A closer look at dYdX’s latest ‘Unlimited’ upgrade and why it matters for DeFi users

The decentralized finance (DeFi) landscape has witnessed exponential growth recently, with the total market capitalization of this space growing from $54 billion to a whopping $110 billion over the last 12-month stretch — representing a surge of over 103%.

The DeFi market’s growth over 2024 (source: Defillama)

The DeFi market’s growth over 2024 (source: Defillama)

Amidst this growth, popular decentralized exchange dYdX has released its most significant upgrade to date — dubbed ‘Unlimited.’ It introduces several new features that re-think the very way DeFi enthusiasts and crypto investors interact with the derivatives market.

The core of dYdX Unlimited lies in its groundbreaking permissionless market listing feature, which, as the name suggests, enables users to instantly list any market on dYdX without any prior governance approvals. 

Simply put, traders can now launch new perpetual contract markets spanning various assets — ranging from cryptocurrencies to even prediction markets — by depositing USDC into the protocol’s ‘MegaVault’ offering. 

This approach represents a drastic departure from how traditional exchanges operate, where listing new assets can involve lengthy approval processes alongside other complex formalities.

The ‘MegaVault’ difference and beyond!

One of the most crucial aspects of dYdX Unlimited is the introduction of ‘MegaVault,’ which serves as the master liquidity pool and automated market maker (AMM) for dYdX. It addresses one of the most persistent challenges in decentralized trading, i.e. liquidity provision. In fact, within just 72 hours of its launch, the vault’s total value locked (TVL) jumped from $3.5 to $30 million.

Megavault’s market performance since its launch (source: dYdX)

By serving as a global liquidity pool, MegaVault ensures that even newly listed markets have sufficient liquidity from day one. As pointed out earlier, users can participate in the offering by depositing USDC into it, thus earning both from trading performance and a share of the protocol’s revenue. 

Given that MegaVault is in its early stages of growth, the estimated annual percentage rate (APR) for depositors is currently high — around 76% (at press time). This has resulted in some users fearing that such high returns (on stablecoins) could result in a crash like the one witnessed with Terra’s UST offering. 

However, it bears mentioning that these APRs are variable over time, fluctuating based on pure supply and demand dynamics. Additionally, the rates are determined through a decentralized process which is overseen by a DAO, ensuring transparent and community-driven adjustments. 

Therefore, the elevated APRs at launch seem to be a means of incentivizing early participation and will most likely normalize as more users contribute liquidity to the vault.

Most recently, the dYdX community approved a proposal to allocate 50% of revenue to the MegaVault and 10% to the Treasury SubDAO, further strengthening the ecosystem’s long-term viability.

Beyond these core trading features, dYdX Unlimited also introduces several user-centric improvements aimed at enhancing the ecosystem’s overall security while spurring community growth. 

To this point, the implementation of permissioned keys provides users with granular control over their wallets, ensuring that only authorized participants can perform specific actions such as depositing or withdrawing funds. 

Not only that, the launch of the platform’s comprehensive affiliate program allows users — who trade at least $10,000 — to unlock exclusive affiliate links, enabling them to earn from referrals’ trading fees while simultaneously offering discounted rates across the platform’s product suite.

Backed by strategic growth and a well-defined vision

The aforementioned developments have been orchestrated under the leadership of the dYdX Foundation CEO Charles d’Haussy, who recently emphasized the importance of maintaining the exchange’s agility while being able to scale operations. 

Moreover, the timing of dYdX Unlimited’s launch has been extremely strategic, with prominent VC firm Pantera Capital having projected the platform’s market capitalization to potentially triple — to over $10 billion — within the next year. 

Such a valuation would position dYdX among the top 20 most valuable cryptocurrencies globally. 

The platform’s financial performance supports these projections, with dYdX recording $5.12 million in earned fees and a monthly profit of $1.83 million (after token incentives) during January 2024 alone.

This success can partly be attributed to its innovative approach to trading fees and user incentives, employing a tiered maker-taker fee structure that rewards active traders. Fees range from 0.05% for casual traders to as low as 0.025% for high-volume participants, making dYdX’s pricing structure highly competitive. 

When combined with the platform’s early mover advantage and successful migration to Ethereum L2, dYdX seems to have already captured a significant share of the crypto perpetuals market.

Looking ahead, dYdX Unlimited can democratize financial access within the burgeoning DeFi realm. Therefore, as the crypto market continues to evolve, the project’s strong fundamentals position it as a pivotal player in this space — potentially even influencing the broader trajectory of DeFi’s mainstream adoption.