A new way has emerged for the operators of Ethereum [ETH] to diversify their portfolio. A decentralized start-up of financial derivatives known as dYdX is to create short and leverage positions for Ether and other ERC20 tokens. In particular, the startup recently closed a financing round led by the investment market leader, Andreessen Horowitz.
Other important investors for the round were Polychain Capital, Kindred, Abstract and angel investors such as Brian Armstrong, CEO of the Coinbase trading platform and Elad Gil, an important investor.
The founder of dYdX, Antonio Juliano, declared:
"The main use of cryptocurrency so far has been trading and speculation, buying and holding." It is not the way in which sophisticated financial institutions trade. "
He continued to talk about derivatives markets in general and how they are larger than the underlying spot markets of an order of magnitude. He said:
"The cryptocurrency market is probably in the order of $ 5 billion to $ 10 billion in volume, so you'd expect the derivatives market to be 10 times bigger. a great opportunity here. "
dYdX offers a short token Ethereum that is inversely anchored to the value of cryptocurrency. When the price of Ethereum rises, the value of the token decreases. When Ethereum depreciates in value, the value of the token increases. This means that traders could sell these tokens after having predicted a decline in the price of Ethereum.
dYdX also plans to offer short token and leveraged for any cryptocurrency on the ERC20 standard. This would potentially allow customers to obtain short currencies that they know they want to depreciate in value.
The way these tokens work is that lenders on the backend of the system can get interest by providing Ether, or other currencies as collateral. This warranty is locked in an intelligent contract that backs up short tokens. These tokens will be offered on your dYdX application and also on other platforms that collaborate with the startup. Juliano said:
"We think of this as more than just shorting your favorite shitcoin, we think of them as mature financial products."
The startup was created with a vision to provide infrastructure support to institutional investors and large funds. The protocol itself was a project to start offering marginal tokens. Now, it aims to provide maximum liquidity to investors who attempt to enter the cryptocurrency market through margin trading.
On the business model for startup, Juliano said:
"We intend to gain protocol-level value in the probable future through a value-added token.It would have been easy for us to rush to add a questionable token as we have seen in many other protocols, however, we believe it is worth reflecting on the best way to integrate a token into our ecosystem in a way that creates rather than destroying value for end users. "
Polychain, Olaf Carlson-Wee, had only good things to say about the dYdX product. He also provided a positive prediction, stating:
"Antonio and his team are among the best engineers in the cryptographic ecosystem who build a new software system for peer-to-peer financial contracts." We believe this will be immensely valuable and used by millions of people, I do not care about short-term revenue models, but rather the opportunity to permanently improve global financial markets. "