Exchanges

Question 1

dydx

Answer 1

non-custodial decentralized exchange that allows users to leverage trade via Ethereum smart contracts.

Question 2

What was dxdy the first exchange to do?

Answer 2

It is the first perpetual DEX protocol to implement a layer 2 solution

Question 3

What is the significance of dxdy being the first perpetual dex to implement a layer 2 protocol?

Answer 3

This allows traders to deposit funds and trade instantly without paying gas fees for every transaction.

This allows exchanges to utilize order books as a market maker, which is preferred by many traders. As a result, many traders are switching to these platforms to prevent the risk of centralized exchanges (which I’m guessing offer order books as well) acting maliciously.

Question 4

Before usage of L2s why were dexes limited to using automated market makers such as liquidity pools instead of traditional order book to update the price of an asset?

Answer 4

Reasons for this restriction include the expensive fees required to update an order book, far too slow transaction speeds for high frequency trading and poor liquidity due to sparse usage.

Question 5

Dydx partnered with who to build a layer two protocol for the exchange?

Answer 5

StarkWare

Question 6

What is the significance of dydx using Ethereum Smart Contracts?

Answer 6

1) allows traders to use margin [not exactly sure how] 2) benefits from the security provided by ethereum 3) and also lets dydx use StarkWares L2 solution for fast close to no gas transactions