I’m a Bitcoin OG and very confused how Defi works exactly?

[Woodrose]

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.

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).

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

[1714823138]

1714823138

[1714823138]

1714823138

[1714823138]

1714823138

[1714823138]

1714823138

[1714823138]

1714823138

[hugeblack]

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.

[adaseb]

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.

[Edwardard]

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

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

[adaseb]

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

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

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.

[Edwardard]

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.

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

[libert19]

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?

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.

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?

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