Introduction to Blockchain and Cryptocurrency Exchanges

One of the most exciting ingenious creations of the 21st century is undoubtedly blockchain technology. This new generational innovation continues to revolutionize several sectors of the world, bringing solutions to existing and future problems. Interestingly, the blockchain has become the backbone of the internet and is currently powering the "web 3.0" feature.

Unlike the "old" internet, the blockchain is built to create a decentralized system of governance, accountability and ease in transactions. The transactions on the blockchain are powered using digital assets, with cryptocurrencies being the most common. The advances to cryptocurrencies were made primarily to address the inefficiencies and challenges that traditional fiat currency has created and provide a future reliable means of exchange. Through cryptography, the transactions in blockchains are potentially secured.

Currently, there are over 1500 cryptocurrencies traded on different exchanges, and interestingly, these figures keep increasing significantly. Cryptocurrency trading sites are continually developed with various tools and architectural features to cater to the increasing digital assets.

There are two different forms of crypto exchanges in the blockchain space: centralized and decentralized exchanges.

Centralized Exchanges

In centralized exchanges, there is characteristically a middle man who manages these transactions for centralized exchanges. These exchanges act as trustworthy brokers in deals and serve as custodians, storing and safeguarding your assets. Leading centralized exchanges try to make every part of the digital asset trading experience more accessible, from consumer protection, security to fair market pricing, regulatory compliance, and access to a broad range of digital assets. Centralized exchanges are more common and currently account for over 95 per cent of digital asset transactions

Challenges of Centralized exchanges

Security of assets and data

Centralized exchanges are largely unsafe, and there is a considerable risk of losing funds over security breaches and attacks. As the exchanges control user funds and keys, there is the possibility of losing access to your assets, which does not represent the blockchain decentralization and security goals.

Scalability and Liquidity Problems

Most centralized exchanges struggle with large transactions that reduce transactions from getting executed, and this is synonymous with traditional markets and therefore creates an unstainable means of exchange. Also, liquidity is divided into fragments, and there is false volume representation and no clear leader.

No Good Customer Support

Centralized exchanges do not provide good customer service to the majority of their customers, which could have a negative impact on the future of centralized exchanges. Every business's success is determined by how it treats its clients and users. Customers frequently complain about recovering lost monies, and 2FA resets on exchange sites. Some exchange sites fail to meet these expectations, which has harmed the exchange market's growth.

Because centralized exchanges have exhibited a lack of security, transparency, and efficiency, a considerable need for decentralized exchanges has emerged. Decentralized exchanges have no trusted middlemen but instead, facilitate the trading of cryptocurrencies through the execution of smart contracts. Unlike centralized exchanges, users are in control of their private keys in decentralized exchanges.

Decentralized exchanges

Decentralized exchanges use the technology that underpins cryptocurrency to make trading safer and more transparent. Because there is no single system, it eliminates the main limitations of bitcoin markets, aligning them with what made blockchain technology so effective in recent times.
An essential benefit of decentralized exchanges is – safety and privacy. Since user data and funds are decentralized, relative safety and privacy are well preserved.
A game-changer in cryptocurrency trading will be combining the features of centralized and decentralized changes. The big question is, are there any existing blockchain exchanges that offer this blend of features?

Excitingly, the answer is Yes!!!

Introducing an Innovative Decentralized Exchange – dYdX

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dYdX is a decentralized exchange (DEX) that provides several trading options, including spot trading, margin trading, perpetual contract trading, lending, and borrowing services using smart contracts on the Ethereum (ETH) blockchain. This platform was launched in 2017 and already has a governance token, DYDX, that has already been distributed through airdrops.

dYdX also offers the following decentralized finance services:

Spot Trading

Users can purchase and sell cryptocurrencies by putting market orders, limit orders, and stop orders, much like centralized exchanges. These three orders are supported by dYdX's spot trading platform and also margin trading.

Margin Trading

In dYdX margin trading, users can borrow funds to trade assets, and dYdX offers both isolated and cross margin trading. In the former, users can use a single position while margin is distributed across open positions in the cross margin feature. Trading pairs include ETH-DAI, ETH-USDC, and DAI-USDC

Perpetual contract trading

The perpetual contract is similar to the futures contract trading, where users can either take the long (buy) or short (sell) positions. But in contrast to futures, perpetual trading has no expiration date and as such, users can hold indefinite positions. The trading assets on the dYdX platform supports over 22 assets with up to 25x leverage

Lending and borrowing

When a new block is mined in lending and borrowing, users can deposit their assets into lending pools and receive interest. Users can also use these pools to borrow money on the platform's other services.

Experiences on the dYdX exchange

Layer 1

In the layer 1 version, there is a high level of decentralization for spot and margin trading, and leverage can go as high as 5x. If users have appropriate collaterals, they can borrow to fund their positions. By appropriate collateral, a user is expected to deposit higher than the intended borrowing amount. The collateral minimum is currently set a 125%, and interestingly, this protects lenders from abrupt liquidation.

However, there are plans to stop the Layer 1 feature (Spot and margin) due to sole integration plans for perpetual trading and dependency on the Ethereum blockchain

Layer 2

Layer 2 is the proposed future for the dYdX platform. Layer 2 dYdX is quick, frictionless, and economical to use, and it mimics the experience of trading on a centralized exchange like Binance.

Layer 2 dYdX allows you to trade perpetual crypto contracts for various digital assets. The USD-paired cryptocurrencies accessible for trading are BTC, ETH, SOL, DOT, AAVE, LINK, UNI, SUSHI, MATIC, and LTC. You can apply up to 25x leverage, which is a significant improvement over Layer 1 dYdX.

The innovative perpetual exchange is based on StarkWare's Layer 2 blockchain, which distributes zero-knowledge proofs to an Ethereum smart contract on a regular basis to prove the validity of state transitions within L2.

The scaling solutions such as StarkWare offload computing from the main chain, allowing for substantially higher throughputs and lower transaction costs while retaining the powerful security of Ethereum blockchain.

Problem Statement

The numerous features and solutions of the dYdX platform listed above make them most desirable for trading and exchanging assets. However, the extensive tools can be pretty overwhelming and somewhat complicated for new users. Given the need to simplify the processes and tools on the dYdX platform and increase the knowledge base of its increasing users, this article has highlighted insights to realizing this goal.

Way Forward:

Strategies for Educating the Retail Market and Stakeholders on the dYdX Platform: Achieving Increased User and Knowledge Base.

1. Simplified Step-By-Step Starter Guides

Using step-by-step starter guides can be the game-changer to educating traders and stakeholders on the dYdX exchange. Many individuals have a different background outside the blockchain space, and grasping concepts without a simplified guide can be quite demanding. Using a product for the first time can be challenging, which can impact an individual's willingness to reuse them again. When the experience is complex or awful, they are likely not to use them again. By incorporating simplified step-by-step guides on strategic areas and features of the exchange and website, users can easily toggle on their desired process. For example, using the perpetual contract feature is less common in centralized exchanges; if the dYdX exchange team can embed a starter step process before every user initiates a trade on the website, it can enable users to experience wholesome trades. A "skip" feature can be made available to allow users to disable the process in situations where the guide is already known.

2. Website Banners for Key News and Features

Website banners establish a focal point that usually makes them the first things observed. This is why it is so essential to get a banner right because it only has a few seconds to pique a visitor's attention and urge them to stay on the site longer. The dYdX exchange has an innovative team that can create original and enticing banners to create a call to action for users. Since education is of significant interest on the dYdX exchange, links to learning resources, visual educative contents, and guides can be situated strategically, promoting user action. The banners can be dynamic and have a wide range of information depending on user challenges.

3. Offline and Online Seminars and AMAs

This tool has proved to be significant in educating users about products and services. Through Seminars and AMAs, traders and stakeholders on the dYdX exchange can be exposed to complex processes on the exchange and allow them to ask pertinent questions. Organizing in-person events in different locations across the world is a starter process. One way to achieve this is by having country representatives who are well adept with the working principle of the exchange. For example, I was an ambassador for a top blockchain project in the UK and periodically, my team and I visited universities to organize seminars and events. These events are tailored to teach people about new and existing projects. While the world has gone digital, many people appreciate direct human interaction, and this can help educate traders and stakeholders of the platform.

However, a wider audience can be reached by organising online seminars and events. Again, country representatives who are critical players in the blockchain ecosystem in their countries can educate traders on how to use the platform while also onboarding new users. Using platforms like Clubhouse, twitter spaces, telegram rooms and even WhatsApp is a way to kickstart this process. Offering users incentives to be a part of these discussions can enhance interest in learning.

4. Personalized Blog Posts and Email Educational Service

Blogging is a fantastic strategy to educate users and bring visitors to a website. The more content education on the dYdX blog, the more visibility and indexing the search engines will make. Also, blogs can be tailored to develop information that users can share with their connections, thereby creating well spread and an improved knowledge of the platform features.

Blog posts should be about navigation steps, ideas and processes, and the length should be relatively small since the attention span of humans is short. It is exciting to see the dYdX blog with helpful information and well-tailored resources. However, technicality for different user base can be improved upon.

Short Email services that are concise can educate users on the different features of the dYdX exchange site. These could be presented in the form of use cases that are relatable to users. But this service should only be solicited from users upon registration on the platform.

5. Video and Infographics Contents

Making a brief but compelling video and infographics to show off and educate users about the services or features of the dYdX can be significant towards achieving a knowledgeable user base. In these videos and infographics, it is crucial to keep it brief and to-the-point, then share it across all of the digital platforms of dYdX, including blogs, LinkedIn, Twitter, Facebook, Medium, Instagram and other relevant websites.

Regardless of how interesting or instructive written information is, presenting it in an appealing manner (video and infographics) can help it stick in readers' minds much more quickly. After all, the brain is superior at recalling visual information. However, when using both to educate – a video can engage and inform your audience, while a text part can provide further information if needed.

6. User Generated Forums and Prompt Customer Service

Making it easy for traders and other stakeholders to create content on dYdX forum blogs and social media sites can create a good learning environment. Users can share their struggles and experiences using the exchange site on these forums and have other users and the dYdX team help them out. Of course, these forums will be monitored by the exchange team to ensure compliance with the rules of the platform. In some other cases, these forum topics may be subject to approval by the exchange team to prevent unruly users from destabilizing the platform.

dYdX users and the unique features and products should not be distanced by ineffective communication. The team should know all they need to know and want to know it. I firmly believe that effective communication and timely access to forums and customer service will create a happy and knowledgeable customer base that is better and able to use the products and services of the exchange.

7. Highlighting Benefits and Reward – Attractive factor

Users are willing to go far with you if they know how much you care. One of the reasons many brands lead over their competitors is their competitive advantage. Educating traders on what they stand to benefit from using the dYdX platform can increase learning and product utilization interest. The best way to achieve this is by marketing the benefits of the dYdX platform. There is already a myriad of benefits for dYdX users, including:

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a. Trading Rewards:

dYdX is committed to distributing 25% of the initial token supply to customers who trade on dYdX Layer 2 based on a combination of fees paid and open interest.

b. Liquid Provider Rewards:

Liquidity providers will receive 7.5 per cent of the initial token supply, depending on a formula that considers uptime, two-sided depth, bid-ask spreads, and the number of markets supported. These incentives, like trade rewards, will be distributed every 28 days over five years with no lockups. Per epoch, more than 1.15 million DYDX tokens will be distributed.

8. Trading Academy for Kids and Youths

The world is evolving, and many teenagers are getting into cryptocurrency and the blockchain. The knowledge gap for advanced trading skills and tools, including the present one on dYdX exchange, is lacking. To build a future of skilled active traders and community, an academy can be developed to leverage animations and cartoons to teach young children how to trade on decentralized exchanges. The dYdX is a focal point.

I firmly believe that the decentralized exchange system is still in the infancy stage, and only through strategic positioning would the goals of the dYdX platform be realized, hence a need for a trading academy with animated cartoon-like learning.

The future of crypto exchanges lies in the decentralized systems – dYdX and, even more importantly, in the younger generation and educating them using this means would be fulfilling and rewarding

Conclusion

Without any doubt, decentralized exchanges are gaining widespread attention, and it is expected that the would out-compet centralized exchanges giving better rewards, security, and myriad trading options.

Already, decentralized financing has threatened traditional financing and only a matter of time before there is increased global adoption. It is exciting to see that dYdX is a key player in this revolution, and I am excited that the future of financing is in safe hands.

Education is paramount, and I firmly believe that incorporating the strategies listed above will be a game-changer towards increasing active traders and stakeholders.

All images used are royalty-free images, and are referenced accordingly. Other images are property of dYdX exchange

References and Additional Information.

dYdX Website
dYdX Blog
dYdX Discord
dYdX Twitter
dYdX Github
dYdX Youtube
dYdX Reddit
dYdX Whitepaper
dYdX LinkedIn