Putting market making in the users’ hands: AMA recap with dYdX

Antonio Juliano, Founder of dYdX, became a guest on the recent Cointelegraph AMA. He discussed his return to the company and shift back into ’startup mode’, introduced new products available within dYdX Unlimited and shared his vision for the potential growth of onchain derivatives markets.

Unlocking “unlimited” trading with markets on demand [Brought to you by @dYdX] https://t.co/2D19nMOuFn

— Cointelegraph (@Cointelegraph) December 2, 2024

“We’ve barely scratched the surface“

After announcing his resignation from dYdX in the spring of 2024, Juliano underwent a period of introspection. “I realized that the company was getting a little too complacent, which was absolutely driven by me. One of the challenges in crypto is that everyone is so short-term focused. And what we’ve built at dYdX is something that has longevity. But iteration and innovation are pretty hard to do in a bigger company. That’s why we’re back in startup mode,“ he said.

Now back at the wheel, Juliano wants to fundamentally rethink the derivatives trading landscape: “Is it taking big bets? What should the form factor be? Is it just for professional traders? Are there ways to get more people involved in trading these advanced types of products? The design space is really huge, and we’ve only begun to scratch the surface.“

He went on: “The current DeFi derivatives market sees about $5-10 billion in daily trading volume, while centralized crypto derivatives exchanges handle about $100 billion. I think, there’s room for growth. So far, crypto has been really effective at creating new asset classes, but not so much at really driving a lot of adoption with existing asset classes being traded on crypto rails. But we’ll get there. And when we do, there’s going to be a really big inflection point where crypto volumes skyrocket.“

Referring to the recent retail growth, Juliano linked it to the emergence of new crypto products that bring retail users into the space: “Last time it was NFTs, and before that it was ICOs and DeFi in general. Now it’s memecoins. The great aspect of crypto is that anyone can use it by just downloading it on their phone and starting trading immediately. But both sides, retail and professional, are critical and dYdX really wants to be the bridge between them and novel things.“

“Now we have the entire journey for derivatives markets“

Using all these questions and trends as a kind of growth direction, dYdX has undergone a major upgrade with dYdX Unlimited as part of it. The new features available within it aim to redefine the possibilities of derivatives exchanges, which Juliano talked about in detail.

He introduced two distinctive products, the first of which, Instant Market Listings, reflects a successful trend in the broader DeFi space: “It’s a little different from Uniswap or Pump.fun because you’re not creating new coins when you use Instant Market Listings, you’re creating leveraged trading through perpetuals. Launch your coin, let it be really easy to trade through spot, then come to dYdX and list it with leverage so more professional traders can get involved. That’s what you see with instant market listings.“

Juliano emphasized the lack of delays associated with traditional listing processes on CEXs. “You don’t have to wait for the Binance Listing Committee or whatever. One button and it’s instant. Now that happens in derivatives.“

Another product he presented, MegaVault, introduces high-performance automated market making to the world of DeFi derivatives. While dYdX has traditionally focused on order book trading facilitated by professional market makers, MegaVault complements this by delivering a master liquidity pool funded by USDC depositors earning attractive yield.

“MegaVault automatically provides liquidity for just about every asset that exists on dYdX. It’s quite synergistic with instant market listings, because when you want to list a new asset on dYdX, you have to make a deposit into MegaVault for that asset, and it immediately starts quoting that asset. This automatic liquidity provision is really complementary to the professional liquidity provision that already exists on dYdX, and it’s likely to be much better for new markets,“ said Juliano.

MegaVault also simplifies the typically complex process of market-making in derivatives. “Normally being a market maker is very complicated, especially in derivatives. You have to manage risk, build trading bots, and place hundreds of orders every second,“ Juliano said.  With MegaVault, he said, users can become liquidity providers with a single click and earn a variable APR based on the performance of the market-making strategy. In addition to trading profits, MegaVault also receives a significant portion of the protocol’s overall revenue, recognizing the critical role liquidity plays in a successful exchange.

“It’s really cool that dYdX is opening up to new classes of users for whom we have historically been a pretty complicated product and who have not had access to liquidity and derivatives before,“ said Juliano. He expects the combination of instant listings and AMM-driven liquidity to create a dynamic ecosystem: “These new markets will go from being really easy to list to naturally having liquidity, and then naturally evolve to a more sophisticated way of trading with order books.“

He also emphasized that dYdX now offers a comprehensive journey with the new Unlimited features: “There hasn’t been a platform where you can have that full journey, especially with derivatives from newly created markets. Now we have everything from instant market listings to an automated market maker all in one place. Real market makers can come in and provide deeper liquidity, tighter spreads and other things.“