On Thursday, crypto derivatives platform dYdX, currently built on Ethereum layer 2, announced that it will migrate to a standalone blockchain based on proof-of-stake compatibility Cosmos SDK and Tendermint for the version 4 update. The company cites the decentralization and performance of the Cosmos chain as reasons for being a “best fit” to build dYdX for release. 4.
Currently, the current dYdX protocol processes about 10 trades per second and 1,000 order and cancel positions per second, with the goal of scaling to higher amounts. However, the company says that neither Ethereum layer 1 nor layer 2 solutions can meet its requirements for speed throughput while meeting 100% decentralization requirements by the end of the year.
All dYdX tokens will be open source, and the protocol itself will operate on open networks without permission with no services operated by the main entity dYdX Inc. All validators and node operators will run the underlying node software, which will handle consensus, off-chain matching of order book, deposits, transfers, withdrawals, and oracle rate. In addition, traders will not need to pay gas fees for trading, but only fees for executed trades similar to those of dYdX v3 and central exchanges. The fees will then be distributed as rewards to auditors and contractors.
Furthermore, dYdX seeks to bridge blockchains by leveraging Cosmos’ inter-blockchain communication protocol. In this way, dYdX can link digital assets, such as stablecoins, directly from other secure chains on Cosmos. Key development priorities include moving collateral for trading to/from blockchains such as Ethereum as well as centralized exchanges. Since its inception last February, the protocol has processed more than $626.6 billion in digital asset derivatives trading volume.