets, do you mean more assets?

• 53:56Speaker 02

  More assets, yeah, like more trading pairs.

• 53:58Ryan Sean Adams?

  What kind of assets do you think?

• 54:00Speaker 02

  Uh, yeah, that's definitely something we're still trying to figure out. Uh, we're doing a lot of experiments. Like we just launched the link perpetual on Tuesday, actually. We're like probably exploring like other things.

• 54:10Ryan Sean Adams?

  Link marines. Hopefully any link marines watching.

• 54:13Speaker 02

  Yeah, if like things like, you know, YFI's of the world, like other cross-chain access assets, like the big ones like XRP, stuff like that. Um, but yeah, adding lots more assets, that's the second improvement. The third improvement is like, if you've used D Y D X, it basically feels like any other decentralized app you've used right now, where it's like, you make a trade and there's like some spinner on the site that like waits until your transaction gets mined, which is like, fine, like, okay, we probably all understand that, but like, let's be honest with ourselves, like trading on a centralized exchange where like your balance is up like immediately and it like feels really snappy. It's just a way better user experience and we're going to be able to support that as well in the instant trades after the Starkware integration. And then the like last improvement, which is also really important, but is like a little more

• 54:55Speaker 02

  under the hood, is like, we're going to put like the oracle prices on like Zero Knowledge World, um, which will basically allow us to have way, way more performant oracle price updates, um, than what exists on like any other like oracle solution on Ethereum right now. Um, and that's basically going to allow us to offer like a lot higher leverage at a lot lower risk to the platform.

• 55:15Ryan Sean Adams?

  Okay, I'm just going to summarize everything you said, because this is super exciting. I didn't realize this. So what this all feels like to me is it's a major V2 upgrade for D Y D X. This is not a small tweak. This is like a major V2 upgrade and it's basically going to put you in terms of UX uh, experience and like range of assets you support on par with what centralized exchanges are doing, except

• 55:37Speaker 02

  Exactly.

• 55:38Ryan Sean Adams?

  just as decentralized as you are today, meaning no one has to give up their assets. Um, there's no uh KYC process involved. There's no black box where like a BitMEX can kind of, you know, cheat you and, and trade against you or do some nefarious activity, maybe, maybe not, who knows, right? Um, and you're going to be able to do this in like a four month time horizon, right? Is that what you just said?

• 56:02Speaker 02

  Yeah, that's exactly what I said.

• 56:03Ryan Sean Adams?

  Freaking exciting.

• 56:04Speaker 02

  Yeah.

• 56:05Ryan Sean Adams?

  I'm excited about it now. And uh, one last question to, to kind of tie this off. So one big question is around composability. So Diversify has their Starkware um, roll up, right? And Gods Unchained, I think they're using Starkware as well. I heard that recently. Um, can you talk to the difference? You're going to use Ethereum as a Settlement layer, not like a Polkadot or Avalanche. But can you talk to the other rollups from your rollup? Does that make sense?

• 56:32Speaker 02

  Uh, yeah, basically, no. Um, that's kind of like the one thing that like we trade off, but we already kind of like trade that off on D Y D X. Because we haven't really gotten into this yet, but we use like a central matching model right now. Which basically means that we run like a matching engine and like an order book. Um, in a centralized way, but still like all of the trading is non custodial and like settled on the blockchain. So it'll be very similar to that. Um, in terms of like the composability right now. Um, but yeah, we're not, we haven't been quite as like focused on that as like a compound or like a uniswap of a world. Like really like our MO is just trying to provide like you, the traders with the best possible like trading experience like on D Y D X. And that's what we've been like laser focused on.

• 57:12Ryan Sean Adams?

  Super exciting. David's chiming in. He's got three questions. Hey, David and everyone listening. So we've got five minutes left with Antonio. We want to be, we want to keep these to an hour. So could we try to do as lightning round questions as we can these next five minutes? And just pack them all in. Go ahead, David.

• 57:26David Hoffman?

  Yeah, two of these questions lumped together really well. So what is the long-term business model of D Y D X? And is there a world where D Y D X gets like acquired by somebody of the likes of like Coinbase? Or Gemini, or some big gargantuan in the space? Or are you guys gonna go ahead and pioneer your, your own roads here?

• 57:45Speaker 02

  Yeah, it's a great question. So there's kind of like two things that D Y D X has right now. So it's like the centralized like matching, like centralized company runs that. Like we take trading fees, we make revenue. And then like the second thing is this like decentralized protocol. And that's kind of where we're thinking about like the token potentially coming in over time. Um, so I think like we'll see just like these like split a little bit more like over time. Like, yeah, of course, like the centralized part could be like acquired. I'm not gonna sit here and say that it like couldn't. Um, but like definitely the decentralized part will continue to be its own like autonomous decentralized network.

• 58:16David Hoffman?

  And then another follow-up. So one thing I'm really bullish on is every single entity that has and operates its own L2 is incentivized to have its own on-ramps. And like D Y D X especially would benefit from having its own native on-ramp. Have you guys thought about this?

• 58:31Ryan Sean Adams?

  You mean fiat on-ramp too?

• 58:32David Hoffman?

  Fiat on-ramp, yes.

• 58:34Speaker 02

  Yeah, definitely. We thought about it. Yeah, I think it's something where if we did it, we would partner with like another like product that does kind of like a Fiat on-ramp. But like, we wanted just again, make the product experience for like trading on D Y D X as simple as possible. And I definitely think like Fiat on-ramps like in the product, whether that's like us totally building it or integrating with somebody else is something that's important.

• 58:54Ryan Sean Adams?

  So a question from Sid, other projects in DeFi are these platforms, right? Composable money legos, that sort of thing. You de-hedge is building on synthetics. Are there some ways that D Y D X can act as a platform? It's kind of an underlying primitive money Lego for other things to be built on top of.

• 59:12Speaker 02

  Yeah, definitely there are. I'd say it's not our main focus right now. But like, there are a lot of interesting things that have been built on top of D Y D X, actually. And like, D Y D X also supports like flash loans, if you've heard of like, you know, that like marketing lingo before, which I'm sure you have. Like, a lot of the like flash loan applications kind of go through D Y D X as like margin protocols right now. So that's like a good example of like how things can like be built on D Y D X. So definitely, I think it's.

• 59:41Ryan Sean Adams?

  Other price oracles, do you plan to integrate price data feed from other oracles besides what you're using right now?

• 59:47Speaker 02

  Yeah, we're definitely looking into it. So we have two Oracle providers as of Tuesday. So we're using Chainlink for the link perp for that oracle. And then we use the Maker Dow B2 oracles for kind of the all the other stuff. What we're basically building for the Starkware integration is kind of like I was saying before, and the advantages spiel was that we're kind of building our own like oracle solution there, which will kind of work similarly and will integrate with like the Maker Dow B2 network for price oracles. But it'll basically just like feed the prices like into zero knowledge lands like way faster and more accurately than they exist on Ethereum. So it's a bit of like a hybrid solution.

• 1:00:22Ryan Sean Adams?

  This is all going to go through the zero knowledge land that you're talking about, the Starkware implementation as well. Very cool. All right. A super secret pseudo anonymous account just asked the question, is ETH money? Antonio, how do you answer?

• 1:00:35Speaker 02

  Definitely. I mean, we're using it as collateral for so like, you know, you can trade, trade on the price of ETH, like use it as collateral like you would any other stablecoin. So definitely.

• 1:00:45Ryan Sean Adams?

  There you have it. Thank you for the ETH perpetual, by the way. I think that's great for the ETH bulls. Okay, last question for me, and then I think we're gonna have to wrap it up. We've got two minutes left is, how could the Bankless Nation help you guys? So, you know, I've, I've used this term like. I mean, we're on a path to become more and more bankless over time, right? Like decentralize as much as we can. It's a journey. It's not overnight. But one of the things that we love to support is obviously decentralized exchanges, doing the sorts of things that centralized exchanges could do before. Kind of like, I love to use the term buy, buy, bit mix. You know, like, like DYDX and other bankless protocols can start to replace some of these things.

• 1:01:29Ryan Sean Adams?

  How can the Bankless Nation, I guess, help you do that? Get involved? Are there other ways to get involved in your governance token? If you choose to release one, what can we do to help?

• 1:01:39Speaker 02

  Yeah, absolutely. I mean, I think definitely the best thing you can do is like getting the word out there. Just in terms of like, you know, posting about it, like talking to other traders or like people that you may know, which could be like good users of DYDX, using the product yourself, giving us like feedback where you constantly want to iterate and just make the product like the best possible that we can make it for you. Yeah, in the future, if we do decide to do like governance token, just like participating more and like governance, stuff like that. But absolutely, like we think of DYDX like as a product, like as an exchange, and we would just want to make it the best for you and everybody else. So it's really helpful as much as you're all able to like get the word out there, ask questions. That's how people learn and then just keep talking about it.

• 1:02:22Ryan Sean Adams?

  Awesome. I see QAZ put it well. I feel like a sponge soaking up the knowledge of the ocean, referring to this conversation we just had with Antonio from DYDX, he's the founder of DYDX. This has been your AMA Bankless Nation. Thanks for joining me. One last action item for you. If you want to support DYDX and what it's doing, try it out. Be careful, of course, you know, derivatives, margin training, perpetuals, not for the faint of heart. Test with small amounts of funds, like you gotta know what you're doing with this stuff. It gets dangerous and risky quickly. But if you want to try it out, the best way to do that is a type in bankless.cc/dydx.

• 1:03:01Ryan Sean Adams?

  That is going to take you to the DYDX homepage and also give you a 10% bankless special exclusive discount on all DYDX fees moving forward. So make sure you do that and let's, let's support what Antonio and his team are doing. Thanks so much, Antonio, for joining us.

• 1:03:20Speaker 02

  Yeah, thanks so much for having me. This was great.