Bankless - The dYdX Boom | Antonio Juliano (10/6)

Episode Date: October 6, 2021

Save 10% on dYdX trading fees! https://trade.dydx.exchange/r/bankless  ------ In September 2021, dYdX did more trade volume than Coinbase for the first time. The growth in the scaled trading protocol has been astounding, and this has been no coincidence. dYdX has pioneered Layer 2 solutions along with Starkware's ZK Rollup, and the result has been an explosion of perpetual swaps and deep liquidity pools on dYdX's native rollup. Antonio Juliano returns to Bankless to discuss the parabolic growth of dYdX, the plans for its governance & utility token, and the future of decentralized derivatives. State of the Nation is livestreamed on Tuesdays at 11am PT / 2pm ET. ------ SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge  ------ ZERION | Your Gateway to the Metaverse! https://bankless.cc/Zerion  ------ BANKLESS SPONSOR TOOLS: GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini​  LIDO | DECENTRALIZED STAKING https://bankless.cc/Matcha  AAVE | LEND & BORROW ASSETS https://bankless.cc/aave  UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants/dharma  ------ Topics Covered: 0:00 Intro 8:30 Antonio Juliano of dYdX 11:06 dYdX vs. Coinbase 15:50 Who's Trading? 19:09 Behind the Success 24:31 Layer 2 & TVL 32:40 Order Book 38:45 The Largest Exchange 42:03 Competing with FTX 47:30 Decentralization 52:58 The DeFi Spectrum 57:20 Pioneering Scale & Layer 2 1:04:48 Ethereum Layer 1 1:07:48 Regulatory 1:12:41 Successful dYdX 1:16:10 Closing & Disclaimers ------ Resources: Antonio on Twitter:  https://twitter.com/AntonioMJuliano?s=20  dYdX: https://dydx.exchange/  How to Trade: https://newsletter.banklesshq.com/p/how-to-trade-on-the-dydx-rollup  How to Earn: https://newsletter.banklesshq.com/p/a-guide-to-earning-on-dydx  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Hey, Bankless Nation. Welcome to another state of the nation. Super excited about the topic today and the guest we have. David, why don't you give a quick preview? Who are we talking about? What's this about? Antonio Giuliano from D-YDX, who will be on the show for the third time because D-YDX continues to just deliver absolute groundbreaking metrics and landmarks when it comes to decentralized trading now on layer two. And so that is very important. really the story of this week is that DYDX has been doing more volume than Coinbase. And Coinbase is the leading centralized exchange. Can you say that again?

Yeah. You say that again. DYDX. A order book-based exchange that lives on an Ethereum layer two is doing more volume than the world's leading centralized exchange and also all other D-Dex's on Ethereum combined. Right? And so this is an amazing success story out of the project that has been grinding. for years, so well-deserved to the D-YD-X team. And I feel like after, once you have like

more volume than Coinbase or more volume than a leading centralized exchange, like we have a bunch of lessons to learn about how that story unfolded. And so that is what we are going to tell it today. Sorry, yeah, how they how they do it? That's the question. This meteoric rise, how did they do it? What I love about this story, too, is no sacrifices in decentralization were made. Like, no harm to decentralized protocols in the making of DYDX, which is absolutely fantastic because there's so many like other alternatives out there that sacrifice on decentralization and say, hey, decentralization is not what users want, not what users

care about. But DYDX is prioritized it the entire time. And now this success, it feels like an overnight success, but it's really been like a five-year overnight success. I think a huge catalyst was the launch of layer two. But I'm going to, we're going to let Antonio tell us more of this story. So we'll get to that in a minute. One thing I'd like to remind bankless listeners, if you are a bankless listener and you want some, let's see, let's see if I can share this. You see my screen here, David? Yeah, I see your Spotify. Okay. Exit that real quick. All right. What I was going to show you is this. This is a bankless

referral. If you are a D-Y-D-X user and you don't know about this or you want to become a D-Y-D-X user, we have a referral code for you to save 10% in the show notes. You can check that out as well. Just another gift from the bankless team. Go check that out. But before we get to the main conversation, David, let's talk a little bit about what's new in the bankless community right now. Mariano Conti on Layer Zero, this is a new podcast where we explore the people behind crypto. David, that episode came out this morning. I haven't listened to it yet. I listen to all of them. I haven't listened to this one yet. Give us a preview of what's in that conversation.

Yeah, the really the fun part about the conversation. And we talked about so many things. But Mariano, he hadn't really, like, worked very, very hard, very much before Ethereum. And something about Ethereum turned him into an absolute grinder, one of the leading smart contract devs in all of Ethereum. So the story behind Mariano, specifically on that told in layer zero is like, why did Ethereum make Mariano a hard worker when he wasn't that before? Wait, wait, wait. So you mean he wasn't working very hard? You mean he was like kind of lazy? Yeah. Is that how he would put it? Because he is definitely not lazy now. He's definitely not lazy now. And so like, yeah, the story is like the story we told is the transition between being not a hard worker to

one of the hardest workers in Defy. Wow. Yeah, I'm looking forward to listening to that. We also came out with a podcast on Monday with Devin Fincer, who is the, founder of OpenC, that's an incredible, I think Unicorn of the Year, maybe, although DYDX might be a contender for that. I don't know, but, you know, OpenC has had just an incredible year, no signs of slowing down like $3 billion in transaction volume for the last two months. And catch that episode, if you want to understand why and how they're actually doing it. David, we've also got to give a shout out to Zirion, who's doing some magic in the NFT, landscape. I use Zirion for all sorts of things, viewing my crypto portfolio, viewing my D4,

DFI portfolio. But now they actually have a way to showcase NFTs. I'm looking at your Oh my God. God damn. I need to get rid of these Fidenza rocks. You can't. Just keep them in here, you know, pass them to your kids at some point in time, hand them down. And you know, it's super cool. I haven't fully done this yet, but I want to. I want to borrow my wife's Apple Watch. one, but check this out. You can use Zirion to actually add your NFT to be the faceplate of your Apple watch. That is pretty sick. It takes like 20 seconds to do that. We want better ways to flex our NFTs to the world. And I guess putting it on your Apple Watch is an underappreciated and then, and now available tool to all NFT flexors out there. Absolutely. So flex your NFT with style.

Use Zirion. Go check that out. There's a link in the show notes to that where you can find all sorts of more information. David, I've got to ask you the question I ask before every state of the nation as well, which is, what is the state of nation today, sir? This one's kind of a cop-out, but the state of the nation is decentralized because more trading volume is going on D-Y-D-X, which is a decentralized exchange than going on Coinbase or any other centralized exchange. And so this is a huge victory for the world of being bankless and being self-sovereign. And that is all thanks to the power of an orderbrook base exchange on the layer two.

So today, the bankless nation is a little bit more decentralized. You know what? I'm going to plus one that because you know what I was doing right before this episode. I was reading up on Polynia. If you've read anything that Polyna is written, he's a poster on Heath Finance also has medium. But it may be so bullish on like layer twos and where that's going. But just still like a wealth of information and resource.

I think people are underrating layer two right now, Ethereum layer two specifically, and we're in this season where they're overrating alternative layer ones that compromise on decentralization. So yeah, state of the nation is decentralized. We're going to get into that in just a moment with Antonio, talk about the DYDX story. But before we do, we want to thank the sponsors that made this episode possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm.

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So if you want to stake your ETH, Terra, or Seoul, and get liquidity on your stake, go to Lido.fI to get started. All right, guys, we are back with Antonio Giuliano. He is the co-founder of DYDX. He was previously an engineer at Coinbase, but five years. ago, Antonio quit Coinbase to build D-YDX. Now, D-YDX has passed Coinbase in 24-hour volume. That's a crazy story. We've had Antonio on the show before twice, but we keep bringing back because he keeps delivering these crazy results. And D-Y-D-X is probably, I don't know,

the story of the month of September. So Antonio, great to have you back. How are you doing, sir? Doing really well. Thanks so much for having me and excited to be on. Yeah, well, look, you tweeted this out. This is like a milestone type tweet. You tweeted this out the 26. You said five years ago, I left Coinbase and eventually founded DYDX. Today for the first time, DYDX is doing more volume in trading volume than Coinbase. Absolutely crazy.

Can you get like, first of all, how does that feel and give us a sense of like, you know, did you ever think you would be here? Yeah, I mean, I definitely did. think there was a good chance we would be here at some point. It's certainly not a given when you're building just a really innovative, exciting new project and a really new space. But this is kind of what we've been talking about for the whole time, you know, us and everyone who I think is excited about DFI, just the potential, like the reasons to use it long term, the potential growth opportunity with token launches, which is obviously played into this

in a really big way. Didn't quite think it would happen this soon. But as you guys were alluding to in the intro. It's certainly been a long grind on YDX, but I think we have set ourselves up really well for success, and that's always exciting. It's really nice to be able to compare trading volume between Coinbase and DYDX just because it's apples to apples, but also Coinbase and DYDX as platforms are different platforms. So maybe can you help me and the listeners kind of just compare and contrast the differences behind Coinbase and DYDX? Most notably in my mind, like the availability of assets, I think is a lot lower on DYDX, which makes those volume numbers even more impressive. And then also can you maybe clue us into like the

number of users that are trading on DYDX and if you do know the numbers on Coinbase, how those compare? Yeah, great questions. So I think there are a number of key differences between DYDX and the platform like Coinbase. Obviously, the biggest difference is that DYDX is decentralized, non-custodial, transparency, all the good stuff you guys really preach. and I'm sure the listeners can appreciate. And then the other really big difference between DYDX and a platform like Coinbase is DYDX is focused on financial derivative products and specifically perpetual contracts, whereas Coinbase, for the most part, is focused on spot trading.

Spot trading is sort of just a fancy word for regular old buying and selling of assets. Tep touched on this before on the show, but just a quick recap of kind of what financial derivatives are and why we're really excited about them. derivatives are synthetic products, which can be created on top of any asset. Synthetic basically means when you're trading a derivative, you're not actually trading the assets that are under the hood. So if you're trading like a Bitcoin perpetual, there's no actual Bitcoin being traded or kind of being held on DYDX or any other platform you may be trading perpetuals on.

But there are these kind of financial incentives, financial mechanisms, which effectively make these derivative products trade at the price of the underlying asset. And that's really what we've created on D-Y-D-X. And the reason people are so excited about derivative products and the reason they've been taking off in a huge way in cryptocurrency, even before D-Y-D-X, has been that you can trade them with leverage. And kind of what the concept of leverage means is that you can come to an exchange with, say, $100. And say you went to Coinbase with $100. You could buy $100 worth of Bitcoin. And that's great. You know, we all want to buy Bitcoin. But if you come to D-YD-X or, you know, a different platform that offers leverage trading and you are, you know,

willing to lever up, you could buy, say, $500 worth of Bitcoin or $1,000 worth of Bitcoin with your $100 through kind of the power of leverage. It's not without risks. There are risk with trading on any leverage platform. But, you know, for the most part, that's what's been driving a ton of volume to these derivatives exchanges over time. The biggest exchanges, the space by trading volume in the past year or two have been Binance and FTX, and their trading volume has really been dominated by trading of these derivative products. And that's really why we're focused on derivatives at DYDX. You know, zooming all the way out, our highest level goal at DYDX is to become one of the biggest exchanges in crypto, period, centralized or decentralized,

but kind of on a three to five year time horizon. And that's what's really informed our focus on derivative products, because basically by definition, if you want to be the biggest exchange in crypto, you must support the biggest trading markets. And those are already and, you know, will continue to be derivative products. Obviously, we're making a really big bet on decentralized exchanges. I'm sure we'll touch a lot on why we're, you know, all really excited about decentralized exchanges. But I'd say those are probably the biggest differences between DYDX and Coinbase. Certainly there are other differences. As you mentioned, Coinbase supports more. markets than DYDX does. However, we've actually been improving on that quite a lot recently.

I think we're up to like 27 or so markets now. I haven't checked how many Coinbase has, but yeah, I think it's like 50 to 100. But I think last time we spoke on the show, DYDX had on the order of like five markets. And I think we talked on on the show back then about, you know, all this stuff that we were working on from a tech perspective to enable us to launch a lot of new markets. that's driven a lot of growth and sort of that thesis has come true. So, you know, still not quite to the level of a coin base or, you know, especially like a finance or FTCS on the number of markets. But what I would say there is most of the trading volume in crypto happens on the top assets. So, you know, Bitcoin and Ether just drive most of the trading volume and the space,

you know, just those two. So as much as we're able to capture that on DYDX, I think we have been successful there. So, yeah, a lot there. I'll stop there for now, but I'd say those. those are kind of the biggest differences between the two. I think another difference I'd like to highlight is that DYDX doesn't have a native Fiat on ramp, and Coinbase does. And that's definitely why Coinbase is optimized for spot trading rather than these perpetuals, which makes it even more astounding that DYDX has beaten Coinbase with trading volume because Coinbase has hooks into everyone's bank accounts,

whereas DYDX is kind of like the hard way, where you actually can only take money from L1 Ethereum and have that be deposited. And that has also changed probably the user profile, both in the nature of what the products are on DYDX and also how you get there, is probably also change the nature of what users are actually using DYDX. So maybe just to finish off adding color to the nature of DYDX, could you also talk about like the general user profile? Who is trading on DYDX, are the amounts that they're trading on DYDX,

more than you would find on a centralized exchange like Coinbase. What's just the nature of the user profile on DYDX? Yeah, absolutely. So again, because we're focused on these financial derivative products, these types of products are just fundamentally more complex than products you'd find on a normal spot exchange like Coinbase. And therefore, the types of users that are trading on DYDX are much more advanced than call it like the average coin base user.

DYDX really isn't targeting somebody who has bought, you know, first $100 worth of Bitcoin in the past week. It's really much more targeting people that have been in the space for a while, understand financial derivative products or at least want to learn about them. And I think that manifests itself in our metrics in a couple different ways. I don't really know what CoinBasis numbers look like. I would sort of guess there are a number of active weekly traders is probably in the hundreds of thousands to maybe low single digit millions. On UIDX, just sort of for comparison on an order of magnitude, I believe we have about 7 or 8,000 weekly active traders.

But as you say, they're pushing much, much more volume on average than sort of like the average coin-based user is. So the users that we're capturing are much higher value on average. There are a couple different profiles. I think UIDX is targeting both international advanced individual crypto traders, you know, people that likely have traded derivatives and perpetuals on other platforms like finance or FTX before. And then DYDX is also targeting in a big way, sort of all of the top crypto trading

funds in the space. One of the other really exciting things and probably the thing that I've been most excited about with all the DYDX growth recently is that almost all of the top crypto trading funds have already integrated with UIDX or at least are sort of like talking with us about integrating. And that's really exciting because I think that's where the real trading volume and sort of the real value capture comes from. DYDX will always be a platform both for individual traders and let's call it like crypto institutional traders. But I think a lot of these more crypto institutional traders had traditionally been hesitant to enter DFI or, you know, there wasn't

enough trading volume or activity there to make it make sense for them. And that's really starting to change right now with DYDX. And I think that's really exciting. That's awesome. And I think that leads into the next question we have for you, which is like, what do you attribute to the recent success of DYDX? You guys have absolutely exploded over the last few months in particular. We have a few theories as David and I were talking about this conversation. And I wonder if you'd like to weigh in on these theories, but then please, like you know best on why you're actually growing the way you're growing. But the first is release of layer two. I mean, we've seen this story elsewhere with Axi Infinity most recently,

not quite a layer two, a side chain, but layer two, lower gas prices, super important for scalability. The second is the DYDX token. Of course, we know tokens are like steroids for growth. And so DYDX is injected some of those steroids maybe with a recent release of the DYDX token. And the third is maybe an increased focus on decentralization. This comes out of some of the shutdown of centralized exchanges in China. Where is that volume going when it leaves Huobi, for example? Maybe some traders are reevaluating the importance of decentralization. Maybe some of that liquidity and volume is actually leaking into defy.

Give us your thought on any of those. And then also tell us the real reason that DYDX has had such explosive growth this year. Yeah, I mean, I think you're spot on. Those are the top three things I would pick to focus on as well. But maybe adding a bit more color to that, for those who aren't familiar, if the DYDX protocol token was released about two months ago by the DYDX Foundation, and that has just obviously driven a ton of growth to the platform. I think I probably even said this last time I was on the show,

but my mantra has always been, you know, DYDX has been around for four years now. So why did it take so long for the DYDX token to be released? And my thesis on this had always been that, yes, tokens can be just massive, like, order of magnitude growth drivers for a platform. But the way you really get big, like the way you like really capture a lot of value is you start by, first of all, making a great product that is already growing organically that has real use cases for people to be able to use it. And you also build a scalable product.

Because just imagine if like the DYDX token had been released, but DYDX were still operating on Ethereum layer one. That growth would not have happened. You know, one really exciting statistic is we were only on DYDX pushing multiples of all of the transaction volume on Ethereum combined. And I think we probably still are. So, you know, it's sort of by definition that. growth could not have happened on Layer 1 Ethereum.

So again, we talked about this on the show before, and I'm sure we'll touch on it again. But as you say, that launch of the Layer 2 product was, I think, a really big step up for us in a couple of different areas that are super important. Scalability, obviously, the product experience is way better. There's instant trading, cross-margining, things and features, users care a lot about. And that product was already growing organically before the token launch. And I think that's important. And then, you know, fast forward to two months.

months ago when the D-YDX Foundation released the D-YDX token. And I think the foundation did a really great job of just creating a lot of these liquidity mining programs. Liquidity mining empirically has been super successful for a lot of different protocols in the space. So it's not really rocket science. But the thing that's hard, I think, is what are you incentivizing with your liquidity mining programs? Are you incentivizing the right things? And I think that's the real critical question and the thing I think, you know, the DYDX Foundation got right in the launch of the token. There are quite a lot of different liquidity mining programs, have to dive into any of them. There are liquidity mining programs for traders on the exchange.

There were liquidity mining programs for, you know, past users of the platform liquidity mining programs for market makers, which is driven in a massive amounts of liquidity to the exchange. There are staking pools, and I think all of these together really play into incentivizing exactly the right behaviors that we want to see and that are valuable on DYDX. So I've been really excited about that. And then sort of your third point, I think that's valuable as well. I think that's sort of like a lesser point. Not that it's not important, but I think that's just something that continues to happen

over time as more people see the value of decentralization, whether that's for transparency, self-custity, you know, censorship resistance. And I think that's what makes us excited about the long-term growth prospects on the platform. To what you said about the token, the beauty about tokens is that you can specifically engineer the incentives that you want out of a token. That's just a tool that some centralized exchange like Coinbase and FTX just can't really figure out by the nature of their centralization.

And so it sounds like we're all on the same page about where the success is coming from, but Antonio, if I can pin you down to actually put some numbers behind this thing, can you like divvy up percentage wise what what amount of the recent dy dx success can you attribute to the layer two was that like 50% of the success 80% of the success what about the token 20 50% like if you had to divide up the pie of the success where where is the success coming from i mean it's a great question it's a little bit hard to say because i think those two are really multiplicative with each other you know i don't think they're like additive um and i think that makes it a little bit tough to like put specific percentage

on it. You know, let's just take the world where, like I said, DYDX is still on layer one with our old layer one product and the token was released on top of that product. I think there would have been a good amount of growth, sure, but, you know, by definition, we wouldn't have been able to scale to more transactions per second than all of Ethereum. And likely we wouldn't have seen even close to, you know, I would guess probably our volumes would be in like the tens of millions or maybe hundreds of millions of dollars. And now we're in sort of the low single digit billions of dollars. you know, but also empirically, like we had been operating on layer two for a while with more or less the same product before the token. It's getting better all the time, but it's more

or less the same before and after the token. And I think before the token, we were seeing daily volumes in roughly the $100 million range. And then as I say, you know, now we're seeing volumes in the $2 billion a day or so range. So empirically, it's driven like 20x growth for us in the past month or so. that growth is definitely being showcased very, very well by the TVL chart for DYDX, which here it is. I joked on Twitter a little bit yesterday when I tweeted out this graph that it literally looks like the up chart emoji. It looks like the same shape. And so, and again, I kind of want to return to almost the same question, to what degree is this layer two incentivizing lockup and what degree is this yield farmer,

yield farmers seeking the incentives out of the token. And where have you seen token incentives really shine when it comes to attracting yield? Like what are the, because there's so many different ways to do, to do like DYDX token yield farming on DYDX because there's so many different ways to pay out incentives, which ones have really resonated with the people that are seeking the DYDX token? And is that why we're seeing all this lockup as well? Yeah, I think that's a lot of it. So let me maybe at a high level, just go through.

through all of the different liquidity mining programs that were launched alongside the token, because there are a couple of them, and they are complex. So feel free to stop me and ask questions at any point. So it's kind of the first and most basic, but also probably most important liquidity mining program is what we call trading rewards. This is effectively just incentivizing users. There's like a fixed amount of DYDX tokens that are allocated to this program for month. and then everyone gets a trader score on DYDX every month.

And your trader score is based off of the amount of fees that you've paid on the platform, multiplied by your average open interest on the platform over that month. And average interest, all that means is like, you know, the amount of positions, you know, if you hold like $1,000 worth a Bitcoin on DYDX for a month, then your average open interest is $1,000. So you take these two things and you multiply them together. And, you know, out of that, you get a score. And the reason you multiply them together is that, you know, you need both of these things.

You need to be both actively trading and paying fees and you need to, you know, just, you know, hold positions on the exchange. So you could make a trade on UIDX and exited immediately, but then your average interest wouldn't be too high. And the other reason that it was set up this way is because these numbers are hard to fake, right? You literally have to pay fees on the exchange and you literally have to lock up capital to hold open interest on the platform. So it's really incentivizing and driving for the most part really organic volume and incentivizing like the way users were already trading on the platform and on the exchange. And I think that's pretty ideal. So that's kind of the first and most important liquidity mining program. Another really important one that has driven just huge success to the platform so far has been,

there's a separate liquidity mining program just directed at market makers on the platform. Just a really quick overview, like who are market makers, what did they do? And you touched on this before, DYDX is an order book based decentralized exchange. But an order book is, it's basically just a sorted list of all the prices people want to buy and sell at. So when you're trading on DYDX or any other orderbook-based exchange, you're trading against other traders on the platform. And for the most part, you're trading against market makers, these professional trading firms, which their whole job is to provide liquidity to people who want to trade on exchanges. And to kind of put some numbers around this and explain why this is so important, liquidity is quite literally the most important thing to an exchange and the most important thing to traders on an exchange. because it's literally the price that you get when you're trading on the exchange.

You know, if exchange A is offering to sell you Bitcoin for $1,000, an exchange B is offering to sell you Bitcoin for $1,000, of course, you're just going to go and trade on the exchange that's, you know, willing to sell it to you for $1,000. Just more liquidity gets better prices for traders, and that's what traders care about, obviously. So anyways, liquidity is super important for an exchange to put some rough numbers around this. roughly D-YDX had around $1 to $2 million worth of depth.

What depth basically means is like how much can you buy within a certain amount of slippage or within a certain percent of the mid-market price. We had about $2 million before the token launch of depth on the ETH markets. And to put it into context, Binance, which is the world's most liquid exchange, has about $25 million within 1% of depth on their Bitcoin perpetual, which is the most liquid product in the world, or in crypto at least. Fast forward to now, D-YDX has created this liquidity mining program, which quite literally incentivizes market makers based on their performance.

And one of the other sort of more complex, but one of the things that I'm most proud of that the foundation did is the foundation came up with this score for market makers on the platform as well, which looks at all of their orders that they've placed on the platform for the entire month. and comes up with one numeric score. And this is important because by coming up with this one numeric score, you can divvy up these market maker rewards in sort of a perfectly incentivized way. The score is complex, but it's based off of a combination of the uptime that they're willing to provide.

So, you know, this market maker is quoting 99% of the time. That's better than if the market maker we're quoting 90% of the time. It's based on the spread that they can provide. spread means sort of like the amounts that you have to pay them to trade against their orders, based on the amount of depth that they can provide, you know, zooming out. Effectively, there's a liquidity mining program that is targeted at market makers. Fast forward to now, and one of the craziest things that I think has happened, to be honest, in the past month is DYDX is literally the most liquid exchange in crypto by a lot right now.

you know, that $2 million of depth that that I talked about before, fast forward to now, and that's $40 million of depth within 1% on our Bitcoin perpetuels and finance has $25 million. So, yes, it's literally we're the most liquid exchange in crypto and perpetuals are the most liquided product in crypto. And I think that's been driving a lot of activity to the exchange as well. other liquidity programs like staking pools that I can touch on and go into, but that was kind of a lot. So I'll stop there for now. But I think those are probably the biggest things that have been driving a lot of growth. Yeah.

You know what? I'm super like maybe sort of a learning lesson coming out of this in hearing you talk is that DYDX is very intentional, intentional about its token strategy and its token incentivization strategy. This is one of the most complex, but also, I guess, high leverage token schedule liquidity programs that I've seen. And you guys were very intentional about waiting to release the token until you were sort of ready for that growth. And then the specific areas that you wanted to apply the token to that would benefit the protocol most. It's very precise. I see a lot of token strategies that are.

just kind of shotgun, here, you get a token, you get a token, and what are we rewarding? What are we incenting? Oh, I don't know. Users, but, like, DYDX has taken a very precise, like, I guess, token strategy, and you're injecting it in the steroids, I guess, in the right parts of the body to increase that muscle mass. I want to ask you this question, too. It's like, I feel like with DYDX's success this year in. the whole decentralized exchange category,

we're seeing a return of the order book. Okay? So I remember the story of like web van, which was a dot com company that wanted to deliver like groceries to your house, right? Early 2001, they went belly up. It was too early. The internet wasn't ready.

Consumers weren't ready. Now we see how many different web vans that have been successful like 20 years later, right? We got Uber Eats and we've got, you know, almost every grocery shop retailer delivers to your house now. It's just like timing is a huge factor in the success here. I think we've seen something similar with order book exchanges, at least decentralized order book exchanges, right?

The very early stages of defy, we had, what was that exchange? I don't know why it's escaping me. Ether Delta. Ether, thank God. Do you remember Ether Delta? What a mess that user experience was, order book exchange all on chain. We saw that. We saw, you know, D-Y-D-X's.

early efforts, nothing took off until automated market makers and Utiswap really crushed it on that angle. But now I feel like we're seeing this resurgence in order book exchanges, like decentralized non-custodial order book exchanges. And I'm wondering if you can kind of reflect on that. Do you think order book exchanges have made a comeback and will now be the most dominant decentralized exchange in crypto. How do you think it plays out between automated market makers, which have been very successful in Defi and order book exchanges? And where do these two things fit? Yeah, great question. And also, again, I think you're spot on with the timing piece. I 100% agree with that. I think the most important thing in startups and tech in general is timing.

There are lots of good ideas out there, but it's irrelevant if you haven't a good idea, if it's not created or pushed at the right time. And I think, you know, AMMs really took off, and certainly I'm not the first person to say this, but because of Uniswap and because Uniswap was able to offer trading of all of these new tokens that weren't available to trade elsewhere. Automated market makers are really good, and I admit they're much better than order books at providing liquidity on sort of the long tail of markets. But, and I've always said this, and I think it's really starting to come true now, order books, I think very strongly are much better at providing liquidity and much better at providing a good

user experience on call it like the top like 100 to 200 markets by volume. I think you see this play out on centralized exchanges. All the centralized exchanges use an order book based model for a reason, right? And again, like zooming all the way out, just because so many things that we do at UIDX are impacted by this high-level directive, we want to be the biggest exchange in crypto, like, period, but like, you know, on a three to five year time horizon. And again, so like, let's just to think about what we need to do if we want to get there. We need to support derivatives. Obviously, we talked about that. But also, as I touched on before, most of the volume in the space goes through these like top 100 or 200 markets. Certainly there's a long tail of sort of like,

you know, random or smaller cryptocurrencies that are valuable to trade. And there should be platforms on which users can trade these assets. But really the thing we care about, that GYDX is just becoming the biggest exchange, then we need to support the best possible user experience and the best possible liquidity for these top markets in crypto. And the way we do that is through order books. And I think that has really played out for us. And the liquidity that we've been able to generate and sort of the crazy stats around like the level of liquidity we have right now, where the most liquid exchange in crypto,

you wouldn't be able to do that on an automated market maker or you'd sort of just need like so so much capital to be able to do that. You know, order books are able to support much more advanced order types, like stop orders, limit orders, all of these different things that professional traders need. Like, you know, I think for the most part, like Jane Street or something like that isn't just going to come and trade on like automated market makers, like quite as much as they're likely to trade on order books. So I think just order books can provide this higher level of user experience for professional traders and for more advanced users. But my point is, like, that's where I think the real volume in crypto is, certainly at least for now, you know,

TLDR or TBD, whether that will be the case, you know, five to 10 years from now in crypto. Like, I could be wrong. But I think it just makes the most sense for us to start with like the highest value markets that we could capture and build the best possible product around them. And for me, that's order books. So Antonio, now you said this twice. We've got to dig in. you really think it's possible for D-Y-D-X to become the largest exchange, not just decentralized exchange, but the largest exchange. That means beating out F-TX, beating out Binance. You've already beaten Coinbase a little bit, right?

But like, you think that's actually possible. I get the sense from how you're speaking. It's not just aspirational. Like, you're kind of serious about that. Tell me how that happens. Yeah, I mean, obviously we've seen a huge amount of growth. in the past month or two. And that's super exciting,

but maybe to put things into context, like where are we actually at right now. Yes, we did more volume than Coinbase. You know, for a couple days, I think we're sort of like trading back and forth with them. Now I'm doing more volume versus less.

We're still a good ways off from like a finance, finances roughly doing like $75 billion a day in volume and DydX is at $2 billion. So it's still a long way to go. FTCS is at like $15 billion a day in volume or so. So yeah, we've got to grow by, you know, another 50 to 100 X if we want to be one of the biggest exchanges in crypto. But again, I think it really is possible. Again, it has to start, in my mind, at least by definition, with derivatives trading because already and in literally every single mature financial market, there's more volume and more value capture in derivatives trading than there is in spot trading. So that's why we're focused on that.

So let's just start with that. I think the real bet that we're making is that decentralized exchange. and obviously specifically D-Y-D-X will beat out centralized exchanges on some timeline. You know, it's hard to say exactly what that's going to be but I always sort of say roughly it's like, you know, we want to be the biggest exchange

in three to five years from now. And I think we're making a couple of bets there. We're betting on the technology, continuing to improve. We're betting that we'll be able to continuously improve the product. We're betting will be able to continuously improve on like the amount of decentralization

we can offer our users. We're betting on, you know, sort of what happens, sort of from like a regulatory crackdown perspective with centralized exchanges. But I think there are a lot of reasons to at least think that there's a realistic shot. I don't know. It's hard for me to give percentages, but, you know, somewhere into like 10. So like, I don't know if I'm being realistic, like 35% chance that I think DYDX becomes like the biggest exchange at some point. I honestly believe that. Maybe people think that percent is like too high.

but I think that most people can believe at this point that there is a shot, right? You know, if we just assume that like the technology works out, the product experience can get better and better and better, already we have the best liquidity. So I think that's like, you know, been disproven already that decentralized exchanges can't have as good liquidity as centralized exchanges. And I think that there's a lot to be excited about at least. And for me, it's like exciting to work on something that has this like, you know, multiple orders of magnitude. type growth potential. That's just what's exciting to me sort of in life. And it's like, you know, it's not a given, but like I think there is a realistic shot that we could be one of the biggest, or the biggest like crypto exchanges and sort of therefore like one of the

biggest like protocols or companies or whatever in the world at some point. And that's exciting to me. So let me ask like, how are you going to do it without Tom Brady? You know what I mean? Like so at FX, for people who aren't familiar, they have like celebrity endorsements now. They're paying professional athletes and celebrities, a lot of money. Slaping their logo on top of stadiums. All the MLB umpires have FTX right on their, on their chest. They're playing the centralized exchange game, and they're playing it very well. You know, we often call them kind of, you know, neo banks, like they're crypto banks,

aren't they? And I guess the bet that DYDX is making is that people will prefer decentralization. and maybe like first users, but also you mentioned something that's super interesting in there. It's like maybe regulators will prefer decentralization. So like, can you do this without Tom Brady?

Or do you intend to like go get the athletes and the celebrities and, you know, play that game too? What's your take? Wait, win DYDX arena. That'll be the day. You know, maybe someday, you know, I won't throw that opportunity or, you know, that possibility.

out the window. At some point, it'll make sense for us to grow and to call it more like mainstream, like international users. And a good way to do that is with advertising, celebrity endorsements and things like that. But for us, like I said, the obvious growth opportunity right now is people that are already trading crypto. Like, finance has $75 billion a day. FTCS has $15 billion a day, D-YDX has two. So let's just grow into like finance and FTCS users for at least the next year or two. and that is a ton of growth potential right there. So that's sort of like answer to the question, why not DYDX arena today? You know, maybe at some point in the future, once we are grown a little bit more

and need to get a little bit more into the mainstream conversation. But there's a huge amount of growth opportunity just with the people that are in crypto right now. And that's really what we're focused on. In terms of the regulatory piece, it's stuff for me to say or kind of dive too much into, like, publicly. But I definitely, you know, I've said this before publicly, And I honestly believe that there are a lot of things that I think regulators care about, that are positive about decentralized exchanges. Regulators care a lot about transparency. Regulators care a lot about solvency of the systems that users are trading on.

And I think decentralized exchanges do a much, much better job with that than sort of these black box like international centralized exchanges do. So I think there's a lot to be excited about there. And just generally, I think there is a huge amount of growth opportunities. for D-Y-D-X, and we're excited about that. That's really cool to hear, guys. We have a lot more to cover with Antonio. We're going to talk about Y-D-Fi in general, and Antonio's thesis around that,

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Hey, guys, we are back with Antonio Giuliano from DYDX talking about the D. YDX story and where we left things before the sponsor break, we were talking about how DYDX might compete and might beat and win against the centralized exchanges, the FTCs of the world. But I feel like we haven't really nailed this point home yet. And I know you guys have been on a trajectory like you could have gone the centralized route at any point in time. You could have thrown in the towel and said this decentralization stuff is too hard. Theorem's not scaling.

You'll see you later. We're turning centralized. but you didn't. You stuck to this roadmap. And I want to ask the question of why defy to you, Antonio? Why is it important for an exchange like DYDX to be centralized in the first place? Why do you think that's a killer advantage? And yeah, just tell us why.

Yeah, it's a great question. And first of all, maybe just to say something a little bit like counterculture, the most important thing to me is that DYDX is that we hit this goal we have set for ourselves of BIDX being one of the biggest exchanges in crypto on the five-year time horizon. That means being centralized. Like, we've honestly thought about that in the past. Obviously, we haven't done it. But like, you know, we've thought about, well, okay, maybe like you say, like, oh, if Ethereum

doesn't work, like, should we just switch to being like a centralized exchange and sort of do what FTX did? But I honestly believe that like the highest probability way that we can win and that we can be one of the biggest exchanges on that sort of timeline is by being a decentralized exchange. And I think that's really exciting. And the reasons why we're excited about that are a couple of things. And probably there, you know, along the theme of what people are excited about with decentralization in general. First of all, decentralized exchanges, as I touched on before, transparent. And this is really important to traders and really important to, you know,

advanced users to trading funds. I think you saw this play out in traditional finance in a really big way and sort of a bad way with sort of the Robin Hood GameStop saga of a couple months ago, where Robin Hood delisted GameStop and people were super upset about that. And fundamentally, they didn't understand the rules of the exchange that they were trading on. And there was the central authority, which kind of had the capacity to censor trades or inform like how users could trade. But by being a decentralized exchange and by having the power to quite literally just encode into code that's running on the blockchain, the rules of the platform, rather than using trust or using

complex legal contracts, that's a really powerful thing and allows us to bootstrap trust on the system much more effectively because we're not sitting here saying, hey, trust us, we promise not to steal your money or screw you over. Instead, it's just like look at the contracts, look at the auto reports, and that's a really effective way for us to bootstrap trust. it's much more secure as well to trade on a decentralized exchange to store your own coins in your own wallet. I think that's important to a lot of traders. And the other really important thing that I think decentralized exchanges have,

and now we've started to have with UIDX, is the concept of community ownership of the platform. The community can quite literally own the protocol that they're trading on. And this is really, really different and fundamentally different than pretty much any other business in history. But if you look at something like a finance where, you know, a CZ owns, I don't know what it is, like whatever, like 20 to 40% of finance, like Sam owns, I think, like 53% of F2X. Whereas on DYDX, the community can quite literally own the platform that they're trading on. And that's a really powerful thing. Already we've seen just a ton of activity on DYDX governance on the forums, driving a lot of engagement to the platform.

and I think once users feel like they're owners of the platform that they're trading on, they're much more likely to use that platform over just something that's wholly owned or mostly owned by an individual or a small set of individuals. I think that's really exciting as well. So those are kind of the main reasons I'm excited about decentralized exchanges. I also think once DYDX gets to a point where it's just open source software running on the chain, that's really powerful where, you know, if you can just pull the DYDX code, and start trading, that's something that's fundamentally different and, you know,

it doesn't exist on any centralized platforms. And that's really what we're going to be building towards over the next year, but already have, you know, a huge step up in transparency, security and community ownership. And eventually, you know, call it like censorship resistance or full decentralization over what centralized exchanges can offer. What's interesting to me about what you just said is this seems like a pragmatic approach. You're trying to be the biggest exchange in the world. And you actually think, decentralization is the way to get there. Yeah, exactly.

And not to take anything away from like anyone else who is just sort of like, you know, fully hyped on like decentralization for more ideological reasons. I'd be proponent of it too, obviously. But like where I'm coming from is I want to build the biggest exchange. Like how do we do that. Decentralization is literally, I think, like how we do that. And there are, you know, multiple different reasons why people could be excited about building protocols and startups.

But for us, it really is, as you say, like a pragmatic. approach. There are a lot of builders in this space who have similar, like, lofty ambitions and just aspirational goals, yet they choose to route around decentralization because they want to get those goals, you know, in the next quarter or in two quarters, rather than in two years or four years. So it's always very refreshing to see someone take the decentralization as a product first approach while also thinking in the long term, right, for thinking in long term games. So it's also is always very refreshing to hear that. And on the same time, on the same, in the same conversation, bankless listeners will, if they've been paying attention, they will know that

decentralization is a spectrum. And there is an actual centralized company that is part of the overall D-Y-D-X ecosystem. And I don't know if this is true, but I've heard murmurings about this, and I want to verify this with you, Antonio. Is there a differential in power between what the token governs over and the company behind DYDX, is there a discrepancy there? Or is that a rumor? Are there any differences in what has power over what when it comes to the DYDX system? Yeah, good question. There definitely are differences right now. At a high level, the token and therefore token governance has control over all of the DYDX smart contracts. So has full admin control over the smart contracts, has control over how they can be upgraded. For example,

like what assets can be added to the exchange, what the risk parameters are, all these different things. Importantly, not a multi-sig, right? This isn't some off-chain agreement saying, hey, there's these multi-sig owners. They will answer to the token holders. That's not where you're saying. You're saying that the token holders actually have admin control over the smart contracts. That's correct, yeah. And we totally burned our like admin keys and everything like that. So only the token holders have control over the protocol now, which I think is really exciting. you know, we're not the first to do that, sure, but I think we've seen that work really well with other projects like compound,

Aves uniswap, to name a few. And we're excited to bring that to DYDX as well. In terms of what the company controls, the company controls the order book and sort of order matching that happens in an off-chain way right now. It controls the revenue that's generated through trading fees on D-YDX, and then the actual product and sort of user interface as well. though I will say over time we do plan to decentralize a lot of those pieces as well outside of the revenue piece.

You know, we just plan to decentralize the order book and the order matching, plan to decentralize an open source the product and really get to this point that I touched on before where eventually DYDX will just be open source code that's out there running on the chain, sort of like a uniswap or like that level of decentralization. That's really what we're building towards. And we're really serious about this on, you know, specifically like a 15. a 16-month timeline. And that's something we're actively working on in researching right now. So you said the centralized companies getting the trading fees. Is that just 100% binaries and the token, the tokens, the token doesn't get any of the trading fees and all the trading fees go to the centralized company? That's correct. Yeah. And then is there a long-term roadmap for that to have any changes or is that just going to be the way that it is?

That's just the way that it is. Yeah. Okay. And then with regards to the, the order books, that's something that's operated by the centralized company. Is that more of like a just a technical property or is that something that like is, is there a roadmap for decentralizing that as well? Yeah, there's a roadmap for decentralizing that as well. And that's sort of what I was touching on that we're actively researching right now. Like how can we build a fully decentralized version of YDX? Historically, we've kept the order book and order matching in a more centralized way,

just due to performance and sort of technical considerations. But I honestly think that with, you know, the rapid innovation that we've been seeing in other layer ones, another Ethereum layer twos and, you know, ETH2 itself, that it is achievable for us to build a great product on UIDX. That's orderbook based and fully decentralized on sort of like an 18-month timeline.

Antonio. Go ahead. Yeah, thanks, David. We're going to go with the same question anyways. You guys have been like one of the most successful pioneers on layer two, right? There's a lot of protocols and like different projects building on layer two, but you guys have like crushed it in terms of volume. And you also kind of pioneered this space too, deciding to like, you know, pivot to to layer

two relatively early. I'm just curious, like, how hard was it? Is it still really difficult to build on layer two's? What advice do you have for people? And just give us an update on layer two from a builder's perspective and somebody's actually brought a successful product to market here. Yeah, so I guess a bit of context on which layer two we're building on and how long it took us and stuff like that.

We're partnered with Starkware, which is the leader in this really exciting new scalability technology called Zero Knowledge Rollups. And we started building with them in, I believe, July or August of last year, and then built for about six months or so and launched our Layer 2 product, I think like February of this year. So, you know, it was a challenging build to start. And I think that's okay. Like UIDX, one of the things we also pride ourselves on is that we have, and I strongly believe that it's just one of the best engineering teams in this space. However, what I would say about layer 2s in general, both on StarCware ends, you know, with other exciting competitors like optimism or arbitram is I think the developer experience is quite rapidly getting a lot better. And it's a lot easier to build on them now.

And I think that's one thing that a lot of people in the space are excited about. You know, now DYDX really has a lot of other people that are also building on layer 2s, whether they're Dexes, whether they're NFT platforms or other things. And I think just the improvements in developer experience has gone a long way towards enabling other projects to build on layer two as well. Are you bullish on ZK roll-ups? And like, yeah, how do you think this all plays out? Yeah, I definitely am super bullish on ZK roll-ups for a couple reasons. I think they're just fundamentally more scalable by a lot than optimistic roll-ups are. And they're also, and most people don't appreciate this, just way more production ready than optimistic roll-ups are.

I mean, empirically, like, UIDX is literally doing $2 billion a day of volume on zero knowledge rollups right now. And I think, like, you know, not to throw shade at anything, but just like looking at the state of the world right now, like Uniswap on optimism, I think, is doing like tens of millions of dollars a day, at least last I saw in volume, maybe more now. But I think that just zero knowledge rollups are really production ready. They have lower withdrawal times. So that's a lot of the reasons why we've been championing them in a big way. and why I'm excited about them in the future as well. It's kind of great, though, like, if you have a, you know, if, if you're doing something that's app-specific and you don't need a lot of

composability, I would say from other chains, right? At least ZK roll-ups without an EVM in their current form. I guess maybe EVM-compatible ZK roll-ups might totally change the game there. But, like, refresh me. I'm looking here on Layer 2B, and I think this is a great. assessment. Recently, they added a whole risk section, Antonio, to their list of layer two projects. And on DYDX, if the sequencer fails, you can still exit to layer one, right? And if there's a validator failure,

there's also an escape hatch, right? This is kind of what ZK rollups provide in that, like, you never have to give DYDX full custody of your funds. If the company shuts down or something super bad happens, you always have the ability to exit back to layer one. I don't know if there's really a question there. It's just like a realization that, like, yeah, maybe I'm more curious in sort of your strategic thoughts here. So this has been almost an alt-layer-one summer, if you will,

in that like a whole bunch of alternative non-Ethurium layer ones, like salinas and avalanches, have really taken off in terms of market, and token price appreciation. What's your take on that versus a roll-up-centric view of the world where it's going to be Ethereum and then a whole bunch of different roll-ups, some EVM, some app-specific roll-ups? What do you think wins in the end? It's tough to say.

And I think that one of the things that's also proven correct over the past year is that there's going to be a lot of different scalability solutions that will all have market share. In my opinion now is that, you know, different chains or different scalability solutions will make sense for different applications. Like, for example, you touched on this before, but we at UIDX care relatively a little bit less about composability. And therefore, like zero knowledge rollups made more sense for us. I will also say as an asterisk, zero knowledge rollups are improving a lot on composability to with StarCware's launch of their Starknet, which is sort of like a shared chain for all of the things building on StarCware.

But outside of that, you know, some projects may care more about scalability, you know, raw scalability. Some may care more about finality. Some may care more about, you know, nation state, censorship resistance, stuff like that. And I think just different chains have different tradeoffs like all technology does. So I don't think there's going to be so much of one winner. So with that backdrop, I still obviously am super bullish and super excited on layer two's rolling back up to Ethereum, empirically, that's working really well right now. You know, DYDX is processing hundreds of thousands of trades per day,

which I think is a very impressive level of scalability. We are, of course, tracking other things that are going on in the space like Salana, like Cosmos, near all that kind of stuff. Again, I'm pragmatic. I'm going to do, and going to build on whatever chain, I think gives DYDX the best chance of success. And I have, you know, no particular allegiance to Ethereum, which, you know, maybe ETHMAX's will.

claim me for. But also hopefully, ETH Maxis actually like me because I am pragmatic and I am saying and thinking and literally putting my money in business on the fact right now that Ethereum is, I think, the best possible platform. You know, Ethereum plus like a layer two roll-up is the best possible

platform for D-YDX to be built on right now. And I think there is still a lot more to do on, you know, the tech side with Ethereum with EF2. You know, layer two is in Starkware and optimistic roll-ups are getting better all the time. So I'm really excited about that's tracking other things that are going on in the space, but still, you know, big proponents

of Ethereum and layer two for now. Definitely the latter is what we like, where you are trying to do whatever's best for DYDX, for your baby, for your company, and you've chosen to align with all the bankless values that Ryan and I preach about on this program. So it's very, very validating from our side of things. David, did you just admit that you're an eth-maxie, you know, implicitly? I am the recipient of that label. And so at some point, I'll just stop arguing with it. But I do not bestow it upon myself. There's a differentiator there.

Antonio, out of the DYDX account yesterday, tweeted out, on November 1, spot in margin trading on the DYDX, layer one will enter close-only mode. I think this is implying that DYDX on main chain Ethereum is coming to an end. What is the long-term relationship with the Ethereum, layer one and D-Y-D-X? That's correct.

Effectively, the layer one platform is being shut down, just to kind of give a bit more context and color there. Yesterday, I think we had like 200,000 trades on layer two, and we had 40 on layer one. So really, like almost all of the volume and all of the activity has already transferred over to layer two. And that's sort of the reason why it's being shut down. It just is, as I've been saying, like an inferior

your product experience and we don't want the DYDX brands or, you know, user experience to suffer and not be up to the standards of all that we have to offer at DYDX. And that's really what informed the decision to shut it down. And also one of the important things in startups and in protocols in general is focus. And I, you know, not to throw too much hay, but I think a lot of people in crypto like lose side of that, to be honest a lot of times. where like, you know, again, like, let's just start with like the high level goal of wanting to be the biggest company or exchange or whatever in crypto. Well, the way I think we do that is just picking like the biggest thing, biggest marketing crypto derivatives and focusing on that and going really hard after it.

You know, not trying to do like too many like other things. You know, eventually probably UIDX will scale, you know, with our team and our head count to the point where we can build great high quality products for all types of different things. But UIDX's team right now is 20 people. with nine engineers. So it just makes sense for us to focus on the highest value product. And we see that as our perpetuals on layer two product. Do you think that this is kind of a canary in the coal line for apps on layer one? Do you think that this is kind of perhaps a learning lesson for builders that maybe the L1 might not be the best place of their energies and of their labor?

And maybe they should focus only on layer two. Do you have an opinion on that matter? I definitely do think that it makes a lot more sense. to focus on layer two for now. I still do think it's likely harder to build things on layer two. Like I said, it's getting better all the time. So I don't know. If I were like starting a startup in the space right now,

just trying to brainstorm about where I might start. I may still start based on what I was doing on Ethereum layer one and then try to like port it to layer two once I sort of like reached a certain level of scalability. But I think it really is on sort of a case-by-case basis, both on, you know, the technical quality of the team. the amount of scalability that they need, like what solution may make the most sense for them.

I think this is just an example of like, you know, shutting down the Manhattan office and like moving somewhere to the suburbs, right, where the quality of life is better and, yeah, everything's cheaper. So, yeah, it's kind of cool that you guys have migrated there. I want to ask a question about kind of regulatory.

So, you know, we have a lot of U.S. listeners right now and listeners that are, you know, frankly frustrated that they can't actually trade perpetual products on DYDX, right? They didn't receive the DYDX token AirDrop. And I know that's not your fault or DYDX's fault. But can you give us a sense for why that's the case? Like what are the reasons that U.S. listeners are barred from this? When we had former CFTC Commissioner Brian Quintends on the program, I made the comment to them,

like, sometimes it feels like we live in a financial prison for living in the U.S. Like there's all sorts of these things in crypto that we can't access. And I asked him why. You know, his response was, well, it shouldn't be like that, right? And then he told us to, like, build faster. It's a really cool response. But, like, what's your take? Why is it like that?

Why can't U.S. consumers and users trade on DYDX? Why didn't we get it in an air drop? Yeah. So first of all, I feel you. Like, it definitely is frustrating, you know, that DYDX can't be offered, you know, both the DYDX token and the DYDX exchange can't be offered anywhere in the world. But what I would say is that compliance is very important to us at DYDX, not to go into too, too much detail, but the U.S.

And specifically the CFTC has a lot of restrictions about what types of derivative products can or cannot be traded on any asset. And on what type of platforms and what sort of licenses that you need to be able to offer these products. And again, not to get into too, too many details, but these licenses are ridiculously hard to acquire. They're sort of like four to five year processes. And then, you know, even if you acquire these licenses, you can. can't just offer any type of derivative products that you may want to do. So, you know, there is, you know, for us as a business, either no path or the path is too hard to offer these types of products to customers in the U.S. I know that's frustrating. I definitely understand everyone's

frustration, but first and foremost, it's important for us to be compliant because we are a company that's operating. And then second of all, on sort of the more token piece, like why was the DYDX token not distributed to U.S. customers. I think for two reasons. First of all, we just wanted the holders of DYDX to be users of DYDX. And again, I just touched on this before, but like, you know, the way it is right now empirically is that DYDX users are not U.S. users. And therefore, like, it makes the most sense for just, you know, the token not to be distributed to U.S. people because they can't be users of the product. And that sucks. And, you know, we'll champion, like, better regulation for the space and all that long term as much as we can

and definitely agree with, you know, the, you know, Brian's, the CFTC commissioner's remarks before. And, you know, we'll work on that for the long term, sort of from like a regulatory advocacy perspective. But given that, it just didn't really make sense for us to distribute the tokens in the U.S. And then the other thing I'll say, just to finish up is, in addition to a lot of issues around derivatives in the U.S., There's also, as I'm sure everyone's heard a lot about, especially recently, a lot of pressure from securities laws perspectives in the U.S. with the SEC around launching a token. And it just made sense for us from like a risk-adjusted, you know, business perspective, given that our users aren't in the U.S. anyways, to just not distribute the tokens to U.S. people and sort of be done with it. You don't have to comment on this next bit, but I just want to say this is a damn shame. And like, I'm just wondering if anybody in Washington is going to wake up and realize that a 20-person team, nine of which are engineers based in the U.S. with U.S.-based talent, can't actually serve U.S. citizens.

On a trajectory, maybe to become the largest crypto exchange in the world, but can't serve its own citizens, it's absolutely ludicrous to me. Don't need a comment from you on that, Antonio, but I hope Washington wakes up and actually. actually realizes what's at stake here. In the U.S., we have the talent to become the leading jurisdiction in crypto and defy. We just need regulators support to help us do that. I don't know who I'm talking to there, David. Why don't you take the next question? All of the regulators that listen to the bankless podcast is who you're talking to. There are some. There are enough. There are enough. Right. Yeah. Antonio, as we come down to the end of this interview and thank you so much for your time.

D-Y-D-X in three, five, ten years. What's the maximally successful version of D-Y-D-X? What does that look like? And please include in your answer, perhaps, a mobile app. Yes, yes. So on the mobile app piece, like,

we're actually building that right now. It should probably go live in like three to six months, just as a short aside. I think like nobody has nailed mobile trading experience in crypto yet, even centralized exchanges, you know, people use like FTCs and finances app, but they're nowhere near as good as like a Robin Hood. And I think that's what we have the opportunity to create with the DydX mobile app.

So I'm super excited about that. You know, I think Coinbase's app is great, but it's not really for trading. It's like for like buying and holding Bitcoin, which is great. Like people should do that too. But we want to nail like the mobile trading experience. So excited about the app to be a big component of that. But have touched on this a lot throughout the show. And I think hopefully I've hammered this point home by now. But we really just want to be one of the biggest exchanges in crypto. And I think we have a real shot to go out there and do that on sort of a five-year time horizon. Already seeing just massive growth for decentralized exchanges, you know, first with Uniswap, now with UIDX over the past year. And I think that should really excite people and should really

at least open people's eyes to that. There's something real going on here in decentralized exchanges right now. Even if you don't understand it, just look at the numbers. Empirically, they're growing a ton. and I think it's worth people, you know, at least taking notice and, you know, giving credence to the idea that there is something really valuable here for the long term, or at least likely that there is. We talked about like what we think these things are, transparency, you know, security, censorship resistance, community ownership. And I think those are the things that once we get to a point where the products on DFI are on par or superior to what can be offered on center. exchanges. And I think we're really close to that at DYDX. You know, I think a lot of these like second order benefits of decentralized exchanges, all the stuff I just touched on will start to shine through. And that will really drive just a huge amount of growth to defy in the long term. And like I said,

we're pragmatic. I just want to build the best, you know, the biggest exchange in crypto. That's sort of like my thing. And I think the best way we do that is is with DYDX and with decentralization. Is there any conversation to be had about Fiat on ramps to DYDX in the future? It's a reasonable question. I sort of think that they're actually not that necessary, or at least call it there's like, there are two different products like a Fiat on ramp doesn't necessarily need to be coupled with the exchange people actually trade crypto on. And I think we've empirically seen that happen over the past few years with Coinbase

and a few others really dominating the Fiat on and off ramps. in the space, but then just honestly getting blown out of the water on their trading volumes by platforms like FTCX and finance, which sure have like some Fiat on ramps, but for the most part, people are just trading crypto to crypto on those exchanges. So I think just empirically, we found over the past couple years that there is a massive business model, at least, with just crypto to crypto trading. And that's what we're focused on. Yeah, it's funny is once you cross that bridge to crypto, you don't tend to leave, right? You stay in crypto and your value and your assets remain there.

Antonio, it's been an absolute pleasure to have you. Maybe give a shout out to this because this seems super interesting. You guys are actually hosting a trading competition. Is that correct? What is that about? That's correct. Yeah, just hosting a regular old trading competition. A lot of exchanges do them, but, you know, can win as you see here on the screen,

up to 250K and UIDX prizes. And then we'll continue to operate these over time. those are paid out in USDC, not in the D-YDX token. But yeah. So how do you win? What are we competing for? Oh, just make the most money on D-YDX, just competing based off of your P&L for a week and whoever can make the most money on D-YDX and flex on everyone else.

There you go, bankless listeners. That is not me. I am not a trader, but some of you out there are. And you can win this competition, 250K. And if you do sign up for this competition, remember to use the bankless referral code, which is in the YouTube comment. as well as the podcast show notes as well. That's right.

Might as well save 10% on your trading fees when you do that. Antonio, thank you so much for joining us. Congrats on the success. We look forward to seeing what new things, DYDX builds in the future. It's been a pleasure to have you. Yeah, thanks so much for having me in great conversation. Appreciate it.

Guys, risks and disclaimers, of course. Defi is risky. All of crypto is risky. If you're trading eth or Bitcoin, you know that's risky as well. You could definitely lose what you put. in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot. Hey, we hope you enjoyed the video. If you did, head over

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