dYdX, a stock Exchange decentralized platform focused on providing perpetual contracts, moves away from Ethereum and creates its own blockchain thanks to the Cosmos SDK. The team expects this change to significantly improve the decentralization and processability of the protocol.
dYdX is becoming its own Cosmos-based blockchain.
The team behind the protocol announced in a blog post today a new version of dYdX which, instead of being based on Ethereum, will be its own blockchain in the Cosmos ecosystem. This may interest you: BTC, DOT, SOL, APE and CAKE will soon be multiplied by 100?. The update, called V4, aims to completely decentralize the protocol, which the team says means ensuring the “decentralization of the least decentralized component of the project.”
dYdX is a decentralized crypto exchange (DEX) focused on trading perpetual contracts. While spot DEXs such as Uniswap and Sushiswap have seen tremendous growth during the bull run, dYdX and other derivative DEXs have yet to see significant adoption.
One of the problems facing derivatives protocols is the creation of “first class” order books and matching engines (instruments to provide “the trading experience that professional traders and institutions require”) capable of handling the extremely high throughput demanded by their customers.
The dYdX team chose the Cosmos SDK over other Tier 1 and Tier 2 chains because the blockchain construction framework allows protocols to decide on their own chain’s parameters, and thus create the tools that they need. dYdX validators are expected to execute an in-memory off-chain order book, with orders matched in real-time by the network and the resulting trades then committed on-chain. Both the order book and the matching engine will therefore be off-chain, but fully decentralized.
The team believes that, following this operation, dYdX will be able to increase its processing capacity tenfold. It will also not require an exchange gas fee, but a percentage-based exchange fee structure, similar to that used by centralized exchanges. Fees will be paid to validators and acquirers through the DYDX token.
The market reacted positively to this announcement, with the DYDX token up 10% on the day and trading at $1.47 at the time of writing.