dYdX ditches Ethereum for its own Cosmos Blockchain
Important takeaways
- dYdX leaves Ethereum and builds its own chain in the Cosmos ecosystem.
- Developers believe the move will allow the protocol to increase processing capacity by at least ten. The new chain will also not require gas taxes, only trade taxes.
- The market reacted well to the news, with the DYDX token rising 10% on the day.
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dYdX, a decentralized exchange focused on offering perpetual contracts, migrates away from Ethereum and spins its own blockchain thanks to the Cosmos SDK. The team expects that the move will greatly help the decentralization and processing capacity of the protocol.
Move with 10x in mind
dYdX is about to become its own Cosmos-based blockchain.
The team behind the minutes announced today in a blog post a new version of dYdX which, instead of being based on Ethereum, will be its own blockchain in the Cosmos ecosystem. The upgrade, called V4, aims to completely decentralize the protocol, which according to the team means to ensure “decentralization of [the project’s] at least the decentralized component. “
dYdX is a crypto decentralized exchange (DEX) focused on trading perpetual contracts. While spot DEXs such as Uniswap and Sushiswap experienced tremendous growth during the bull run, dYdX and other derivative DEXs have not yet seen a meaningful adoption.
One of the problems that plagues derivative protocols is the creation of “first-class” order books and matching engines (instruments that allow for “trading experience pro traders and institutions require”) that are able to handle the extremely high throughput required by their customers.
The Cosmos SDK was chosen by the dYdX team over other Layer 1 and Layer 2 chains because the blockchain building framework allows protocols to determine the parameters of their own chain, and therefore create the tools they need. dYdX validators are expected to run an order book outside the chain in memory, with orders that are matched in real time by the network and the resulting trades are then committed in the chain. Both the order book and the matching engine will therefore be outside the chain, but still completely decentralized.
The team believes that after the move, dYdX will be able to multiply its processing capacity by ten. It will also require no trading gas fees, instead having a percentage-based trading fee structure similar to that used by centralized exchanges. Fees will accrue to validators and stakers through the DYDX token.
The market reacted positively to the announcement, with the DYDX token up 10% on the day and trade to $ 1.47 at the time of writing.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
