Decentralized Derivatives Exchange
Cryptocurrency derivatives dominate the market today, accounting for the majority of the entire crypto space. Centralized exchanges are still far ahead of the cryptocurrency derivatives market in terms of trading volume. However, decentralized derivatives saw significant growth last year. Perpetual contracts are the main derivative product in DeFi, accounting for 90% of the TVL of decentralized derivatives. In perpetual contracts, GMX, dYdX, and Gains Network are among the top three in the TVL ranking of decentralized derivatives. Interestingly, they used three different mechanisms, which may also represent the choice of the market. At the same time, we have added another representative mechanism, the Perpetual Protocol.
After Layer 2 started to run, decentralized derivatives trading began to explode, and representative platforms such as dYdX, GMX, and Perpetual Protocol were deployed and run on Layer 2. The current average daily trading volume of dYdX can reach $1.19B, while the lock-up volume of GMX has reached $602.18M, which is enough to see the potential of the decentralized derivatives trading platform.
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Compare the different mechanisms of the above protocols:
Although the decentralized derivatives exchange still faces challenges such as insufficient liquidity, high transaction costs, low product ease of use, and poor feature richness, it has advantages in asset transparency, user asset control, anti-censorship/ privacy, and on-chain composability, which is over traditional centralized derivatives exchanges. According to the current market development trend, the market size of decentralized exchanges is expected to grow significantly within a year.
Compared with the development of the DeFi derivatives trading market, the development of NFT derivatives has just begun, but it can learn a lot from the development of DeFi derivatives. This is what we have been studying, and I believe it will come soon.
