dYdX shifts to Cosmos-based blockchain for v4 to optimize decentralization and trade flow

On Thursday, crypto-derivative platform dYdX, which is currently built on Ethereum Layer 2, announced that it would move to a standalone blockchain based on the Cosmos SDK and Tendermint proof-of-stake consensus for its v4 update. The company cites the decentralization and performance of the Cosmos blockchain as reasons to be a “best fit” for building dYdX for v4.

Currently, the existing dYdX protocol processes about 10 actions per second and 1,000 order places and cancellations per second, with the goal of scaling to larger sizes. However, the company says that neither Ethereum Layer 1 nor Layer 2 solutions can meet their throughput requirements, while also meeting its 100% decentralization requirement at the end of the year.

All dYdX code will be open source, and the protocol itself will run on open unauthorized networks without services operated by parental entity dYdX Inc. All validators and node operators will run the core node software, which will handle consensus, off-chain orderbook matching, deductions, transfers, withdrawals and pricing oracles. In addition, traders do not have to pay gas fees to trade, but only fees for executed trades similar to those of dYdX v3 and centralized exchanges. Fees will then be distributed as rewards to validators and strikers.

Furthermore, dYdX attempts to bridge blockchains by using Cosmos’ inter-blockchain communication protocol. This way, dYdX can transfer digital assets, such as stablecoins, directly from other secure chains on Cosmos. Top priorities in development include the transfer of guarantees for trading to / from blockchains such as Ethereum, such as centralized exchanges. Since its inception in February last year, the protocol has processed over $ 626.6 billion in trading volume of digital asset derivatives.


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