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To devour this week

🖊️ Editorial

🗣 Our exclusive news

🔶 The dYdX investigation

👁 Foundation Focus

THE BIG SPLASH

The British moment 🇬🇧

If the last few months have taught us one thing, it is that everything can change very quickly in Web3. No company, no personality can consider itself above. And this is also true for states... What is currently happening with the United Kingdom is very interesting in this respect!

Until a year ago, our British friends were not at the forefront of web3 and cryptos. The country certainly has a few players that count in the landscape like Argo blockchain, some well-positioned investment funds and asset managers like CoinShares, but the list is not that long.

But things could change quite quickly. The government of Prime Minister Rishi Sunak has completely changed its tune on the subject. It is now a question, thanks to the Brexit, of putting in place legislation that is at least as ambitious as MiCa and above all more "flexible" with a simple objective: to make the local ecosystem grow and attract as many players as possible to London.

It's a tall order for the world's 6th largest economy. But the crypto sector, with the funds and the jobs it represents, is largely worth it. It is to go and see directly what is happening on the spot that we have decided to go to London in the next few days. Thanks again for your help and your contacts! See you next week for an exclusive report 🔥

The Web3 Awards are fast approaching 🍾

The goal of this event organized by The Big Whale is to reward the personalities and projects that make the Web3 ecosystem shine in Europe!

For this first edition, there are 2 prizes directly awarded by the community:

👉 "Best Web3 Project"

👉 "Best corporate Web3 project"

We count on you for the vote!

Result February 22 🏆

Participate in the vote 🗳️

THE BIG NEWS

OUR EXCLUSIVE INFORMATION 🔥

👉 Waltio's new ambitions

How to keep growing? That's the question the people behind the start-up Waltio 🇫🇷, which helps with crypto-related tax returns, have been asking themselves for a few months (find our full guide). And it looks like they've found their answer: expand abroad and offer their services to businesses.

In four years, Waltio has managed to attract 50,000 users, including 10,000 customers who pay for its services. But all of them are French individuals. The start-up has just announced that it is now available in Belgium. Other European countries will follow.

Above all, according to our information, Waltio, which recently announced it was aiming for 1 million customers, wants to forge partnerships with companies in the sector. "Crypto companies want to offer additional services to their customers, including help with reporting," says one of the co-founders Pierre Morizot.

Binance is one of these players. The biggest platform has just launched its own reporting system, but it only covers activities on its platform. For its customers who would have multiple accounts, the CZ-led company recommends using... Waltio 💡

THE BIG STORY

dYdX : Is the “anti-FTX” ready to take off?

In just a few months, dYdX has established itself in the crypto landscape. As its latest stratospheric figures show, the decentralized platform of American origin has benefited from the fall of FTX and the growing doubts around centralized players. But is this the only explanation? We set out to find out 👀

Four letters: dYdX.

Since the collapse of the FTX platform, dYdX has been the talk of the crypto town. This decentralized exchange platform is considered one of the rising stars of the sector ✨

In fact, dYdX's numbers are quite impressive: in 2022, the platform recorded $466 billion in trading volume (140% in one year) and generated $138 million in fees. Not bad for a project that officially launched in 2021.

How do you explain such success? 🤔

FTX’s fall from grace at the end of 2022 has obviously benefited the decentralized platform. "We had a lot of new users," confirms Charles d'Haussy, the Frenchman at the head of the Foundation based in Zug (Switzerland).

But this is not the only explanation. dYdX has also taken advantage of the fact that, unlike centralized exchanges, the platform is decentralized and therefore does not directly hold its customers’ cryptos.

At the origin of dYdX

dYdX was created in 2017 (it launched its token in 2021) based on a simple principle: professional crypto traders have exchange platforms at their disposal, but all of them are centralized.

No platform offers both complex products and the ability to own your assets yourself. This is exactly what dYdX offers 🤓

"The great advantage of decentralized finance, more than its decentralization, is the transparency of exchanges," explains Pablo Veyrat, co-founder of the Angle protocol. "Unlike traditional finance where you are forced to trust certain actors, decentralized platforms allow you to track funds yourself in real time on the blockchain. And dYdX is part of these new tools," he insists.

You certainly know Uniswap ($620 billion in volume in 2022), which allows to exchange cryptos directly between users? dYdX is in a way its "professional" emanation. It allows you to place buy or sell orders in anticipation of a future price, while offering leverage effects that allow you to multiply your gains or losses!

In practical terms, it's like using Binance, but in a transparent way.

A token that takes off

The results are in: since the announcement of FTX's bankruptcy, the price of the dYdX governance token, DYDX, has grown quite tremendously, even though the markets are not at their best. It has more than tripled and is now worth just over $3.2!

However, the platform has not yet reached the size of centralized exchanges, which have a significant advantage: liquidity. "It is the sinews of war", says an investor. The more liquidity a platform has, the more they ensure that their clients can execute orders on the expected terms and without price gaps 😅

"The success of an Exchange is built on the level of its fees, its functionality, its interface and the range of advanced tools it offers," says Cyril Gerbet, a.k.a. CryptOdin, head of the consulting firm Genesis Partners. "But its liquidity is really the key. Who would want to trade with a tool with which you're not sure you're going to make your trade at the price you think you've validated?"

"Orders on large caps (BTC, ETH, AVAX, SOL, MATIC, LINK, ATOM) go through without a problem," explains DocKov, a member of The Big Whale community who uses dYdX. "On the other hand, it is more complicated for cryptos where volumes are lower. It happens that stop-losses or take profits are cancelled due to a lack of liquidity in the order book," he adds.

"Compared to large centralized platforms such as Bybit or Binance, the user will necessarily be at a disadvantage," adds Cyril Gerbet.

But the protocol is still young and continues to improve. One of the big challenges for dYdX will be to attract new users to increase its cash flow. And to achieve this, the platform is banking on particularly low fees 👀

The cheapest DEX on the market

dYdX does not charge commissions below $100,000 in monthly volume. It is simply the cheapest exchange on the market for "small" investors.

Note that dYdX is also very competitive for larger investors, i.e. those whose volumes exceed $50 million per month. For them, fees are also non-existent.

Only "intermediate" investors pay fees.

GMX, the great adversary

The main competitor of dYdX is GMX. Between them, the two platforms account for about 70% of the revenue generated by all "DEX" (Perp, Kwenta, Metavault, Pika, Mycelium, Mux, etc.).

But their strategy is very different.

👉 First on the price: GMX is more expensive. The platform offers a fixed fee structure (0.1% to open or close a position + a small borrowing fee that accrues every hour), as well as a commission between 0.2% and 0.5% if you buy or sell for cash.

With this approach, GMX generates more daily revenue than dYdX, but the Exchange also runs the risk of losing market share as it goes along.

👉 Then on the remuneration of the community: on the side of GMX, each user who immobilizes the GMX token in the protocol receives a part of the fees paid by all traders.

This system largely explains the insolent health of the GMX token (it has also tripled since the FTX crash). These rewards are paid in ETH if using the Arbitrum blockchain (a secondary layer of Ethereum) or in AVAX if using Avalanche.

On the dYdX side, things are different. The trading fees are fully paid by dYdX Trading, the American start-up that created the decentralized platform.

Traders of dYdX receive income in the form of DYdX tokens. They come from the reserve of the dYdX foundation. Each trader is paid in proportion to the fees he spends: the more fees a trader pays, the more he is paid in DYDX tokens. 20% of the dYdX foundation reserve is reserved for this remuneration 💰

But this should not last very long...

A vote on better revenue sharing for the dYdX community is in the works. But to avoid the risk of being reclassified as an illegal financial security - which GMX is facing - the community might lean towards a "utility role" added to the governance token.

In the meantime, other issues, such as the quantity of dYdX tokens, will continue to animate the debate. In December, the number of tokens available on the market will indeed increase significantly.

Why? Because the team, advisors and venture capital funds (Andreessen Horowitz, Paradigm, Hashkey, etc.) invested in the project will be allowed to resell their tokens.

That doesn't necessarily mean they will (that would be a bad signal going forward), but this deadline could have a significant impact on the price.

However, dYdX holders can consider themselves lucky: the beginning of the "vesting", i.e. the period of free sale of the tokens, was initially scheduled for February and the foundation announced its postponement to December a few weeks ago.

Migration to Cosmos in 2023

While the reason for the delay has not been made public, it is in any case timely, as dYdX is about to leave Ethereum, the blockchain it was built on (and its secondary layer solution StarkEx), for the Cosmos ecosystem.

Migration is planned for around September 2023 🗓️

Officially, this "betrayal" towards Ethereum (announced in summer 2022) is "technical". StarkWare, the Israeli start-up that develops StarkEx (find the interview of its co-founder), would not be able to develop all the tools requested by dYdX.

An example? StarkEx would not be able to keep up with the growth of dYdX. Currently, the system processes about 10 transactions per second and 1000 orders/cancellations per second, and the dYdX teams want to increase the rate.

"The problem with Ethereum and its various secondary layers is that applications like ours have to fit their mold," laments Charles d'Haussy, the CEO of the dYdX Foundation.

"These are great projects, but we needed a blockchain that allows total customization. That's why we chose Cosmos where each application can create its optimal blockchain," he insists.

Cosmos provides a development kit and programmers can let their imagination run wild. Cosmos serves as the common technological foundation for the blockchains of the centralized exchange platforms of Binance, OKX, Cryptocom, Kucoin and the infamous Terra-Luna (originally a UST stablecoin algorithm).

On the side of the Ethereum community, one looks at the departure of the nugget with a certain bitterness. "It's not very elegant to leave StarkWare in this way, especially since they had developed a custom solution for them anyway," says a project manager. "We can assume that Cosmos paid dYdX a lot of money to encourage them to choose their technology," he says.

A source close to the StarkWare ecosystem provides another explanation: "They need to be able to say that their Exchange is decentralized, but in its current form, the StarkEx product is not, because the matching of orders is done on a server hosted at dYdX," she says. "They want to decentralize that part to avoid getting caught by regulators, but it's a very complicated technical challenge," she continues.

And the choice of Cosmos is not without risks. Until the effective migration to Cosmos, dYdX will have to be able to ensure the security of its own blockchain...

The teams will also have to succeed in inciting the holders of the DYDX token to immobilize them in the future version of the protocol (via staking) and to accumulate enough value not to expose themselves to an attack from a malicious actor. Hence the importance of having a tightly knit community until then! Something that could explain the postponement of the release of the team's tokens and the venture capital funds 😏

Because although dYdX is one of the most ambitious projects in the sector, it still has a lot to accomplish. The success of its transition will require a great deal of education and the development of economic incentives capable of creating a virtuous circle over the long term. Especially since competitors (GMX and the future IDEX, whose launch is being prepared) are not lacking in ideas either. We're talking about it very quickly!

THE BIG FOCUS

Charles d'Haussy (dYdX): "We need to get out of the tribal aspect of crypto"

As head of the foundation that manages dYdX's war chest, the former Asia director of Consensys is a strong advocate for decentralization. Exclusive interview to be read on The Big Whale website 🐳

Charles d'Haussy will also be a guest on The Big Whale's Discord on Monday, February 20 at 6:30 p.m. to answer any questions from the community.

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This edition was prepared with ❤️ by Raphaël Bloch and Grégory Raymond. The Big Whale is a free and independent media. By supporting us, you participate in its development.