dYdX is a protocol for short selling and derivatives built on the Ethereum blockchain. The exchange provides decentralized peer-to-peer shorting, lending, and options trading of any Ethereum-based token.
dYdX enables a wide array of financial strategies:
Short sells allow investors to profit on price decreases and can be used for speculation or to hedge existing positions
Fully-collateralized low-risk loans for short sellers allow token holders to earn interest fees
Options can be used to hedge positions, manage volatility, increase leverage, and more
The growth of dYdX can be attributed to the governance token with 7.5% of the supply meant to go to previous dYdX users. The announcement saw the user base swell by over 90% momentarily becoming the leading exchange by volume.
However, the exchange has been able to retain interest from users. Some of the factors driving interest are incentives.
For example, aside from governance, traders are eligible for trading discounts when trading on dYdX if they hold the tokens. Discount fees can go as high as 50% if they hold at least 5 million tokens.
With the governance token, users will get to decide the future direction of the protocol and token holders will be able to vote on proposals to add new features.
Past protocol users who traded on margin or decentralized perpetual swaps are also eligible to earn retroactive rewards.