The decentralized derivatives exchange dydX reached a special milestone yesterday. The trading platform saw a trading volume of more than $4 billion, which is more than its major centralized competitor Coinbase! The founder of dydX celebrated the milestone on Twitter yesterday. But where does this sudden increase in trading volume come from?
Antonio Juliano, the founder of dydX, once worked at Coinbase. That of course makes the milestone even more special. “Today, dydX has more trading volume than Coinbase for the first time,” said a proud Juliano:
5 years ago I left @coinbase and eventually founded dYdX
Today, before the first time, @dydxprotocol is doing more trade volume than Coinbase pic.twitter.com/QzoKAUpH29
— Antonio | dYdX 🦔 (@AntonioMJuliano) September 26, 2021
Centralized exchanges like Binance and Coinbase are a company’s responsibility. They facilitate and maintain a digital marketplace where traders can do business with each other. Because they operate as a business, they must comply with applicable laws and regulations in the country where they operate. The situation is different with a decentralized exchange.
Such exchanges are not part of a company, but consist of smart contracts on a blockchain such as Ethereum (ETH). As a result, there is no single point of contact and traders actually do business directly with each other without a platform in between. And that’s probably where the increase in trading volume on dydX comes from.
In China, all crypto transactions have recently been banned. The use of crypto and the associated services such as exchanges have therefore become de facto prohibited. Chinese blockchain journalist Colin Wu wrote on Twitter yesterday:
“A large number of Chinese users will pour into the DeFi world and the number of users of MetaMask and dYdX will increase enormously. All Chinese communities are discussing how to use defi.”
A large number of Chinese users will flood into the DeFi world, and the number of users of MetaMask and dYdX will greatly increase. All Chinese communities are discussing how to learn defi.
— Wu Blockchain (@WuBlockchain) September 26, 2021
For some Chinese, DeFi applications such as decentralized exchanges are a perfect refuge from which to invest in crypto. The Chinese government cannot exert any influence on this. This is the case with central exchanges. Huobi recently announced that it would completely stop its activities in China.
