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dYdX Unveils Open-Source Code for v4, Initiates Standalone Blockchain Transition

Decentralized crypto derivatives exchange dYdX introduces open-source code for v4, transitioning from Ethereum to its Cosmos-based standalone blockchain, emphasizing orderbook-based protocol.

Key Takeaways

  • dYdX releases open-source code for version 4.
  • New dYdX Chain to utilize Cosmos SDK and Tendermint PoS.
  • Anticipated throughput of up to 2,000 transactions per second.
  • The move signifies dYdX’s shift from Ethereum to its independent blockchain.

Decentralized crypto derivatives exchange dYdX has taken a significant step forward with the release of the open-source code for its upcoming version 4 (v4). This marks the initial phase of its transition from the Ethereum layer-2 network to its dedicated standalone blockchain, known as the dYdX Chain.

The dYdX Chain is built upon the Cosmos SDK and employs the Tendermint Proof-of-Stake consensus protocol. One of its standout features is the expected capability to handle up to 2,000 transactions per second, a significant boost in scalability compared to its previous iterations.

dYdX’s decision to integrate Cosmos into its v4 reflects a strategic move after assessing various blockchain technologies. While considering alternative trading models such as Automated Market Makers (AMMs) and Request for Quote (RFQ) systems, dYdX ultimately recognized the importance of an orderbook-based protocol to meet the demands of experienced traders.

In contrast to existing off-chain orderbook systems, dYdX’s v4 validators will maintain an in-memory orderbook that remains off-chain and is not committed to consensus. Orders and cancellations will flow through the network like regular blockchain transactions, ensuring consistency among validators. Trades will be matched in real-time and recorded on-chain with every new block, delivering both high throughput and decentralization.

Furthermore, dYdX aims to offer greater flexibility with Cosmos, eliminating gas fees and replacing them with fees based on executed trades. These fees will be directed towards validators and their stakers, establishing a fair and sustainable compensation structure.

Antonio Juliano, Founder, and CEO of dYdX Trading, emphasized that this release represents the “full decentralization of dYdX” and aligns with their mission to democratize access to financial opportunities.

Regarding the transition from Ethereum to Cosmos, David Gogel, VP of Strategy and Operations at the dYdX Foundation, highlighted the advantages of building a custom chain tailored to their high-velocity trading needs within the Cosmos ecosystem.

In line with their commitment to decentralized governance, dYdX has introduced a Decentralized Autonomous Organization (DAO). The DAO has recorded 14 proposals and active engagement from 458 distinct addresses, with an average of around 42.6 million DYDX tokens per vote as of September.

To Conclude

dYdX’s move towards a standalone blockchain built on Cosmos technology represents a significant leap in scalability, speed, and flexibility. This transition not only addresses the demands of experienced traders but also aligns with the platform’s commitment to decentralization and fair compensation for validators. As the crypto industry continues to evolve, dYdX’s v4 signifies a key development in the ongoing mission to democratize access to financial opportunities.