Dialogue with dYdX Foundation CEO: Bought the first Bitcoin through Taobao, trust is crucial for dYdX
Trust is essential, and dYdX provides the best service for users.Author: Deep Tide TechFlow
Last year, dYdX Chain officially launched, and this year dYdX briefly became the highest trading volume DeFi product. You may often use dYdX's products or have purchased its tokens, but there is little mention of the team behind it, the long-term vision, and thoughts on DeFi competitors.
Coincidentally, at the Hong Kong Web3 Carnival, we interviewed dYdX Foundation CEO Charles d'Haussy for the first time, discussing the team behind dYdX, future product plans, views on competitors, and insights on the Chinese market.
Through our conversation, we were also surprised to discover that Charles d'Haussy's first Bitcoin was actually purchased through Taobao, and he had led a Fintech company in Hong Kong for many years.
In this issue, let’s delve into the world behind dYdX and understand the thoughts and ideas of this OG team, packed with valuable insights.
Key Points
dYdX operates through multiple decentralized entities, including dYdX Trading, dYdX Foundation, dYdX Operations DAO, and dYdX Grants DAO, each operating independently, reflecting a decentralized governance model.
Trust is crucial, and dYdX aims to provide the best service for users. dYdX will launch a new pricing accuracy system that can quickly list more new cryptocurrencies, enhancing market competitiveness.
dYdX is actively expanding the platform's applications and functionalities in more markets and currencies to meet the growing demands of the DeFi ecosystem.
The dYdX chain is committed to achieving greater decentralization. The decision to launch the dYdX chain was made to provide the best service for users, while dYdX drives major decisions through multiple decentralized entities and community voting to ensure decentralized operation.
dYdX has launched LP Vaults to address liquidity issues, bringing more diversified products, including various memecoins, to attract a broader user base.
dYdX focuses on defining and understanding its user base, providing excellent products and services through clear target audience definitions and highly liquid products to maintain a competitive edge. dYdX values improvements in APIs and the exploration of prediction markets to enrich trading options and enhance user experience.
dYdX actively engages in dialogue with regulators, showcasing the transparency and security of blockchain technology, promoting a legal framework more suitable for dYdX, and emphasizing a transparent and decentralized operating model to enhance user trust and comply with global regulations.
dYdX explores significant partnerships by establishing Chinese Twitter and community groups, believing that the Asian market is vibrant and rapidly developing, making it a key area for the global expansion of DeFi.
dYdX focuses on core products and value propositions, not chasing incentives to shift to other blockchain platforms, maintaining a commitment to its core mission and goals. It emphasizes the importance of resilience, teamwork, and community involvement, managing cash flow and burn rates to cope with market fluctuations and maintain operational stability.
The dYdX Team: Four Main Entities in the Ecosystem
TechFlow: Regarding dYdX, most people are more familiar with its products but may know little about the team behind it. Could you introduce your background and how you joined the dYdX Foundation?
Charles d'Haussy:
Of course, I am the CEO of the dYdX Foundation. dYdX is a leading decentralized exchange, and the foundation is one of several entities supporting the development of dYdX. Unlike traditional companies, dYdX operates through multiple decentralized entities. I joined the dYdX Foundation in 2022.
Before joining dYdX, I served as the fintech chief for the Hong Kong government, responsible for establishing the fintech ecosystem in Hong Kong, Beijing, London, and San Francisco. Later, I joined a significant player in blockchain technology, ConsenSys, as the head of Asia, managing teams in Hong Kong, Singapore, Australia, and Japan, overseeing products like MetaMask and Infura, and leading several central bank digital currency (CBDC) projects with countries like Thailand, South Korea, and Australia.
I purchased my first Bitcoin through Taobao in 2011, which kicked off my cryptocurrency journey. Joining the dYdX Foundation as CEO attracted me because it gave me the opportunity to work with new technologies like the Cosmos SDK stack and application chains. This role aligns with my passion for building and learning through practice, especially in a decentralized and community-driven environment like dYdX.
dYdX has once again achieved a trading volume of $100 billion, marking an important milestone and demonstrating its significant impact in the market.
TechFlow: In discussions with some project partners, we found that dYdX seems to have many departments. Is this true? Could you share the overall team structure and division of labor?
Charles d'Haussy:
dYdX does not operate through a single company but through multiple entities, highlighting its decentralized nature. As of now, there are four main entities in the dYdX ecosystem:
dYdX Trading: Based in New York, it previously operated the platform but now focuses on developing open-source software. About 60 engineers are dedicated to improving the software but no longer manage daily operations.
dYdX Foundation: I serve as CEO here, and we have a team of about 20 people spread across 10 different countries. We focus on governance of the protocol, branding, and communication, interacting with the dYdX community and managing ecosystem relationships.
dYdX Operations DAO: This decentralized autonomous organization handles operational aspects under the new structure, including hosting application frontends and deploying indexers, with a team of about 5 people.
dYdX Grants DAO: Responsible for managing grant allocations within the dYdX ecosystem, supporting various projects and initiatives.
Each entity has its specific role and operates independently within the overall structure of dYdX, reflecting a decentralized governance model that allows different groups to manage various aspects of the ecosystem without needing centralized consent.
Community voting drives major decisions, including funding and strategic direction, further emphasizing dYdX's decentralized nature.
Trust is Crucial, dYdX Provides the Best Service for Users
TechFlow: Overall, dYdX has become a leader in derivatives trading. Could you share some future product plans? What issues still need to be addressed in the derivatives space or the DeFi field?
Charles d'Haussy:
An important upcoming update involves a new pricing accuracy system that will allow us to quickly list 200 to 500 new cryptocurrencies, giving us a strategic advantage in speed compared to other exchanges.
Additionally, we are actively expanding the platform's applications and functionalities in more markets and currencies to meet the growing demands of the DeFi ecosystem.
One of the challenges to address is our reliance on centralized exchange price oracles. The upcoming upgrade aims to alleviate this issue by improving the pricing accuracy system, which is crucial for accurately trading derivatives.
Moreover, the increasingly competitive landscape in the derivatives space requires us to continuously innovate in the products we offer. We also place great emphasis on building a stable and trustworthy platform, as ensuring and maintaining user trust through enhanced security and efficient market operations is vital for us.
These efforts demonstrate our proactive attitude toward expanding our product range and enhancing platform functionality while addressing significant challenges in the DeFi derivatives space to maintain our leading position in this rapidly evolving market.
TechFlow: Last year, the dYdX chain officially launched, and we also saw improvements in the performance and data of the dYdX platform. It is quite rare for a dApp to have its own chain, and when you announced leaving the Ethereum ecosystem, there was some opposition from the community. Could you share the thoughts behind this decision, such as why you were so determined and what pain points and future prospects you saw at that time?
Charles d'Haussy:
The decision to launch the dYdX chain was made to provide the best service for users, rather than any particular loyalty to any blockchain technology. We are essentially chain-neutral because we believe that a good engineer or product manager should always prioritize user needs over technical constraints.
Leaving Ethereum allowed us to control the entire tech stack, enabling us to make necessary adjustments for optimal performance. This is crucial because operating on Ethereum subjected us to high gas fees and slower transaction speeds. Transitioning to our own chain was also to reduce reliance on Ethereum's infrastructure, which may be limited by its technical and scalability challenges.
Previously, our token primarily served as a governance token within the Ethereum ecosystem. Now, on our own chain, it has taken on more utility, significantly enhancing the value we provide to users. This transition is vital as it allows us to innovate freely and implement functionalities that were previously constrained by existing blockchain infrastructure.
In summary, the decision to create the dYdX chain was to take control of our destiny in the DeFi space, ensuring we can provide higher quality and more scalable services. This enables us to respond better to market demands and technological advancements, standing out in the competitive DeFi landscape and building a stronger ecosystem for users.
TechFlow: Recently, you officially announced LP Vaults, which should be an important update. Could you introduce this update? What impact will it have on the dYdX ecosystem?
Charles d'Haussy:
Regarding the recently announced LP Vaults, this update represents an important step forward for our platform. LP Vaults are designed to address liquidity issues that often hinder the growth and efficiency of trading platforms. Traditionally, about 80% of our trading volume was dominated by Bitcoin and Ethereum, which somewhat limited our ability to expand into a broader range of assets.
However, by introducing LP Vaults, we can now bring more diversified products, including various memecoins. This is not just about increasing the number of tradable assets but enhancing overall liquidity, which is key to maintaining a healthy trading environment. Insufficient liquidity can lead to high slippage and price instability, which is detrimental to traders and the entire ecosystem.
LP Vaults will enable us to better manage and increase liquidity, especially for new or less common trading assets. This will attract a broader user base, provide more trading opportunities, and enhance the vitality and resilience of the dYdX ecosystem.
In the DeFi space, trust is crucial. While innovation is important, it is not the only determinant of success. Trust is equally important. Our users need to feel that trading on our platform is safe and reliable. By improving liquidity through innovations like LP Vaults, we not only expand our capabilities but also strengthen user trust in our platform. This combination of innovation and trust is vital for the long-term success and stability of DeFi.
More Competition, More Innovation, More Users
TechFlow: The derivatives market is a very crowded space, with many projects looking for ways to attract new users or expand their narratives, such as Hyperliquid and Vertex. How do you view the relationship with other perpetual DEXs and how do you maintain a competitive edge?
Charles d'Haussy:
Regarding our position in the crowded derivatives market and our relationship with other perpetual DEXs (like Hyperliquid and Vertex), it is important to understand our unique strategy. The derivatives market is indeed competitive, but at dYdX, we place a strong emphasis on defining and understanding our user base. This clear definition of our target audience allows us to tailor our services and products more effectively to their specific needs.
At the same time, we welcome competition in the decentralized finance space, as it drives innovation and benefits the entire ecosystem—more tokens, more users, and greater trading volume.
Additionally, superior liquidity is the cornerstone of our strategy. Better liquidity leads to better price discovery and lower slippage, making our platform more attractive for serious trading activities. We ensure that our products are not only diverse but also highly liquid, which is crucial for traders who need a reliable and efficient trading environment.
In summary, by clearly defining our audience, providing excellent products and services, and ensuring strong liquidity, we successfully maintain a competitive edge in the derivatives market. This focused strategy not only differentiates us from competitors but also enhances user trust and loyalty, solidifying our position in the market.
TechFlow: For many users, the more trading pairs a trading platform lists and the faster the trading speed, the more direct their judgment of the platform's quality. From dYdX's perspective, what areas do you think should be prioritized for development and improvement in derivatives trading?
Charles d'Haussy:
From dYdX's perspective, when assessing the areas we should prioritize for development and improvement in derivatives trading, several key areas are our focus. While many users do measure a trading platform's quality by the number of listed trading pairs and trading speed, dYdX believes that the core elements driving the success of a derivatives trading platform go beyond these.
First, our API plays a crucial role in the platform's functionality. We are continually working to improve our API, as it not only enhances user experience but also ensures that our platform can seamlessly integrate with various trading tools and systems. This integration capability is vital for attracting institutional traders and complex trading strategies, which significantly contribute to our platform's trading volume and liquidity.
Second, we are exploring the potential of prediction markets. These markets allow users to speculate on future events, representing an exciting growth avenue. They not only enrich the trading options on our platform but also attract a broader audience, increasing engagement and trading volume.
It is important to emphasize that about 80% of our trading volume comes from derivatives trading. This high percentage underscores the significant impact derivatives have on spot price determination. Therefore, our development efforts aim to enhance the functionality and features of our derivatives products. By doing so, we ensure that our platform not only meets current user needs but also anticipates future market demands.
In summary, while the number of trading pairs and trading speed are important, at dYdX, we focus on strengthening our API, exploring innovative market types like prediction markets, and continuously improving our derivatives trading capabilities to better serve our users and maintain a competitive edge in the market.
TechFlow: When dYdX Trading announced the development of the dYdX chain, it mentioned the goal of achieving greater decentralization. However, many projects talk about decentralization. In your view, "how to achieve true decentralization?" How should it be evaluated, and where does dYdX's decentralization manifest?
Charles d'Haussy:
When dYdX Trading announced the development of the dYdX chain, the goal was clearly to achieve greater decentralization, a term frequently discussed by many blockchain projects. However, achieving true decentralization is not just about discussion; it involves practical and concrete steps to ensure that the system operates in a genuinely decentralized manner.
In my view, true decentralization can be achieved by distributing control and decision-making processes within the platform to a wide and diverse range of stakeholders, rather than concentrating it in the hands of a few. This includes not only decentralized governance through DAOs (Decentralized Autonomous Organizations) but also ensuring that infrastructure and operations are distributed across a decentralized network of nodes.
Evaluating decentralization can often be challenging for users, as it is not always clear what criteria to consider, or they may not be well-versed in the technical aspects that indicate decentralization. At dYdX, we are committed to making this evaluation process more transparent. This transparency is reflected in our governance management, where token holders have significant input and control over the direction of the protocol.
Furthermore, by transitioning to our own chain, we have taken an important step in decentralizing our operational infrastructure, which previously relied more on centralized components.
To provide a truly decentralized platform, we strive to distribute operational and governance aspects across a broad network. This approach ensures that no single party has undue control over the system, aligning with the fundamental principles of blockchain and DeFi. Therefore, dYdX's decentralization is not just about reducing reliance on central entities but also about enhancing user trust and security, providing equal opportunities for everyone to participate in and influence the ecosystem.
TechFlow: Recently, Uniswap's decision to enable fee switching has garnered widespread attention. However, dYdX has long shared 100% of protocol fees with its users, empowering $DYDX stakers. How do you view the Uniswap situation, and what distinguishes $DYDX from other platform tokens?
Charles d'Haussy:
Regarding Uniswap's decision to enable fee switching, I want to point out that at dYdX, we have already pioneered this model by sharing 100% of protocol fees with $DYDX stakers. This makes our stakers almost like shareholders, directly benefiting from the fees generated by the platform.
When you stake $DYDX, you receive USDC generated from the trading fees paid by users. This model rewards our stakers in real-time based on the platform's activity and trading volume fluctuations.
This direct profit-sharing model not only tightly aligns our stakers' interests with the success of the protocol but also differentiates us from other platforms. Our stakers are not just receiving more tokens; they are genuinely participating in the economic outcomes of the platform, making our model significantly different and, I believe, more beneficial to our community. This system makes $DYDX not just a utility or governance token but a direct economic participation tool tied to the platform's success.
Focus is Crucial
TechFlow: As a leading perpetual product, regulation is often a key aspect. How does dYdX navigate the complex DeFi regulatory environment, and what steps are taken to comply with global regulations? What are your views on the future of DeFi regulation, and how might it impact platforms like dYdX?
Charles d'Haussy:
Operating a leading perpetual product like dYdX indeed requires navigating a complex DeFi regulatory environment. In my view, the priority is to understand that regulation is not just a constraint but a means to ensure safety, transparency, and trust. At dYdX, we emphasize that we are more transparent than centralized exchanges because everything is verifiable on-chain. This transparency is not only the foundation of user trust but also the basis for regulatory compliance.
We actively engage in dialogue with regulators to help establish a legal framework that recognizes the unique attributes of blockchain technology. This includes demonstrating how our decentralized setup inherently provides consumer protections different from traditional financial systems. Our platform operates on blockchain technology, which inherently provides transparency and security, and we leverage this as a core argument for promoting a more tailored regulatory approach.
Regarding the future of DeFi regulation, I believe it will become more nuanced, recognizing the significant differences between decentralized and centralized services. This evolution could be positive for platforms like dYdX, as it would eliminate the current ambiguities and potentially lead to broader adoption and trust.
Innovations like the inherent transparency of blockchain and the trust technology that allows transactions and operations to be verified without a central authority are key. These innovations not only challenge traditional models but also provide a blueprint for how DeFi can integrate with the global financial system while enhancing user protection and system integrity.
Looking ahead, I expect regulation to start reflecting the unique capabilities and advantages of DeFi platforms, which could greatly benefit dYdX as we continue to prioritize compliance and user safety in our operations.
TechFlow: This year, dYdX seems to be placing more emphasis on investment in the Chinese market, such as establishing Chinese Twitter and community groups. What are your views on the Asian market and its users?
Charles d'Haussy:
This year, we have indeed invested significant effort in the Chinese market. Recognizing the importance of the Asian market and its users, we are actively engaging with this audience through initiatives like establishing Chinese Twitter and community groups. Our strategy is based on the belief that Asia will play a key role in the global expansion of DeFi, especially for dYdX.
In my view, the Asian market is vibrant and rapidly developing. Users here are very tech-savvy and willing to embrace new financial technologies, making it a key region for dYdX. To better meet the needs of these users, we are exploring significant partnerships with Asian exchanges and enhancing our platform to offer more mobile experience options tailored for Chinese users. This focus on mobile experience is crucial, as mobile access is the primary way many Asian users engage with technology daily.
Moreover, empowering users is at the core of our mission. We believe in providing tools and resources that allow users to interact with our platform in the way that suits them best, free from unnecessary restrictions or complexities. This approach not only respects users' autonomy but also aligns with our core principles of decentralization and open access. Our emphasis on the Asian market is both a strategic decision and a user-centric one, aiming to incorporate their preferences and needs into the evolution of our platform.
TechFlow: Finally, as one of the most established projects in the Web3 space, dYdX is considered one of the most successful projects. Managing a project's success is indeed very challenging. Could you share some experiences from the entrepreneurial journey that might be useful for future builders?
Charles d'Haussy:
Managing a successful project like dYdX, especially in the ever-evolving Web3 space, is indeed a challenging yet rewarding journey. Based on my experiences, there are several key insights that could be very valuable for future builders in this field.
First, the importance of focus cannot be overstated. In the world of Web3, the possibilities seem endless, with new ideas emerging every day. It is crucial to maintain a strong focus on core products and value propositions. For dYdX, this means honing our strengths in the derivatives market and continuously improving our products rather than spreading ourselves too thin across too many features or markets. I would also caution against chasing incentives and shifting to other blockchain platforms. Maintaining a commitment to core missions and goals is key to long-term success.
Second, resilience is essential. The entrepreneurial journey, especially in an emerging and untested market like Web3, is filled with uncertainties and challenges. There have been countless moments of uncertainty, and external conditions have often been far from ideal. However, perseverance and commitment to the vision have always been at the core of successfully navigating these challenges. I want to emphasize the importance of closely managing cash flow and burn rates. At dYdX, we maintain a cash reserve sufficient for 18 months. This is crucial for sustaining operations amid the fluctuations of the blockchain industry.
Additionally, building a strong team and fostering a collaborative culture is vital. Web3 projects require a mix of skills, not only in blockchain technology but also in finance, regulation, user experience, and more. It is crucial to attract, nurture, and retain talent that not only possesses exceptional skills but also shares the decentralized and innovative vision that dYdX embodies.
Finally, engaging with the community is essential. The decentralized nature of Web3 means that community input is incredibly valuable. Listening to, engaging with, and sometimes leading the community helps us refine our products and become stronger. This is also a way to ensure we remain relevant and truly meet user needs.
These lessons from the dYdX journey apply not only to blockchain projects but also to any entrepreneurial endeavor in a technology-driven field. The combination of focus, resilience, teamwork, and community engagement forms a solid foundation for success in the dynamic Web3 environment.
