dYdX Digests Ethereum for Its Own Cosmos Blockchain

Moving with 10x Mind

dYdX will soon be its own Cosmos-based Blockchain.

The protocol’s team AnnouncementToday’s blog post features a new version for dYdX, which will not be based on Ethereum. Instead, it will use its own blockchain in Cosmos. The upgrade, called V4, aims at fully decentralizing the protocol, which according to the team means ensuring the “decentralization of [the project’s] least decentralized component.”

dYdX (crypto decentralized exchange) is focused on trading perpetual contracts. Spot DEXs like Uniswap or Sushiswap saw tremendous growth during this bull run. However, dYdX has yet to see significant adoption. 

One of the issues plaguing derivative protocols is creating “first-class” orderbooks and matching engines (instruments that enable the “trading experience pro traders and institutions demand”) capable of dealing with the extremely high throughput required by their customers.

The dYdX Team chose Cosmos SDK to replace Layer 1 and Layer 2, because the blockchain-building framework allows protocols decide the parameters of their chain, and thus create the tools they need. Validators for dYdX are expected to manage an off-chain, in-memory orderbook. Orders are matched by the network in real time and trades are then committed on-chain. The matching engine and orderbook will be both off-chain but fully decentralized.

The team estimates that dYdX can increase its processing power by ten following the move. It will also not charge trading gas fees and instead use a percentage-based trading fee structure, which is similar to that used by central exchanges. Stakers and validators will be charged fees through the DYDX token.

The market reacted positively to the announcement. The DYDX token was up 10% in the first day. TradingAt $1.47 at time of writing

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