Acting as a governance token to the dYdX decentralized exchange, DYDX grants its holders the right to put forward and vote for protocol improvement proposals. In addition to voting, DYDX tokens can be put to use within the DEX by depositing, securing trading discounts, or staking thanks to dYdX being built on the layer-2 protocol.
On dYdX, users can lend, borrow and trade crypto assets. The DEX's code is open-source and its functionality relies on smart contracts. Exceptional for an Ethereum platform scalability is achieved with ZK-STARKS, zero-knowledge rollups. The transactions are securely bundled into a packet of proofs which get verified in the main chain.
Unlike other DEXs, which use automated market makers, dYdX has an order book and derivatives trading. All deposits to the exchange contracts generate yield, and the security of the user's deposits is provided by safety mechanisms. For one, lending without providing sufficient collateral is impossible.