Dydx's daily trading volume surpasses that of Uniswap. Is the explosion of DeFi derivatives coming?
[Roast Boy Creator Alliance] DeFi has exploded from trading, lending and other fields, and the form of innovative traditional finance has gradually come out of the circle, becoming the most important application on the blockchain, but the DeFi derivatives market that has always been optimistic has never been the leader At this moment, the attention is extremely high, but the market reaction has not taken off.
The high degree of attention is due to the prospect of the DeFi derivatives market. In the traditional financial field, the market size of derivatives is much higher than that of the spot market. In 2020, the nominal value of the overall derivatives market is roughly US$840 trillion, while the size of the stock market is US$56 trillion, the size of the bond market is US$119 trillion, and the size of the derivatives market is 4-5 times that of its original assets .
Another reason for the attention is that there are many disadvantages in centralized derivatives transactions, and users in the currency circle are familiar with black-box operations such as "inserting pins", "unplugging network cables", and "data smashing".
Most of the existing transactions of digital currency derivatives occur in exchanges, in the form of delivery contracts, perpetual contracts and options.
Coingecko data shows that among the centralized exchanges with the highest trading volume, the trading volume of derivatives is much larger than that of spot trading.
The chart on the right side of the figure below tells us that in the DeFi field, the trading volume of derivatives is far lower than that of spot trading. Compared with traditional finance and centralized exchanges, there is huge room for expansion. After all, decentralized derivatives trading can avoid the risk of single point of failure and evil.
The reason for the insufficient development of derivatives in the current DeFi field. Including the computational complexity of derivatives transactions such as contracts, and the performance limitations of the previous public blockchain network, resulting in insufficient liquidity of transactions on the chain, slow speed and unable to adjust positions in time to deal with risks. DeFi derivatives have not been found to allow A solution that is satisfactory to the public. Although the AMM model has improved, problems such as capital utilization and impermanent losses still cause headaches for traders.
With the maturity of Layer 2 technology, derivatives have developed in a breakthrough way. Derivatives in the centralized field are defined, which are mainly divided into four categories, namely futures (perpetual contracts). Currently, there are Perpetual Protocol, dYdX, Futureswap, Injective Protocol, MCDEX, DerivaDEX, etc.; options include Opyn, Hegic, Charm , Opium, etc.; synthetic assets include Synthetix, UMA, Mirror, Duet, etc.; prediction markets include Augur, Polymarket, etc.; interest rate swaps include Horizon, Yield, Barnbridge, etc.
Dydx is a decentralized order book-style perpetual contract trading platform. Its V2 version is deployed after Layer 2 Optimism of Ethereum. With the high speed and low handling fee of Layer 2, it has accumulated enough liquidity and can achieve stronger transactions. Autonomous, planned order book transactions. The trading volume is increasing day by day, even reaching 1 billion US dollars on August 29, surpassing Uniswap to become the DEX with the largest trading volume. At present, the cumulative trading volume of Dydx has exceeded 10 billion US dollars.
Both daily trading volume (yellow line) and daily revenue (red column) of dydx continue to grow. Dydx is conducting transaction mining activities for 5 years.
PERPetual, another derivative track project, is gradually regaining the lost ground since 519. It adopts the form of AMM to solve the liquidity problem. Perpetual’s V2 has just been launched, and an innovation is to convert the user’s holdings to NFT, adapting to Uniswap V3’s upcoming LP certificate NFT.
With the development of Layer 2 and various expansion solutions, the problems of performance, risk control, transaction costs and transaction anonymity in decentralized derivatives projects will be partially resolved, and decentralized derivatives exchanges will also become Layer 2 development the biggest beneficiaries. In the long run, the derivatives track is still one of the tracks with great development potential and high upper limit in the Defi field.
