Topic: I’m a Bitcoin OG and very confused how Defi works exactly? (Read 356 times)

You pay on uniswap, how much? Depends on network you trade on. In my experience, polygon is cheapest. Be careful with which tokens you trade there though, often scammers create copycat tokens. Suppose, there is reputed token on ethereum then scammers would deploy similar named token(s) on other chains (bsc, polygon, etc). Always a good idea to confirm contract address with project team to stay safe.


Metamask is convenient. Can directly connect to dapps and can change chains on the go.

Essentially, binance is more user friendly for me, but if you got problems with giving out your kyc, you might have to use a dex (although dexes still collect your ip addresses). For normal users like me who are not so rich enough, we dont mind giving out a little privacy to the exchanges unless we are not doing something wrong. I guess you should be fine with binance (if you are like me xD). And anyway, I believe if binance goes bankrupt, btc's value will crash near 3k-1k and alts maybe go towards zero lol.

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However, for long term holding, just buy from any exchange and withdraw immediately to your personal wallet where you hold the keys.

Yeah I read that and I don’t know what to think exactly. It seems secure but you never really know. So it’s pretty much almost like trading on a CEX like Binance.

What is more secure in your opinion? A centralized CEX like Binance or the DEX Dydx platform? The platform at anytime can get hacked due to some exploit, chances are of Binance getting hacked very slim.

Seems to be a trade off in both. However those DEX like Uniswap which immediately send you the tokens after your trade, that seems more secure than the perpetual DEX trading platforms.

In order to guarantee self custody of the funds, at any point in time, a user may opt to perform a forced request. Forced requests are initiated by a Layer 1 transaction, to avoid censorship. In case that the request is not served within a limited time frame, the user is able to freeze the StarkEx contract (and thus the exchange) and withdraw directly from the frozen contract. There are two forced actions: forcedWithdrawal and forcedTrade .
Reference: https://dydx.exchange/faq

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However, I still recommend not using too much funds for trading on both cexes and dexes. We never know.

Ok so if a dex gets hacked or exploited and I am providing my tokens as liquidity i might get that stolen, so I won’t be providing any tokens to loan.

However say I am using dydx to day trade their future derivatives and I have an active trade and there is some hack on dydx. Will my funds be at stake or not?

When I am in a trade where are the funds which I used to provide collateral to open up the trade? It says it uses L2 Starkware so if there is a hack, can I get my funds back from that L2 back into the L1 ETH network? Very confused about this.

I tried the test net portion but it doesn’t send any funds over, you just sign your Metamask wallet and you can demo trade but doesn’t get any of the eth test net coins moved anywhere.

Perhaps redefining your question more accurately will give you better answers. You have now got a general perception and now you must specify what you are looking for. So what is your goal, is day trading, buying and storing, arbitrage, staking, or what exactly are you looking for?
To reduce fees, there are centralized network solutions such as BSV, or second layer solutions such as Polygon.
Privacy is not a big issue if you are an immortal user, but unfortunately bridges have proven to be just as vulnerable as the mainframes.
Also, the problem of liquidity, which will make trading slower, achieve losses due to slow execution of orders.

Finally, most platforms claim to be for decentralized finance (DeFi,) but they are centralized at some point.

Just to add some idea about how DEFI exactly works. I tried to read some articles about DEFI and I think it's pretty interesting. One of the innovative ideas that DEFI created was "Flashloans".

It's not a new idea for other but I think it's also good to discuss though. Aave is an example of lending protocol. It looks like a margin trading but here you can borrow and lend tokens. It started around 2020 and it still operating until now.

In the article that I had read, it says that you can borrow a massive amount of tokens without collateral. I don't know if it works for a long run.


I think the worst thing that you can experience in using DEX is trading fees since they are using AMMs, I think most of their profits will come to the trading fees. What might happen of there is no liquidity at all?

And as I have seen also your post, I think our security and investment are being compromised since we have to lock our for a period of time.

Anyway, before I heard already about uniSWAP and DYDX. Maybe, there are still cool features that I need to explore in those DEX.

Reference:

https://defiprime.com/flahloans-comparison

Just wanted to add a comment here on DEXs -- I saw Edwarded already explained about AMM and orderbook DEXs (defi now is normally associated with AMMs so it's just a large common pool where anyone can contribute asset pairs to liquidity).

There were actually Bitcoin DEXs (the very first I used was Counterparty, still active, but barely so) and there's no earning incentive there, as they're simply orderbooks and suffered from liquidity problems (not enough demand, high slippage, etc.) and that's why AMMs have been successful (incentive in the form of commission from providing liquidity).

Just be aware, and I repeat mk4's point, that you should always assume worst-case scenario. Using AMMs to earn means locking in your assets on that network, and the protocols of DEXs like Uniswap (which, if I understand will no longer be open source).

The illusion of non-custodial might lead you to think it's safe, but there are other vulnerabilities like front-running or simply backdoor protocols that can steal your funds anyway from pools (and it's all happened before).

I think it's fairly safe to use open source orderbook DEXs on Bitcoin -- but because it's not popular I also wouldn't consider it battle-tested, therefore, not safe enough.

Just to be sure — always assume the worst case scenario. Want to use DEXs like Uniswap? Use them using a proxy/VPN just to have an extra privacy layer. Obviously it doesn't give you high amounts of privacy, but it's definitely better than nothing.

Use VPN to discover your IP or tor browser some kind of VPN provider out there using obfuscated VPN. metamask is used widely on a couple of DeFi and this one EVM compatible chain. so you can directly move to other chains just adding a couple of information.

and yes there is actually bunch of DeFi platform that doesn't allow US people to access their website because of regulation, you can usually find it on platforms that offer initial coin offering or usually called Intial Dex Offering on DeFi

I'm not expert on DeFi but I know almost anything  , hit me up on telegram if you have other question : @dansus021

I am just trying to gather information and collaborate to make Cryptops the best next generation DEX it can be. The current DEX solutions seem to be lacking in actual real potential advantages over current CEX.

I don't use ETH that much, so it is not a problem for me. If you have an HW wallet, you can connect it with MEW or MyCrypto if you really need it. You can also change your RPC to other services (after you register, or use a free one, etc) if you want to use MetaMask. Alternatively, you can just continue using it if you don't mind your IP being collected, or you use a VPN and you don't use DEX that much. Using DeFi (most of them at least) nowadays is more or less equal to giving at least some personal info to the platform that you use, so that's that.

Keep in mind that policy can change, and even if Uniswap explicitly stated that it does not collect personal data, I think you should be aware that according to the news, they still collect some data. One of the reasons for doing so is to "comply with regulation"[1]. If you decide to use them for privacy reasons, make sure to keep up to date or check out their ToS regularly to make sure you don't miss anything.

[1] https://decrypt.co/115200/uniswap-now-collects-certain-data-users

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As far as I can see, your product is not even ready yet. What can OP even do with your marketing information if he can't even use it? Running a testnet is quite different from being exchange ready. I suggest keeping these promotion post for later when users can use them like other DEXes that exists right now.

Dont worry about spreads on the top coins, just dont trade shitcoins on dexes, they are illiquid and sometimes you cant even sell them.
I guess you should better use dydx for derivatives trading. The fee is none if your trading volume is not much (<100kusd per month)
Refer: Dydx perpetual fee structure

Uniswap doesnt collect IP addresses, however dydx does it according to its privacy policy.
Also,  "USE OF A VIRTUAL PRIVATE NETWORK (“VPN”) TO CIRCUMVENT THE RESTRICTIONS SET FORTH HEREIN IS PROHIBITED" on dydx. Maybe this is done to track hackers and ppl doing illegal activities, but we cant do much.

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Even pancakeswap (bsc based dex),   collects IP addresses of its users. Also, trustwallet collects user ip addresses, lol.

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So, here only uniswap is truly decentralized since it collects some user data, such as traders’ device type or browser—but no personal data such as Ip address, emails, name, etc.  

Cryptops currently runs on 30 different servers in random data centers worldwide and none do or ever will any kind of restricting by region. This could be easily defeated in Cryptops anyway by just running your node and getting direct blockchain access to your trade wallet.

Can they truthfully be called decentralized if they are able to restrict by region like that? In my opinion it would not be a true DEX.

So what is everybody doing now after Metamask claims to collect IPs. What are the other alternative wallets out there to use?

Don’t DEX also check IPs to make sure you are not accessing from a restricted region. Saw a video somewhere where someone in the US tried to access some DEX and they were restricted due to having a US IP. So the DEX also knows the IP address it seems.

Yes, that's right Central Platforms (CEX) have IP addresses for each user, this is understandable and known to all.
But DEX "wallets and exchanges" shouldn't have that, Web3 applications should be completely decentralized and not be able to read any user data, since they can read IP means they can read other sensitive information and collect data, and possibly send it in a hidden way to another place!!!

But fortunately I suspect they don't have full access to your wallet or "Futures / Derivate DEX platforms" (they can't freeze or manipulate your assets), they can only read your data and block you from using their services.

As long as you are the only one with your private keys, your assets are safe.

1) Besides privacy issues. What is the negative about metamask collecting IP addresses? When we use a CEX we always give out our IP addresses. Is it to bad USA people from accessing Futures/Derivate DEX platforms?

2) Besides Pancakeswap, DYDX, GMX, what are the other futures/derivate exchanges with leverage? On Coinmarketcap they only list dydx, kine, apollox, perpertual protocol, deri and helix. But GMX and Pancakeswap are missing from there. Is there some list which lists all the derivate platforms?

3) On Pancakeswap, there is a 0.10% fee per trade however what is the spread when I buy/sell. Is it the same price? If price for ETHUSD is $1000. If I buy I pay a 0.10% fee and buy it at $1000 and if I sell 1 second later, I get to sell at the same price (assuming market hasn't changed) ? And just pay the 0.10% fee?

It seems nice with 100x but the 0.10% is very high for a derivatives platform, especially if there is some spread also.

To avoid high gas fees use a pancakeswap or 1inch exchange on the BSC network, most of the coins and tokens are on the BSC network as Wrapped with high liquidity volume.
BSC's gas fee is much cheaper than Ethereum's gas fee.

Also a good feature is (Limit orders) present on pancakeswap and 1inch which helps in executing orders at the specified price and is useful in reducing the gas fee to (0) because the fee is deducted from the coin being sold or bought (such as central exchanges).


Yes right, this happened to me at the beginning of the Russian-Ukrainian war, Metamask blocked me from using their services based on the IP address, when I was connecting to DEX with Metamask I could access my wallet and read the data only without being able to execute orders.
Fortunately, the ban was later lifted.

Cryptops is a new DEX that was designed to be easy for new users who want to trade crypto option derivatives on blockchain.

In short Cryptops is a direct access layer 1 blockchain with an on-chain order book that uses layer 2 components to provide a verifiable crypto options derivatives market. The trades close on average in 3 seconds and is able to handle 1000+ transactions per second.

For improved security there are no browser wallet plugins, smart contracts or protocols that have a history of being hacked and losing millions. Just straight forward direct access to the assets/tokens that reference the on blockchain option derivatives.

Cryptops is an open publicly available blockchain that anyone can use to create their own option derivatives market for any crypto currency they desire. Cryptops will be creating an options derivatives side chain for BTC at the launch of the blockchain. I am willing to help anyone interested in launching an option derivatives market for any crypto of their choice, just send me a message.

Some advantages Cryptops has to offer include:
1) You are able to generate a secure account on an air gapped computer then download the CryptopsTerm wallet/trade app and trade without your keys ever needing to leave your premises.

2) You can run your own Cryptops node with the CryptopsTerm wallet/trade app and get 0 ms access time to the on blockchain order book, again with your keys ever never needing to leaving your premises.

3) Cryptops has the best most secure staking rewards model and staking is possible without needing to run a node or anything like that. In Cryptops you can earn staking rewards on coins that are held in a cold storage wallet that was created on an air gapped computer. The rewards are automatically paid out weekly to your configured hot wallet address using a built-in blockchain mechanism.

The testnet BTC option derivatives can be viewed using the CryptopsTerm at https://cryptops.exchange/CryptopsTerm/#testnet by clicking "Markets" then "Monthly BTC Calls" or "Monthly BTC Puts".

Self custody account keys for the testnet can be generated using the Cryptops Laboratory at https://laboratory.cryptops.exchange/#account-creator?network=test then funded using the friendbot on the same page.  Wallets in Cryptops are not considered valid until they have been funded.

If anyone thinks this project has potential and would like to take part at an early stage to help launch the project just send me a message. Current plans are to launch the BTC option derivatives market on the public Cryptops blockchain early next year.

If you're not yet aware, Metamask is collecting IP addresses from anyone who uses their default. So you might want to change your node provider if you have some issues with that. It is a bit tricky since most node providers are usually paid ones, or need some registration to use. You might want to use a different wallet entirely to connect with an exchange (like a direct connection to your HW probably).

AFAIK, if you connect your HW with MetaMask then you'll need to connect your HW again to approve transactions so if a hacker has access to your PC but not HW, the funds would still be safe. However, that's certainly not the best scenario and they can use other means to attack you such as deploying a scammy smart contract where you just need one approval and they can move your tokens anytime. There have been many cases like this so you should be more careful when you connect to some exchange, make sure it is not a phishing site. CMIIW.

Dydx is a non-custodial exchange, hence here your keys are your only 2fa or whatever. If you connect it through public computers, they can have access to your keys and withdraw funds from your metamask wallet (not dydx, since dydx is not a wallet, its a third party dapp interacting with your wallet). So always use a safe laptop/phone while importing your keys and you should be fine.

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Btw, you shouldnt use public computers for centralized exchanges as well (even if 2fa is enabled). Defi or non-defi everything can be hacked if you are not serious enough with your own actions.

So in terms of security. I can use a hardware wallet such as ledger with my Metamask. So that way my seed and wallet.dat (for Metamask) is not on online computer.

However after I connect with dydx. How do I keep it secure from there? Say someone gains access to my PC and it’s logged into dydx, can’t they just withdraw to their address? Doesn’t seem to be any 2fa for dydx. I am confused about this part.

No, you can't. Uniswap is an automated liquidity protocol / market maker. Pricing is automatic, based on the x∗y=k market making formula which automatically adjusts prices based off the relative sizes of the two reserves (ETH and the associated ERC-20 token) and the size of the incoming trade.
Unlike uniswap, dydx doesnt make use of automated market maker (AMM). Instead, the platform utilizes a traditional orderbook + matching model to meet your requirements.
There is a successfull proposal made for this already since october 2022. Not sure they've depolyed already on zksync or maybe very close (not following them too much).

I went to uniswap to check the spreads and it doesn’t load any order book like it does for dydx or any derivative site such as Bybit. Is there any way I can check the spreads and order books for Uniswap?

Looking at etherscan gas fees currently it’s like $3 for a trade. So this is good if you are trading mid/large amounts however if you want to trade small then the gas fees will add up. So why doesn’t uniswap do what dydx does where it uses layer2 and make it gasless? With the trading fees, spreads, the gas fees will add up if you are trying to day trade.

1. You can send tokens to cold storage once you have them but I don't think you can interact with these sites while having your funds in cold storage. You can use hardware though too and that's normally advisable (I don't think you're able to use multisig either).

2. One thing I can think of is that dYdX has leverage while uniswap doesn't which could be one thing changing the volumes (ie one quoting actual values on spot and one quoting volumes on leverage).

3. You can use side chains for lower fees if the token is on there and what you want to do is on there. You can save on trades too but you don't save much. Dydx also used to pay your loading fee when I last used them you aren't holding your funds if they're stored in Dydx, I don't know how they're stored but if you're putting a lot in there I suggest you try to find out.

4. You probably can, from what was mentioned in the above response dydx is compatible with wallet connect which should be compatible with mew (just from a quick search).

You always need a connect your wallet online to interact with any Defi protocol.
On coinmarketcap's dex page, dydx is listed as no. 2 with volumes slightly lower than uniswap. However, we dont have much data on coingecko.
You cant do much about gas fees, just avoid buying/selling your coin when the network is highly congested. Check for live gas fee for swapping on various dexes on etherscan gastracker. Dydx being layer2 has advantage of no gas fee (good for the perp traders). However, uniswap is not gasless. You can use other networks if the dex supports them. For eg. use pancakeswap for bsc based coins.
Currently, dydx supports MetaMask, Coinbase Wallet, Ledger, Trezor, Wallet Connect, imToken. MEW is not recommended.
Source: https://help.dydx.exchange/en/articles/3076178-which-wallets-are-supported

So with everything going on with CEX i am thinking of finally trying out DEX.

I am not new to crypto but I am very confused how all these Defi work exactly. So i have a few questions.

1) I need to use Metamask? Any way to use it with cold storage?

2) I looked at Defi volumes. It says Uniswap is largest with >1B in volume and then Curve. But then I looked at dydx and it also has > 1B in trading volume. However it’s not ranked as #1 or #2. So what is the difference between dydx and uniswap?

3) If you trade a lot, what can you do to reduce gas fees? I heard that dydx is gas less because it’s layer2. Is uniswap also gasless? Instead of using ETH network can I use Solana, BSC, or some other chain for lower fees?

4) Why can’t I use MyEtherWallet instead of Metamask? As I understand you transfer from Metamask to dydx, if so why can’t I transfer from MEW to dydx instead of using Metamask?

Thanks for all your help.