What is DYDX?
DYDX is a governance token of the dYdX Layer 2 Protocol ("the protocol"). dYdX is a decentralized exchange is built on the Ethereum network delivering financial instruments to users such as perpetuals, margin, NFTs and spot trading, as well as lending and borrowing. dYdX equips traders with off-chain order books with on-chain settlement and enables them to short-sell tokens, increase exposure by longing with leverage, or earn interest on deposited tokens.
dYdX leverages StarkWare's Layer 2 to eliminate the need to trust a centralized exchange while trading, and thus combines the security and transparency of a decentralized exchange, with the speed and usability of a centralized exchange.
Holding the DYDX token allows the community to govern the the protocol by enabling shared control of the protocol, it grants traders, liquidity providers, and partners of dYdX access to collectively towards an enhanced Protocol. The token also enables governance, rewards, and staking, all designed to drive future growth and decentralization of dYdX. Staking pools are designed to promote liquidity and safety on the Protocol.
On the technical side, DYDX is an ERC-20 utility token used to power the dYdX trading platform. The total fixed supply of DYDX is 1,000,000,000.
How does DYDX compare to Bitcoin?
DYDX differs from Bitcoin in a few important ways.
First, Bitcoin is a “coin” and DYDX is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated maths puzzles to verify transactions. By contrast, DYDX is a token that runs on the Ethereum blockchain. On Ethereum, ETH is the only coin that can be mined and miners mine ETH to process DYDX transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that DYDX can be used in most other decentralized finance applications.
In addition, unlike Bitcoin, DYDX is a governance and utility token. While, like Bitcoin, DYDX can be used as a means of payment or a store of value, its market price may be very volatile and so it may not be useful for payments or storing value.
Finally, DYDX’s market capitalization is smaller than Bitcoin’s. As of April 2022, DYDX’s market capitalization was estimated to be $400 million, as compared to Bitcoin’s market capitalization of $800 billion.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about DYDX, including an opinion that DYDX is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of DYDX prior to making it available on Wealthsimple Crypto and has concluded that DYDX is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated DYDX based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of DYDX, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created DYDX;
- The supply, demand, maturity, utility and liquidity of DYDX;
- Material technical risks associated with DYDX, including any code defects, security breaches and other threats concerning DYDX and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with DYDX, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of DYDX.
Like all other crypto assets, there are some general risks to investing in DYDX. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
Further to these general risks, the dYdX trading inc, DYDX development team and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of DYDX have no recourse to dYdX trading inc or Wealthsimple if DYDX declines in value for any reason.
Given that DYDX tokens provide holders with discounts for using the dYdX protocol. They have a use or purpose other than investment and speculation based on the efforts of dYdX Trading Inc. and their value can be attributed to the potential discounts holders can receive. As a result the market price of DYDX is affected by factors other than the efforts and actions of dYdX Trading Inc.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading DYDX. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: April 28, 2022