How A 19-Person Cryptocurrency Startup Surpassed Coinbase In Daily Trading Volume

Antonio Juliano, the 28-year-old CEO and founder of the crypto derivatives exchange Dydx The company’s CEO, Antonio Juliano, has said that it will likely earn $80 million in net earnings this year.

While bitcoin is hovering near its highest point, many cryptocurrency firms show that they can harness a small collection of resources and rapidly turn them into highly profitable businesses.

Dydx is a four-year-old San Francisco startup that lets traders from outside the U.S. buy and sell digital currency-based financial products handled more transactions than Coinbase, the largest cryptocurrency business in America. On the 27th and 28th of September, Dydx recorded $18.6 billion in transactions, compared to $5.9 billion recorded by Coinbase, according to CoinGecko. That’s made Dydx bring in 75 million in revenue to date in 2021. The company is expected to earn $125 million by year’s end and earn $81 million in net profit, according to 28-year old CEO and founder Antonio Juliano. This is equivalent to soaring earnings per share of around 65 percent.

Juliano was born in Pittsburgh and then went to Princeton to pursue a degree in computer science. However, as with crypto billionaire Sam Bankman-Fried, he did not possess a keen interest in cryptocurrency before entering the field. He was just aware that it was his dream to work for a tech company and eventually become an Entrepreneur. In 2014 the venture capitalist Fred Wilson visited one of Juliano’s entrepreneurial classes at Princeton and discussed Coinbase, which gave Juliano an idea of the best place to work following the university. He completed his degree in 2015 and was hired by Coinbase as an engineer in software and became the 100th employee of the company. He stayed on for a year, then did a brief time with Uber and later launched a cryptocurrency search engine application. The venture failed because the timing was wrong, Juliano says.

He decided to create something based on Ethereum, the well-known software for cryptocurrency that functions as an uncentralized computer, with programs running on the top. After studying the financial markets and watching the growth of Coinbase, it was then that he had the idea to create Dydx. “The way best financial markets evolve is, first of all, an asset is created, then it’s traded on spot exchanges,” He explains, referring to exchanges that allow you directly own the asset, as Coinbase offers for bitcoin.

“Then Assets are then traded through margin exchanges. In the end, the derivatives are created in addition to an asset that they want to sell. This seemed to be an obvious next step to construct,” he says.

In the latter part of 2017, when the first coin offering boomed in cryptocurrency, he secured $2.5 million of seed money from Andreessen Horowitz Polychain Capital and Coinbase cofounders Brian Armstrong and Fred Ehrsam, along with other investors. Did was launched in 2018 and allowed users to purchase cryptocurrency “on margin,” meaning they could borrow funds through Dydx’s platform to buy crypto. Dydx platform to buy crypto is a technique that traders employ to gain leverage and boost their profits (potential losses are increased, too.).

In the year 2019, Dydx was processing about 1 million dollars daily in transaction transactions. In the following year, it shifted its concentrate upon “perpetual swaps,” a popular variant in the hands of Hong Kong crypto exchange Bitmex. Perpetuals monitor the price of bitcoin. However, they don’t require that you own real bitcoin. In contrast to futures, financial derivatives have been widely used for more than 100 years. Perpetuals do not have an expiration date. In 2020, they launched their first perpetual, Dydx, which soon grew to trade between $10 and $30 million daily.

Two significant changes triggered Dydx’s spike in volume this year, according to Juliano. The first was in April when Dydx adopted technology for blockchain known as StarkWare, which significantly accelerates cryptocurrency transactions via Ethereum. Before this, those trading on decentralized exchanges based on Ethereum typically had to wait for 60 seconds before trades could close and had to shell out Ethereum “gas” transaction fees of between $50 and $100. With StarkWare, the gas charges are lower, and Dydx will pay the fees. “Now you make a trade, and it quick updates as a normal website would,” Juliano states. “That’s pretty variant from what most people are used to in decentralized finance.”

The other significant modification was that Dydx joined forces with a Swiss-based foundation to create the Dydx cryptocurrency token. The company then went on to pursue a highly aggressive marketing strategy known as “liquidity mining.” That’s an abbreviation for providing cash rewards to people who choose who trade on exchanges. Did could offer self-minted currency as a reward, thereby providing a low-cost method of financing incentives. “Tokens can throw fuel on the fire for growth with a product that already has a product-market fit,” Juliano says. Juliano.

The results of these changes are shocking. Dydx’s daily volume increased from around thirty million during July, to 450 million during August and before doubling to $2 billion in the month. (The peak in September’s final days was because trading awards are distributed towards the end of each month, and traders are more motivated to make trades when the deadline gets closer.) Dydx has a mere 6000 active users who deal with many thousands of dollars per day on average in crypto.

The drawback of providing “liquidity mining” incentives to traders is that it could attract “wash trading” when an individual creates two accounts and trades himself to earn the reward. In August, Dydx noted  $1.7 billion worth of the crypto token compound sold through its platform. It was around ten times higher than that amount traded hands-on on other cryptocurrency exchanges. Dydx examined the issue and concluded that the transaction was a wash trade and didn’t offer trading rewards to the wrong users.

“That prompted us to take an active stance against wash trading,” Juliano says. Juliano. “We have active observing programs that use both common sense and non-theoratical analytics to identify wash trading.” He estimates that anywhere between 1 and 5 percent of Dydx’s traffic in August was in wash trading. As of September, the company said it decreased to 0.1 percent due to the new monitoring tools.

The majority of Dydx’s users reside located in Asia and Europe. Due to stricter regulations within America. U.S., Dydx suspends all U.S. residents from utilising its platform. In September, China’s central bank made it clear that all transactions involving crypto were illegal. China also has an extensive tradition of securing crypto and has generally found ways to circumvent government restrictions. However, should China discovers a way to stop or reduce trading in crypto derivatives within its country, that will undoubtedly harm Juliano’s work. “Dydx is not based in China and does not market to Chinese users, so we aren’t a good source for reviews on China regulation,” Juliano declares.

Contrary to Coinbase and other brokers, Dydx doesn’t allow people to store their money on its platform and has no regulatory licenses. Did doesn’t conduct those “know your customer” checks required by financial institutions that are regulated. Still, it does utilize an outside service to keep track of digital wallets used by users to identify illicit funds. This simple regulatory approach ensures that compliance costs are low and profit margins are high. Juliano thinks that it won’t put him in hot water in the eyes of U.S. officials. “Dydx has been in association with the CFTC and other government regulators for a long period now,” Juliano declares. He says, “It comes down to the fact that we just don’t support U.S. customers.”

Did was last able to raise venture capital in June with $215 million in valuation, according to PitchBook. It was processing $25 million in a day, or around 1 percent of what it trades currently. If it were to raise more money, the valuation would go up dramatically. However, Juliano does not plan to seek additional venture capital because the business is highly profitable. Juliano says he’ll reduce the number of employees, probably not exceeding 50, in the coming year. “A tiny team with the highest quality people can out-iterate and out-ship huge teams, especially in such a new market.”

Even with a small staff and a small staff, in the upcoming two to five years, “Our highest level goal is to become one of the huge exchanges in crypto, period,” the CEO declares. To achieve the goal, he’ll need to beat Coinbase and FTX, FTX, which processes approximately $15 billion in transactions per day, and Binance that processes an astounding $90 billion.

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Robert Scoble
Robert is the assistant managing editor for HC News, overseeing coverage of markets, companies, strategy and business leaders. Originally from Boston, Scoble began his journalism career in 1997 & now resides outside New York.

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